Putnam Investments agreed to pay $12.5 million to settle an ERISA suit accusing the company of failing to properly manage its $651 million 401(k) plan or maintain a prudent investment lineup.
U.S. District Judge William G. Young on April 17 granted preliminary approval of the settlement that was agreed upon by the plaintiffs, Putnam and other related defendants.
In addition to the financial restitution, Putnam agreed to provide "prospective relief for at least two years going forward, including maintenance of an investment policy statement and charter for the Putnam Benefits Investment Committee, and annual fiduciary training for plan fiduciaries," wrote Joan Glancy, one of the lead plaintiffs, in a letter filed in U.S. District Court in Boston on April 16 supporting the settlement offer.
The defendants will also maintain a suite of low-cost third-party passive investment options in the plan, and the benefits investment committee will meet regularly to review the plan's investment options.
Putnam spokesman Jon Goldstein issued the following statement regarding the settlement: "Putnam has always taken its fiduciary responsibilities very seriously and continues to operate in the best interests of our plan participants."
The suit, originally filed in 2015, accused the defendants of loading the defined contribution plan "exclusively with Putnam's mutual funds, without investigating whether plan participants would be better served by investments managed by unaffiliated companies." The complaint alleged that using these mutual funds cost plan participants "millions of dollars in excess fees every year."
The suit also accused Putnam of failing to remove underperforming investments from the plan's lineup.
"Defendants have no process for selecting mutual funds for the plan, indiscriminately adding every mutual fund that Putnam offers into the plan," the complaint said. "Furthermore, defendants have no process in place to monitor the plan's investments and remove investments that have become imprudent."
