Wells Fargo & Co. is once again in the crosshairs of a proposed class action challenging the in-house investment funds in the company’s 401(k) plan.
The lawsuit, filed Nov. 17 in a Minnesota federal court, accuses the banking giant of filling its 401(k) plan with expensive and poorly performing investment funds that earned fees for Wells Fargo. The company is also accused of failing to use its “enormous size” as the third-largest 401(k) plan in the country—with nearly $40 billion in assets at one point—to negotiate for lower fees ( Wayman v. Wells Fargo & Co. , D. Minn., No. 0:17-cv-05153-PJS-KMM, complaint filed 11/17/17 ).
The claims echo those in a 2016 lawsuit that Wells Fargo defeated when a federal judge determined that the company couldn’t be liable under the Employee Retirement Income Security Act for “failing to choose the cheapest fund” for its 401(k) plan. That decision is currently on appeal in the U.S. Court of Appeals for the Eighth Circuit, where Wells Fargo has received support from industry groups including the U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association.
Wells Fargo’s win in that case was a rarity in ERISA litigation. Of more than two dozen financial companies to have been sued over in-house 401(k) investments in the past few years, Wells Fargo is the only one to have had all claims against it dismissed on their merits. Many judges have ruled against the financial companies, refusing to dismiss cases against American Century, Insperity,Edward Jones, BB&T, Allianz, and Franklin Templeton.
This newer lawsuit against Wells Fargo also attacks the company’s decision to keep a money market fund in its 401(k) plan when a “cheaper and better performing stable value fund” was already in the plan.
The lawsuit was filed in the U.S. District Court for the District of Minnesota by Lockridge Grindal Nauen PLLP and Kessler Topaz Meltzer & Check LLP. It seeks to represent a proposed class of “hundreds of thousands” of people who participate in Wells Fargo’s 401(k) plan.
In addition to naming Wells Fargo and its benefits and human resources committees as defendants, the lawsuit also names more than 20 individuals, including current Wells Fargo Chief Executive Officer Timothy J. Sloan and several members of the board.
Wells Fargo declined to comment on the lawsuit.
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