Posted January 2nd, 2019.
By Emily Brill
Law360 (January 2, 2019, 6:54 PM EST) — A proposed class of roughly 17,000 participants in Transamerica Corp.’s 401(k) plan have sued the financial services company in Iowa federal court, claiming it flouted the Employee Retirement Income Security Act by placing six allegedly underperforming proprietary funds on the plan’s investment lineup.
Calling the alleged underperformance “neither modest nor temporary,” the proposed class claimed to have lost hundreds of millions of dollars due to Transamerica’s alleged failure to properly manage their retirement savings.
“Year after year, Transamerica selected and retained poor-performing proprietary investment portfolios for the Plan when superior investment options were readily available,” the proposed class wrote in the complaint, which they announced Wednesday.
The proposed class accused Transamerica of sitting by and watching as its funds underperformed their benchmarks by as much as 30 percent over a 10-year period.
The Dec. 28 complaint lobbed two claims at Transamerica, accusing it of breaching its ERISA-imposed fiduciary duty of prudence by failing to remove the six funds and of failing to monitor the 401(k) plan’s investment committee and 20 unnamed individuals expected to oversee the fund.
“There’s nothing inherently wrong with offering your own funds to your employees, except when year in and year out they underperform not only their investment benchmarks but comparable funds that have similar investments and strategies,” said Charles Field, a partner at Sanford Heisler Sharp LLC who, alongside colleagues, is representing the proposed class.
Through a spokesperson, Transamerica on Wednesday denied the allegations.
“Our business complies with all applicable state and federal statutes and regulations, and participates in periodic regulatory reviews. The allegations of wrongdoing against Transamerica in the recently filed lawsuit — which focuses on six ‘proprietary investment portfolios’ in the Plan — are false and we will vigorously oppose the case,” the company said in a statement.
The proposed class is represented by Charles Field, David Sanford, Alexandra Harwin and David Tracey of Sanford Heisler Sharp LLP, and J. Barton Goplerud of Shindler Anderson Goplerud & Weese PC.
Counsel information for Transamerica was not available Wednesday.
The case is Karg et al. v. Transamerica Corp. et al., case number 2:18-cv-01042, in the U.S. District Court for the Northern District of Iowa.
–Editing by Breda Lund.