Transamerica to Settle $5.4 Million Over ERISA Suit
Transamerica 401(k) plan trustees have agreed to pay $5.4 million to settle an Employee Retirement Income Security Act (ERISA) class action lawsuit.
Transamerica Bends the Knee
Transamerica sought a federal judge in 2019 to dismiss the class action case, claiming that the allegations had already been resolved in a previous dispute. The judge, however, ruled that the class action should proceed, as the earlier legal action focused on 401(k) plan fees and not on investment management. In 2020, the lawsuit was certified as a class action.
According to the federal lawsuit filed in Iowa, the underperforming funds in Transamerica’s retirement plan cost employees between $15 million and $20 million.
On Wednesday, the company told an Iowa federal judge that it had signed a $5.4 million settlement for an ERISA class action, which alleged that it filled its 401(k) plan with failing proprietary investments.
Current and former employees charged the life insurance and financial services company with abdicating its ERISA-mandated responsibility to make prudent investment choices on behalf of its employees. They argue that it did so by investing in 6 underperforming company-managed funds through its Transamerica 401(k) plan.
As stated in the class action lawsuit, Transamerica allowed investment funds it managed and placed in its 401(k) to underperform their benchmarks by up to 30% over a 10-year period.
Karg et al. v. Transamerica Corp. et al.
The company will be required to construct a $5.4 million fund for Class members, covering legal fees and expenses if the judge approves the current settlement agreement. Additionally, the Settlement compels Transamerica to continue training employees on complying with ERISA requirements when managing its 401(k) plan.
The lawsuit covers roughly 17,000 people. Their share of the Settlement will be decided by the length of time they invested in the funds and the amount of money they invested.
In 2018, Transamerica agreed to settle $195 million to resolve a class action lawsuit brought by life insurance policyholders for unexpected premium increases. In it, the plaintiffs argued that Transamerica violated policyholder contracts by unfairly increasing policyholders’ monthly prices.
Editor’s Note on Transamerica 401(K) Settlement 2021:
This is written to inform you of Transamerica’s $5.4 Million Settlement to their current and former employees, alleging that the company disregarded the ERISA’s responsibility to make appropriate investment choices for its employees.
Case Name & No.: Karg et al. v. Transamerica Corp. et al., Case No. 1:18-cv-00134
Jurisdiction: U.S. District Court – Northern District of Iowa
Products/Services: Employee Retirement Income Security Act (ERISA)
Allegations: Transamerica is allegedly offering numerous poor-performing retirement plans to its employees
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