During the fourth quarter of 2023, 50 ERISA-related lawsuits were filed and/or updated. Each event represents the involved parties either reaching a settlement or filing an appeal, or a court decision was made. The parties involved in the ERISA lawsuits in the fourth quarter included two financial firm, four healthcare firms, two university, one tech firm and other prominent organizations such as Tyson Foods, Whole Foods Markets, Aon, Kohler Co., Kellogg Co., FedEx, Colgate-Palmolive Co., General Electric and KPMG LLP. There were 26 ERISA lawsuits involving excessive record-keeping fees.
Financial firms
- Metlife Group will pay $4.5 million to settle ERISA violations of maintaining proprietary products in its investment lineup while cheaper but better-performing investments are available.
- Capital Group was sued for alleged self-dealing, offering or retaining long-term underperforming funds and its alleged failure to remove five proprietary American funds in its investment lineup that did not exceed benchmark returns.
Healthcare firms
- Genentech agreed to pay $250,000 to settle ERISA claims of allegedly charging excessive record-keeping fees and offering expensive but poor-performing investment options.
- Henry Ford Health System agreed to pay $5 million to settle ERISA allegations for its alleged failure to select the lowest-cost investment shares, offering expensive but worse-performing investments and charging excessive record-keeping fees.
- Yale-New Haven Hospital Inc. agreed to pay $1 million to settle ERISA allegations of offering poor-performing investments and charging high record-keeping, administrative fees of $48 per person annually while other plans charge $35 per person.
Universities
- The Department of Labor filed an amicus brief signaling that Yale University 403(b) plan participants ought to be granted an additional trial with respect to the high record-keeping fees levied by the plan fiduciary, notwithstanding the fact that no investments were lost. Previously, jurors rejected claims including the plan fiduciary’s failure to appropriately monitor or select plan’s investment lineup, share class and improperly allowing TIAA-CREF Stock Account to be added when TIAA Traditional Annuity was purchased. However, plaintiffs were unable to demonstrate that they were harmed by the excessive record-keeping fees, the jurors rejected their request based on the no-loss determination. The DOL objected, arguing that, if everything else was equal, a profit might or would have been made rather than no-loss since no-loss is the outcome or conclusion, not a reason or evidence that a stricter fiduciary procedure was followed previously.
- The 2nd U.S. Circuit Court of Appeals upheld the dismissal of allegations against Cornell University, including alleged failure to monitor and control record-keeping fees, to remove underperforming investments or to offer higher cost retail shares of mutual funds.
Tech and telecom firms
- A federal appeals court declined to reconsider a lawsuit against AT&T over alleged breaching duty of prudence. AT&T was investigated for its mismanagement of self-directed brokerage services and was investigated to see if its contract with BrokerageLink was a prohibited transaction. AT&T was sued for allegedly failing to adequately oversee the compensation given to record-keeper Fidelity and investment adviser Edelman Financial Engines.
Other organizations
- KPMG will pay $650,000 to settle multiple ERISA claims of allegedly charging excessive record-keeping fees, and imprudently selecting expensive but bad-performing investment options in its $7.2 billion 401(k) plan.
- An ERISA lawsuit against Gannett Co. Inc. was dismissed. Gannett Co. was sued for allegedly having a concentrated position in its 401(k) plan and for not divesting stock of former parent TEGNA fast enough. Gannett Co. was spun off from TEGNA in June 2015 and TEGNA stock fund was closed in 2018.
- An ERISA lawsuit against Parker-Hannifin was dismissed. Parker-Hannifin was sued for charging excessive fees and retaining an underperforming Northern Trust target-date series compared to its benchmark S&P Target Date Series index, though Northern Trust wasn’t a defendant. The judge determined that the comparison between Northern Trust and S&P and/or other target-date series isn’t meaningful.
- Tyson Foods was sued for charging excessive record-keeping fees, its alleged failure to bargain for lower fees given a massive size of $3.2 billion and its failure replace the record keeper Northwest Plan Services.
- Whole Foods Markets was sued for charging excessive record-keeping fees and the plaintiffs claimed that Fidelity Investments’ services are “routine,” aren’t materially different from other record keepers and thus the fees aren’t justified or competitive.
- Aon agreed to pay $4.5 million to settle an ERISA lawsuit for allegedly offering low-performing proprietary Aon target-date CITs that have been on the market for less than five years in the Centerra Group 401(k) plan, rather than offering comparable target-date series mutual funds.
- NextEra Energy Inc. was sued for allegedly charging excessive record-keeping fees and dumping nearly half of plan assets in depressed company stock over the past two years in its $6.95 billion 401(k) plan (to artificially affect stock price). NextEra’s subsidiary, Florida Power & Light, is accused of violating state and federal campaign finance law.
- Kohler Co. was sued for using outdated mortality table from the 1960s and incorrect actuarial interest rate assumptions to calculate the conversion from a single-life annuity to a joint and survivor annuity (an alternative that would have been chosen); certain married participants were locked into the old formula and retrospective retirement benefit calculations weren’t done.
- Marsh & McLennan Cos. was sued for offering allegedly an imprudent underperforming BlackRock LifePath target-date series and allegedly poor-performing Mercer emerging market funds. None of the four participants invested in Mercer funds and the case was dismissed because they lacked standing to sue.
- A judge dismissed a case against Exelon where the company was sued for allegedly charging excessive fees, offering underperforming investments and expensive advisory services. The judge said there was no breach of duties to offer target-date series, a domestic equity fund, an international equity fund and a fixed-income option in its $11.6 billion 401(k) plan.
- Kellogg Co. was sued for using outdated mortality tables and inaccurate actuarial interest rate assumptions. “Actuarially equivalent” joint and survivor annuity instead of standard single life annuity should have been used to calculate participants’ monthly benefit payouts, the suit said.
- FedEx Corp. was sued for using outdated mortality tables that decreases the present value of benefit payouts that are “actuarially equivalent” to single-life annuity, which led to less than expected monthly retiree payments.
- Colgate-Palmolive Co. filed a motion for summary judgment arguing that the plan fiduciary didn’t breach the duty when a 401(k) plan participant’s entire balance of $750,000 or above was stolen. The plaintiff claimed that record keeper Alight Solutions mailed a temporary PIN to her address in South Africa, which allowed perpetrator to change her contact information. Colgate-Palmolive Co. claimed that its committee wasn’t aware of the whole situation.
- General Electric will pay $61 million to settle a 6-year-old lawsuit for allegedly offering expensive but poor-performing proprietary mutual funds managed by GE Asset Management previously. GE Asset Management was sold to State Street Corp. in July 2016, and the ERISA lawsuit covers investors who invested in funds between September 2011 and August 2023.
