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Transamerica Corp. has reached a $5.4 million settlement with around 24,500 current and former employees over allegations it mismanaged workers’ 401(k) investments.
The company asked an Iowa federal judge to sign off on the settlement of the 2018 Employee Retirement Income Security Act (ERISA) class action lawsuit on Wednesday, Law360 reported.
Current and former employees accused the life insurance and financial services company of abdicating its responsibilities under ERISA to make prudent investment decisions for its workers. They allege it did so by letting six underperforming company-managed funds stay on its 401(k) plan’s investment.
Transamerica asked an Iowa federal judge to throw out the class action lawsuit in 2019, saying the claims had been litigated in a previous dispute. However, the judge ruled that the class action lawsuit should progress, as the previous legal action centered on 401(k) plan fees, not investment management. The lawsuit was certified as a class action in 2020.
According to the class action lawsuit, Transamerica let the investment funds it managed and placed in its 401(k) underperform their benchmarks by as much as 30% over a 10-year period, Law360 reports.
If the judge approves the current settlement agreement, Transamerica will have to create a $5.4 million fund for members of the Class, which will also go towards legal fees and expenses.
The settlement also requires Transamerica to continue training staff on how to uphold ERISA responsibilities in the management of its 401(k) plan.
Charles Field of Sanford Heisler Sharp LLP, one of the lawyers for the Class, told Law360 that he was pleased the settlement had been reached after having litigated the case vigorously.
“Now, rather than going through another two years of litigation, we can get money in the pockets of these plan participants,” Field said.
In 2018, life insurance policyholders secured a $195 million settlement with Transamerica in return for ending a class action lawsuit over unexpected rate increases. Lead plaintiffs alleged in a class action lawsuit that Transamerica violated contracts with policyholders when it unfairly increased their monthly rates.
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The class is represented by Charles Field, Kevin Sharp, Robert Van Someren Greve and Shaun Rosenthal of Sanford Heisler Sharp LLP, and by J. Barton Goplerud, Brandon M. Bohlman and Brian O. Marty of Shindler Anderson Goplerud & Weese PC.
Transamerica Corp. and the trustees of the Aegon USA Inc. Profit Sharing Trust are represented by Wilford H. Stone of Lynch Dallas PC, and by Catalina J. Vergara and Randall W. Edwards of O’Melveny & Myers LLP.
The Transamerica ERISA Class Action Lawsuit is Karg et al. v. Transamerica Corp. et al., Case No. 1:18-cv-00134, in the U.S. District Court for the Northern District of Iowa.
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