Verizon Communications Inc. will pay $30 million to settle a lawsuit by a former participant in a company 401(k) plan who alleged ERISA violations in its investment practices, according to a settlement document filed July 7 in a U.S. District Court in New York.
The parties announced an agreement in principle last month for the 7-year-old lawsuit, but they didn't reveal the terms at that time.
The class-action settlement will cover 160,000 participants and beneficiaries. The agreement document was filed by attorneys representing the plaintiff and was unopposed by the defendants.
The agreement requires court approval in Melina N. Jacobs vs. Verizon Communications Inc. et al., which focused on allegations that a poor-performing hedge fund, the global opportunity fund, should have been removed from the plan's lineup.
The plaintiff accused plan executives of failing to "adequately monitor" the fund's performance and "failed to take any corrective action" despite the fund's results, according to the settlement agreement.
The original lawsuit was filed in February 2016 contending that defendants failed to monitor the hedge fund; failed to monitor the performance and fees of a target-date series; and failed to provide adequate fee-disclosure information to participants.
U.S. District Judge Paul G. Gardephe dismissed the target-date allegation and the fee-disclosure allegation in September 2017, but he allowed litigation to proceed for the global opportunity fund complaint.
The Verizon defendants were unsuccessful several years later in asking Mr. Gardephe to reject the hedge fund complaint. A trial had been scheduled for July 10.
"There is no evidence that defendants were engaged in a process to monitor the global opportunity fund, or had a reason to maintain the global opportunity fund as an investment option in the Savings Plan in light of its poor performance," the judge wrote in April this year.
The parties subsequently took the dispute to mediation in early June.
"Although class counsel is confident in its ability to ultimately prove liability of defendants on the claims asserted, the risks of a verdict in favor of defendants at trial, when weighed against the immediate benefits of settlement, confirm that the settlement is in the best interest of the class and therefore should be approved," the settlement document said.
Verizon Savings Plan for Management Employees, Basking Ridge, N.J., had $31.1 billion in assets as of Dec. 31, 2021, according to its latest Form 5500 filing.