Financial firm JP Morgan has agreed to pay $75 million to settle claims that the company violated the Employee Retirement Income Security Act (ERISA).
Several cases that were ultimately consolidated into one JP Morgan ERISA lawsuit alleged that company breached its fiduciary duties under ERISA when it caused its stable value funds to invest in the Intermediate Bond Fund and Intermediate Public Bond fund. The plaintiffs alleged these actions were imprudent and placed stockholder retirement funds at risk.
According to the JP Morgan ERISA lawsuit, the financial firm further violated its fiduciary duties to its clients by engaging in prohibited transactions. The plaintiffs claimed that JP Morgan brokers knew the transactions were prohibited, but executed them anyway, further placing client retirement funds at risk.
The JP Morgan ERISA lawsuit alleges that their protected retirement funds were put at risk when the financial firm used them to invest in highly leveraged assets, including, among other thing, mortgage-related assets. Ultimately, the risky transactions lost participants’ retirement funds.
“After extensive arm’s length negotiations,” say court documents regarding the proposed settlement, the parties agreed to settle the dispute in August of 2015.
“The Settling Plaintiffs and Class Counsel consider it desirable and in the Class Members’ best interests that the claims in the Class Action be settled on the terms set forth below, and they have concluded that such terms are fair, reasonable, and adequate and that this Settlement will result in significant benefits to the Class,” states the settlement agreement in the JP Morgan ERISA lawsuit.
JP Morgan does not admit any liability under the settlement agreement, but will pay former plan participants $75 million. The class action would have represented participants in over 300 of JP Morgan retirement plans that were affected by the risky investments.
Those who participated in ERISA plans, as well as beneficiaries of those plans, who were invested in any JP Morgan Stable Value Fund that invested in the Intermediate Bond Fund or Intermediate Public Bond Fund between Jan. 1, 2009 and Dec. 31, 2010 will be entitled to a portion of the settlement agreement. There were also three subclasses.
Class members will be mailed notice of the JP Morgan ERISA settlement. Class members who are still active accounts with JP Morgan will receive an allocation into their account. Class members without an active account will receive a check.
According to the settlement notice, allocations to individual class members will be based upon their 401(k) records.
ERISA and Fiduciary Duty
Retirement plans are protected under the Employee Retirement Income Security Act of 1974 (ERISA) as well as for disability insurance, life insurance and health plans. Under ERISA, companies are required to meet the following standards;
- Participants must be provided information about their plan.
- Minimum standards for participation, vesting, funding, and benefit accrual must be set.
- Plan fiduciaries must meet principles of conduct.
- Plan fiduciaries must be overseen and held accountable.
- Participants have the right to file a lawsuit against fiduciaries if they breach their duty.
If you suspect that your retirement account is being mismanaged, contact an experienced ERISA attorney at Bradley/Grombacher today.