A recent lawsuit against Wells Fargo is the second of its kind and has been filed due to alleged violations of ERISA. ERISA is the Employee Retirement Income Security Act of 1974, a federal law that affects many private employers.
ERISA outlines a complex set of standards and rules for retirement and welfare benefit plans to protect both employees and employers. In addition to outlining disclosure rules for plan members, establishing reporting responsibility, and enacting procedural safeguards, ERISA includes rules about how plans must be administered to protect employees.
Employees who suspect a violation of ERISA for any reason may have grounds to pursue legal claims directly against the employer or other liable parties.
Allegations Outlined in New Wells Fargo 401(K) Lawsuit
The new ERISA lawsuit was filed due to alleged violations of the financial and best-interest protection portion of the federal law. These guidelines state that funds must be protected and delivered in a manner that puts the best interests of the plan members as the top priority.
The Wells Fargo 401(k) lawsuit argues that use of underperforming proprietary investment funds that are also high cost allowed Wells Fargo to benefit from the profits while costing participants millions of dollars in potential retirement savings. According to the lawsuit, the Wells Fargo made these investment decisions out of self-interest and failed to disclose such a conflict of interest to the original plaintiff as well as members of the class.
In the last year, 401(k) litigation regarding excessive plan fees has increased significantly and multiple lawsuits have been filed against asset managers, including Franklin Templeton Investments, American Century Investments, and MFS Investment Management.
The Wells Fargo 401(k) lawsuit alleges that the $40 billion in assets in that retirement plan and the more than 350,000 participants were affected by negative behaviors engaged in by the plan managers. Underperforming and high-cost funds were allegedly selected by the plan managers to allow Wells Fargo to benefit from this arrangement while diminishing the potential returns for those who were counting on it for their retirement.
According to the Wells Fargo 401(k) lawsuits, the fiduciaries of the 401(k)-plan breached their duties of prudence and loyalty by failing to establish an unbiased review process to evaluate the cost and performance of investment options.
The Wells Fargo 401(k) lawsuit explains that the retirement plan included a proprietary target date fund suite, money market funds, international equity as well as proprietary small cap and large cap funds. Some of those non-proprietary funds were extremely costly for plan participants but did not perform as well as other options.
Recently, a similar lawsuit was dismissed against Wells Fargo that alleged breach of fiduciary duty as well.
If you or someone you know believes that you have an ERISA claim due to a breach of fiduciary duty, you need to consult with the experienced attorneys at Bradley/Grombacher today. Fill out this form now for a free consultation.
Note: Bradley/Grombacher is not representing the plaintiff in this lawsuit.