The U.S. Department of Labor (DOL) has announced the settlement of a class action Employee Retirement Income Security Act (ERISA) lawsuit for more than $124.6 million on behalf of the more than 9,000 participants in the DST Systems Inc. 401(k) plan. The DOL and private plaintiffs alleged that DST and other defendants, including New York City investment management firm Ruane, Cunniff, & Goldfarb Inc., had failed to manage the profit-sharing portion of its retirement plan properly.
The DOL filed suit against DST, a Kansas City information processing software and service provider, in a New York federal district court in October 2019. In its suit, the DOL claimed that DST and its fiduciaries had violated ERISA by failing to act prudently and loyally in diversifying the plan’s assets.
The DOL alleged that the plan managers invested plan assets primarily in a select group of securities that failed to minimize the risk of large losses to the participant investors. More specifically, the investment manager invested more than 45% of the plan assets in the stock of Valeant Pharmaceuticals International, which then decreased dramatically in value. As a result, plan participants experienced losses of over $100 million to their retirement savings. In this case, the settlement illustrates the fiduciary duty of investment managers to diversify plan holdings to maximize profits and minimize losses and the duty of other fiduciaries to monitor the investment managers’ actions.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.