M&T Bank Corp. agreed to pay $20.85 million to settle a class action ERISA suit filed by participants of its 401(k) plan, according to documents filed in federal court in Buffalo, N.Y.
The suit filed in 2016 by lead plaintiffs Sa'ud Habib, Beverly Williams, J. Marlene Smith, Kenneth Sliwinski and Russ Dixon, alleged that sponsors of the M&T Bank Corp. Retirement Savings Plan engaged in unlawful self-dealing while managing the $2.54 billion plan, violating their fiduciary duties.
"Defendants use the plan as an opportunity to promote the business interests of M&T ... at the expense of the plan and its participants," the suit alleged.
In 2010, eight of the plan's 23 designated investment alternatives were M&T Bank proprietary mutual funds, despite expenses being on average 90% higher than similar funds found in similar-sized defined contribution plans. All but one of the M&T-affiliated funds had underperformed its benchmark by their one- and 10-year marks.
The suit further alleged that the plan's sponsor not only failed to remove these funds but added more proprietary mutual funds within the plan's lineup.
In 2011, M&T finalized its purchase of distressed Wilmington Trust, which had its own family of overpriced mutual funds, according to the suit. After taking over Wilmington Bank, the defendants allegedly added six out of Wilmington's nine mutual fund offerings to the plan, "despite their high expenses, and poor or non-existent performance history."
Over the next five years, despite the Wilmington Funds' alleged consistently low performance and high fees, the plaintiffs accused the defendants of keeping these investment options within the plan, only reluctantly removing a few because those particular investment options closed.
"The fiduciary defendants' addition of the Wilmington Funds to the plan and retention of these high-priced, poorly performing funds have cost plan participants tens of millions of dollars in damages," the suit alleged.
As part of the settlement agreement, M&T Bank will contribute the $20.85 million to a common settlement fund through its insurers, the net proceeds of which will be distributed pro rata among eligible class members. Current plan participants will have their accounts automatically credited with their share of the net settlement amount, while former participants will be required to submit a claim form.
M&T Bank spokesman David Lanzillo issued the following statement via email: “We are pleased to have resolved the claims involving our 401(k) funds and we feel that a voluntary settlement is the best way for all parties to move forward to avoid costly litigation or further extend an already lengthy litigation process.”
