Salesforce Class Action Claims 401(k) Mismanagement

Salesforce has been hit with a class action lawsuit by former employees claiming that the company mismanaged its 401(k) pension plan, resulting in high costs for workers.

Plaintiffs Tim Davis, Gregor Miguel, and Amanda Bredlow say Salesforce did not attempt to reduce expenses or look closely at each investment option that was offered in the plan.

In addition, the plaintiffs argue that Salesforce did not use the lowest cost options for numerous mutual funds in the plan.

According to the Salesforce class action, the company didn’t consider alternatives to the mutual funds within the plan, despite the fact that these alternatives would have lower fees and, in some cases, better performance histories.

Davis and the other two plaintiffs in this Salesforce class action lawsuit say that they did not have actual knowledge of Salesforce’s decision-making process regarding the plan, as this information is only within the possession of the defendant.

“Having never managed a large 401(k) plan such as the plan, Plaintiffs lacked actual knowledge of reasonable fee levels and prudent alternatives available to such plans,” the Salesforce class action notes.

The plaintiffs acknowledge that changes were made to the plan in 2019, in which certain investment options were adapted to lower class shares. However, the former Salesforce employees maintain that these changes were “far too little and too late” as the damage from previously high costs had already been “baked in.”

“There is no reason to not have implemented these changes by the start of the Class Period when the majority of lower-class shares were available,” the Salesforce class action lawsuit claims.

The plaintiffs allege that the actions of the defendants were contradictory to the actions of a reasonable fiduciary and have cost the plan and its beneficiaries millions of dollars.

As required by the Employee Retirement Income Security Act of 1974 (ERISA), the defendants are required to administer and manage the plan solely in the interest of the plan’s participants and beneficiaries.

Thus, the duty of loyalty ensures that the defendant shows complete loyalty to the participants and set aside the consideration of third parties, say the plaintiffs. In addition, the plaintiffs argue that investments for the plan should not not favor the provider over the participants of the plan.

Despite these rules, Salesforce retained in the plan many mutual fund investments that cost more money than necessary and were not justified to the value of the plan, the plaintiffs claim. Additionally, Salesforce allegedly “failed to leverage the size of the Plan to negotiate for lower expense ratios for certain investment options maintained and/or added to the Plan during the Class Period.”

The plaintiffs maintain that they are entitled to benefits in the amount of the current value of their accounts in addition to what their accounts would have been worth if not for the breaches of fiduciary duty by the defendant.

Potential Class Members include individuals who were participants in or beneficiaries of the Salesforce 401(k) pension plan after March 11, 2014.

Do you participate in a 401(k) that you feel is being mismanaged? Leave a message in the comments section below.

The plaintiffs are represented by Daniel L. Germain of Rosman & Germain LLP and Mark K. Gyandoh and Donald R. Reavey of Capozzi Adler PC.

The Salesforce 401(k) Class Action Lawsuit is Davis, et al. v. Salesforce.com Inc., et al., Case No. 3:20-cv-01753, in the U.S. District Court for the Northern District of California.

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