Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
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.
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 firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Text of the complaint is at http://www.bloomberglaw.com/public/document/v_Safeway_Inc_et_al_Docket_No_416cv04903_ND_Cal_Aug_25_2016_Court.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)