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A class action lawsuit alleging Philips North America LLC violated laws protecting its 401(k) plan participants from unreasonable fees and high cost investments was settled for $17 million.
Philips 401(k) participants alleged that they were saddled with high fees for expensive and poorly performing investment options.
The Philips class action lawsuit accused the company of failing to use the multi-billion dollar bargaining power of the 401(k) offered by the company to negotiate for lower fees and better investment options.
The Philips 401(k) class action lawsuit had been pending for two years. In addition to the payment, Philips has agreed to seek out lower cost recordkeeping services in the year and a half following the approval of the settlement agreement.
Philips will also be required to publish a communication to current plan participants explaining the risks and benefits of the plan’s money market fund investment option. An independent consultant will also be retained by Philips to review and make recommendations regarding the investment options.
“Class Counsel will both monitor compliance with the settlement for three years and take any necessary enforcement action without cost to the Class,” according to the motion in support of the Philips class action settlement agreement.
In a statement, Philips denied liability in the class action.
“Although Philips disagrees with the claims asserted in the complaint and believes that it has prudently managed the Philips North America 401(k) plan, the company has opted to settle this matter for $17 million certain non-monetary relief,” said the company. “The settlement allows Philips to avoid a protracted lawsuit and to put additional money toward plan participants’ retirement savings rather than spending it on a costly legal battle.”
In turn, the plaintiffs said that although they believed they had a good chance of winning the Philips 401(k) class action lawsuit, proceeding could result in delay due to appeals.
“This case also would require a complex trial with numerous highly experienced testifying expert witnesses with extensive reports, as well as the dedication of tremendous resources,” noted the plaintiffs’ motion in support of the Philips class action settlement agreement.
According to the Philips 401(k) class action lawsuit, more than 30,000 individuals participate in the Philips 401(k). The plaintiffs alleged that despite this collective bargaining power, Philips 401(k) plan administrators stuck with two poorly performing investment options for plan participants.
“Plaintiffs brought this action alleging that Defendant Philips North America LLC responsible for overseeing the Philips North America 401(k) Plan…breached its duties under Employee Retirement Income Security Act of 1974 (ERISA) by causing the Plan to pay unreasonable investment management and administrative fees, retaining the Vanguard Prime Money Market Fund as the sole capital preservation investment option, and selecting and retaining an investment option, the Principal Diversified Real Asset Fund, that had an insufficient performance and consistently underperformed prior to and after inclusion in the Plan,” says the plaintiffs’ motion in support of the class action settlement agreement.
The Philips 401(k) plan participants are represented by Jerome J. Schlichter and Sean E. Soyars of Schlichter Bogard & Denton LLP.
The Philips 401(k) Class Action Lawsuit is Ramsey, et al. v. Philips North America LLC, Case No. 3:18-cv01099, in the U.S. District Court for the Southern District of Illinois.
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