Safeway, Great-West Sued Over JP Morgan Funds in 401(k) Plan

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By Carmen Castro-Pagan

Aug. 26 — Safeway Inc. and Great-West Financial RPS LLC face a lawsuit accusing them of breaching their ERISA fiduciary duties by allegedly selecting JP Morgan’s high-fee target-date funds as investment options for the supermarket chain’s 401(k) plan ( Lorenz v. Safeway, Inc. , N.D. Cal., No. 4:16-cv-04903, complaint filed 8/25/16 ).

Safeway offered high-fee investment options and agreed to an expensive arrangement for record-keeping services that benefited Great-West in violation of the Employee Retirement Income Security Act, according to the complaint, filed Aug. 25. The proposed class action also alleged that a large portion of the fees charged by JP Morgan’s funds and paid by the plan were kicked back to Great-West as compensation for its services.

This is the second lawsuit filed this year against Safeway involving allegations that it violated ERISA. In July, Safeway was accused of charging high administrative fees and selecting and retaining “opaque, high-cost, and poor-performing investment options” in its retirement plan.

Great-West believes that the lawsuit and its claims are without merit and it will defend the matter vigorously, a company representative told Bloomberg BNA August 26 via e-mail.

Target-Date Funds

The new lawsuit, filed by plan participant Dennis M. Lorenz, who seeks class treatment, takes aim at target-date funds managed by JP Morgan Asset Management, a non-defendant in the action.

Target-date funds aim to enable a participant to address retirement savings needs by investing in a single fund that takes into account when the person will retire, turning more conservative in its investments as the person approaches retirement age. Despite their popularity among plan participants, they have been the subject of complaints against Fujitsu Technology and Business of America Inc., Intel Corp. and Reliance Trust Co.

The JP Morgan funds charged participants between 47 and 50 basis points when allegedly there were available other less expensive funds, such as those offered by Vanguard, the complaint said. The revenue paid out to Great-West, through its Empower Retirement business, more than doubled between 2011 and 2014, while the number of participants in the plan decreased, the complaint said.

Safeway’s breaches allegedly caused participants to pay excessive and improper fees, thus reducing their investment returns, the complaint said.

Safeway didn’t immediately respond to Bloomberg BNA’s request for comments.

Schneider Wallace Cottrell Konecky Wotkyns LLP represents the proposed class.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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