Ameriprise Financial (AMP) has agreed to pay $27.5 million to settle a class-action lawsuit that alleged it broke its fiduciary duty to about 24,000 current and former participants in its own retirement plan.
The suit was instigated against the firm in 2011 by Jerome Schlichter of St. Louis, the same lawyer that has brought similar issues before the U.S. Supreme Court recently.
According to the lawsuit, Ameriprise failed to ensure the reasonableness of the fees it charged for administrative services. The suit also questioned certain investment options being managed by a subsidiary.
While Ameriprise has denied the allegations, it appears to have settled the matter just before the case was set to go to trial in April.
“We have a strong 401(k) plan that is administered for the sole interests of participants. The settlement does not require any changes to our plan, which will maintain the existing broad and competitive selection of investment options and features,” said Amerprise in a statement shared with our sister site, ThinkAdvisor. “The plan has always included funds we manage, as well as funds from other companies and a brokerage window that offers participants additional choice.”
Eight of 13 lawsuits brought by Schlichter have been settled, according to The Wall Street Journal. Lockheed Martin agreed to a payment of about $62 million, for instance.
As part of its settlement, Ameriprise is set to seek bids for the plan’s recordkeeping functions and to pay a flat or per-participant fee for such services, while agreeing to specific fee disclosures and pursing the lowest-cost investment options.
“The non-monetary relief obtained, in addition to the financial terms, not only significantly benefits Ameriprise’s employees and retirees but also sets a standard for best practices for plan sponsors,” stated Schlichter, in a statement shared with the Star Tribune of Minneapolis. “Competitive bids and enhanced communications and disclosure will increase the value of the employees’ and retirees’ 401(k) plans for years to come.”
In a 2012 ruling, a judge refused to dismiss the lawsuit, which included accusations that Ameriprise had loaded up the company 401(k) plan with expensive, underperforming mutual funds and was charging employees excessive fees.