A U.S. District Court judge in Boston has rejected a petition by DeMoulas Super Markets Inc. to dismiss an ERISA complaint filed by a former participant in the company's profit-sharing plan, allowing the case to go to trial.
The former employee, who is seeking class-action status, accused the plan's fiduciaries of mismanaging the plan by offering only a fixed group of investments that performed poorly.
The plan is financed only by company contributions; no participants' contributions were allowed. The plan's lineup was chosen by the fiduciaries; no choices were allowed. The lineup's allocation was 70% domestic fixed income and 30% equities, as explained in the plan's investment policy statement. The plaintiff alleged this allocation was inadequate, during 2013-17, in the case of Paul Toomey vs. DeMoulas Super Markets Inc. et al.
"The court concludes that plaintiff has alleged sufficient facts from which it is reasonable to infer a plausible claim of violation of the duty of prudence" as defined by ERISA, U.S District Court Judge Leo T. Sorokin wrote on April 16, denying the request for dismissal.
"The court is not determining that any single allegation or category of allegations suffices to allege imprudence or that, taken together, they establish imprudence, but only that plaintiff has plausibly alleged the claim in light of the totality of the allegations," the judge wrote.
Mr. Toomey sued in July. "Although many defined contribution plans offer participants a low-risk investment option that focuses on capital preservation, any such investment is only reasonably designed to be offered as 'part of the portfolio,' not the entire portfolio," his complaint stated. "It is not prudent or appropriate to force participants into 'low-yielding investments' without regard to their individual desires or needs."
The DeMoulas (Restated) Profit-Sharing Plan & Trust, Tewksbury, Mass., had assets of $744.5 million as of Dec. 31, 2018, according to the latest Form 5500.