$4.9M Will Resolve Waddell & Reed ERISA Class Action Settlement

Waddell & Reed 401(k) beneficiaries have reportedly secured a $4.9 million settlement in a class action lawsuit alleging financial planning company violated the Employee Retirement Income Security Act.

Members of Waddell & Reed’s retirement plan claimed in their class action lawsuit that the company chose poor investment options for plan participants – so poor, in fact, that the company violated protections under ERISA.

ERISA is a federal law that was enacted to protect employee retirement and pension plans, as well as certain disability insurance plans.

The law holds employers and financial companies to strict standards, called fiduciary duties, when it comes to investment options for those plans. Companies must also keep adequate records and provide competent information to plan participants about their investments.

According to the Waddell & Reed class action lawsuit filed in 2016, the financial company violated their fiduciary duties under ERISA. Specifically, the company failed to provide investment options that had historically performed better and were less expensive than options available to Waddell & Reed 401(k) plan participants.

The financial company admits no wrongdoing under the terms of the Waddell & Reed class action settlement. However, Class Members will be credited a portion of the $4.9 million Waddell & Reed class action settlement automatically.

“Under the terms of the Settlement, Defendant Waddell & Reed Financial, Inc. will cause its fiduciary insurance carrier, RLI Insurance Company (‘RLI’), to pay $4.875 million into a common fund for the benefit of Class Members, which will be allocated pro rata among Class Members in proportion to their account balances in the Plan during the Class Period,” states the plaintiff’s motion.

According to the motion for approval of the class action settlement, Class Members can either have the settlement award included in their retirement account or they can receive a check.

Waddell & Reed will also be required to retain an independent investment advisor to review investment options for the plan over the next three years.

“The Settlement also provides for ongoing prospective relief for at least three years in the form of an independent investment advisor to assist in making decisions about managing the Plan and its investments,” notes the Waddell & Reed class action settlement agreement.

The attorneys for the plaintiff will receive a third of the $4.9 million settlement award. The lead plaintiff who initiated the Waddell & Reed class action lawsuit, Stacy Schapker, will receive a $20,000 award.

The motion for preliminary approval of the class action settlement contends that the proposed Class of plan participants should be certified for settlement purposes.

“Although there are strong defenses to the alleged claims and defendants deny any and all liability with respect to the allegations, all parties have determined that settlement is in the best interests of the litigants, the plan and the settlement class members,” noted a representative for Waddell & Reed in a statement to Law360.

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The proposed Class is represented by Boyd A. Byers, Charles E. McClellan, Alexandra N.C. Rose and Scott C. Nehrbass of Foulston Siefkin LLP.

The Waddell & Reed Employee Retirement Class Action Lawsuit is Schapker v. Waddell & Reed Financial Inc., et al., Case No. 2:17-cv-02365, in the U.S. District Court for the District of Kansas.