Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Nov. 23 — Wells Fargo & Co. enriched itself at its employees’ expense by including costly, in-house target date funds in its 401(k) plan, a new class action complaint alleges ( Meiners v. Wells Fargo & Co. , D. Minn., No. 0:16-cv-03981, complaint filed 11/22/16 ).
In the past year, several proposed class actions have targeted financial companies that include in-house investment products in their 401(k) plans. The employees bringing these suits have seen success in many instances, with courts refusing to dismiss cases against BB&T Corp., Putnam Investments LLC, Allianz Asset Management of America and Deutsche Bank.
This lawsuit, filed Nov. 22 in a Minnesota federal court, accuses Wells Fargo of intentionally boosting the 401(k) assets invested in the company’s own target date funds by defaulting participant contributions into those funds through a “quick” and “easy” enrollment process. The Wells Fargo funds consistently underperformed comparable target date funds, despite carrying fees 2.5 times higher, the suit alleges.
The suit against Wells Fargo claims that the disputed target date funds—which provide a shifting balance of stocks, bonds and cash equivalents meant to align with a participant’s intended retirement date—included an unnecessary layer of fees that made them substantially more expensive than target date funds offered by competitors Vanguard and Fidelity.
Wells Fargo workers would have earned an additional $323 million in returns if the company had offered Vanguard funds instead, according to the lawsuit.
The lawsuit also claims that Wells Fargo’s own 401(k) plan became an “important source of seed money” for the company’s target date funds, accounting for about 28 percent of the funds’ total assets.
Wells Fargo’s 401(k) plan is one of the largest in the country, with more than 350,000 participants and about $35 billion in assets.
Wells Fargo is also facing a trio of lawsuits over another investment in its 401(k) plan: the company’s own common stock. Those lawsuits, filed over a three-week span in October, followed news that Wells Fargo employees had been secretly signing customers up for unauthorized accounts to meet internal quotas and keep profits high. All three lawsuits accused Wells Fargo of wrongfully exposing employees’ retirement savings to losses stemming from the scandal.
The latest lawsuit was filed by Lockridge Grindal Nauen PLLP, Elias Gutzler Spicer LLC and Cohen Milstein Sellers & Toll PLLC.
Wells Fargo didn’t immediately respond to Bloomberg BNA’s request for comment.
To contact the reporter on this story: Jacklyn Wille in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Text of the complaint is at http://www.bloomberglaw.com/public/document/Meiners_v_Wells_Fargo__Company_et_al_Docket_No_016cv03981_D_Minn_.
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 email@example.com.
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 firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)