Case DescriptionCase Type: ERISA
Sanford Heisler Sharp filed a class complaint in the U.S. District Court of Northern Illinois alleging that the Allstate Corporation breached basic fiduciary duties under ERISA by mismanaging the retirement funds that employees had entrusted in its care. The complaint describes how Allstate failed to prudently monitor the investment performance of the Plan options as required by ERISA. As a result, Allstate kept certain target date funds despite chronic underperformance, causing the Plan, and hence participants, to suffer significant losses to their retirement savings.
The complaint further alleges that Allstate allowed two investment advisers to charge its employees unreasonable fees for managed account services. As a part of that, the complaint alleges that Allstate turned a blind eye to a kickback scheme between one of the investment advisers and the Plan’s recordkeeper. The arrangement added another layer of inefficiency that unreasonably drove up the total fees.
Plaintiffs Katherine Cutrone, Mary Ellen Morgan, Michael Smutz, Stan Smith, Mary Beth Am Rhein, Valeri Reinecke and Eddie Yousif filed the case on behalf of themselves and approximately 44,000 current and former plan participants and their beneficiaries. Named as Defendants are the Allstate Corporation, and the 401(k) Plan’s administrative and investment committees. The investment advisers alleged to have charged unreasonable fees are Financial Engines Advisors, LLC and Alight Financial Advisors, LLC.
David Sanford, chairman of Sanford Heisler Sharp and counsel for Plaintiffs 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.”
Charles Field, a partner at Sanford Heisler Sharp and counsel for Plaintiffs 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.”
Commenting on the excessive fee allegations, Alexandra Harwin, a partner at Sanford Heisler Sharp and counsel for Plaintiffs and the proposed class, commented, “Plan fiduciaries have an obligation to ensure that participants are charged only reasonable expenses. Allstate appears to have ignored the fees its investment advisers were charging, and the financial relationship between its investment adviser and the Plan’s recordkeeper, for years. Allowing an investment adviser to charge excessive fees for its services, on top of the fees participants already pay, can have a tremendous impact on a participant’s total savings. The law does not allow fiduciaries to turn the other way while third parties charge an unreasonable fee to Plan participants, which is what we allege that the Allstate fiduciaries did here.”
Leigh Anne St. Charles, senior litigation counsel at Sanford Heisler Sharp and counsel for Plaintiffs and the proposed class, added, “Workers depend on their employer and the Plan’s fiduciaries to have their best interests in mind when making decisions that affect an employee’s retirement savings. We are proud to represent the men and women that bravely came forward to take a stand against powerful financial institutions on behalf of thousands of workers that trusted Allstate with their hard-earned savings.”
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.
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