Compliance

SafeWay ERISA Lawsuits Advance in Federal Court

Two lawsuits filed against the company alleging a failure to prudently manage retirement plan investment and administrative fees have survived preliminary motions to dismiss. 

By John Manganaro editors@assetinternational.com | March 20, 2017
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A judge has rejected motions to dismiss two Employee Retirement Income Security Act (ERISA) lawsuits filed in the U.S. District Court for the Northern District of California, Lorenz v. Safewayand Terraza v. SafeWay.

The cases have a lot of similarities, but Lorenz received a slightly subtler ruling that, strictly speaking, actually granted in part and denied in part SafeWay’s motion to dismiss. Background included in case documents offers extensive detail about the investment and revenue sharing fee agreements at question, reached first with J.P. Morgan Retirement Planning Services and later continued with Great-West.

In the underlying complaint, plaintiff Lorenz alleges that the Safeway defendants “breached their fiduciary duty of prudence by selecting funds that charged higher fees than comparable, readily-available funds, and which had no meaningful record of performance so as to indicate that higher performance would offset this difference in fees; and entering into and maintaining a revenue-sharing agreement with the plan’s recordkeepers … that resulted in excessive compensation to those entities.”

Further, Lorenz claims that the “revenue-sharing agreement constituted a prohibited transaction under ERISA for which the Safeway defendants (as fiduciaries) and Great-West (as a party in interest) are both liable.”

Lorenz seeks “reimbursement from the Safeway defendants for all losses resulting from their breaches of fiduciary duty, as well as reimbursement from both the Safeway defendants and Great-West for any compensation received as a result of transactions prohibited by ERISA.” He further “seeks to certify a class of “all participants in any employee benefit plan governed by ERISA who invested in the JPM Smartretire Passiveblend Funds from 2011 to the present where JPMRPS/Great-West served as the recordkeeper for the plan and received an asset-based revenue sharing payment in connection with the JPM Smartretire Passiveblend Funds.” He also “proposes a Safeway Subclass, which would include “all participants in the plan who invested in any of the JPM Smartretire Passiveblend Funds from the time these funds were first offered by the Plan in 2011 until they ceased to be offered in the Plan in July 2016.”

NEXT: Motion to dismiss proves partially successful