Posted January 5th, 2021.
CHICAGO, January 5, 2021 – Sanford Heisler Sharp filed a class complaint today in the U.S. District Court of Northern Illinois alleging the ways in which the Allstate Corporation breaches basic fiduciary duties under ERISA and violates its employees’ trust by mismanaging their retirement funds. Also named as defendants are the Plan committees and their members that provide investment advice and services to the Plan.
The complaint alleges Allstate failed to remove from its employee retirement plan a suite of ten target retirement date funds that have underperformed their investment benchmarks and other similar collective investment funds significantly for a decade. The consequences to employees are substantial: the Allstate 401(k) Savings Plan has cost its employees millions of dollars in retirement savings.
The complaint further alleges that Allstate arranged for two investment advisers, Financial Engines and Alight Financial Advisors, to sell investment advisory services to plan participants. Under those arrangements, Allstate allowed the two investment advisers to charge plan participants advisory fees that were much higher than the fees charged by competitors offering similar services. Additionally, Allstate condoned an arrangement in which Financial Engines shared its investment advisory fees with the Plan’s recordkeeper. Although Allstate replaced Financial Engines with Alight Financial Advisors in 2017, Alight simply re-hired Financial Engines as a “sub adviser.” Thus, says the complaint, the new arrangement added another layer of inefficiency that drove up the total fees.
The Plan has approximately 44,000 participants and beneficiaries.
David Sanford, chairman of Sanford Heisler Sharp and counsel for Plaintiff and the proposed class, noted, “ERISA’s fiduciary standards are strict and exacting. Since 2011, Allstate has offered its employees these poor-performing target retirement date options. Those options have been detrimental to the retirement savings of Plan participants. Allstate and the Plan committees should be held to the highest standard as fiduciaries.”
The complaint describes how Allstate employees invest billions of dollars in the company’s Plan. Given the company’s sophistication and extensive assets, employees trust Allstate to construct a stellar retirement plan. Yet, according to the complaint, Allstate failed to prudently monitor the investment performance of the Plan options as required by ERISA. As a result, Allstate kept funds despite chronic underperformance, causing the Plan, and hence participants, to suffer significant losses to their retirement savings.
Charles Field, a partner at Sanford Heisler and counsel for Plaintiff and the proposed class, added, “Plan participants have invested over $700 million in these ten target retirement date funds. As a fiduciary to the Plan, Allstate is obligated to monitor the Plan to ensure these investments are prudent. This obligation is especially critical where these ten funds make up almost a third of the Plan’s assets. We allege that Allstate neglected their sacrosanct duties.”
As relief, Plaintiff and the class seek (1) approximately $70 million for financial losses to Plan participants and beneficiaries resulting from the Plan’s underperforming investments and excessive fees; (2) reform to the Allstate Plan that would require divestiture of imprudent investments and ensure only reasonable investment advisory expenses; and (3) the removal of the fiduciaries who have violated their duties to the Plan’s participants and beneficiaries under ERISA.
About Sanford Heisler Sharp
Sanford Heisler Sharp is a national public interest class-action litigation law firm with offices in New York, Washington, D.C., San Francisco, San Diego, Nashville, and Baltimore. Sanford Heisler Sharp focuses on employment discrimination, wage and hour, whistleblower, criminal/sexual violence, and financial services matters. The firm has recovered over $1 billion for its clients through many verdicts and settlements.
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