Bench Trial Ordered for Nationwide ERISA Case

A federal judge ordered a bench trial in a long-running lawsuit accusing Nationwide Mutual Insurance Co. and its affiliates of violating federal retirement law by overcharging employees who invested in a company-backed retirement fund.

In Sweeney et al. v. Nationwide Mutual Insurance Co. et al., Chief Judge Sarah Morrison of the U.S. District Court for the Southern District of Ohio, Eastern Division, ruled that former Nationwide Mutual Insurance Co. employees may proceed to trial with their complaint alleging the company’s 401(k) plan improperly included an affiliated stable value fund that gave company employees less favorable terms than those available to investors outside the defined contribution plan.

The complaint, originally filed in March 2020, alleges the defendants failed to negotiate comparable contractual terms for the 401(k) plan’s guaranteed investment fund and the company’s defined benefit plan. Consequently, the 401(k) plan’s GIF paid a significantly lower interest rate than the identical investment in the pension plan.

The GIF is a fixed annuity that serves as a component of the plan’s default investment option. According to court filings, 86% of plan participants had some portion of their account invested in the guaranteed investment fund as of 2020, totaling $1.75 billion or 30% of plan assets.

Nationwide denies liability, asserting the fund produced competitive returns and met all standards required under the Employee Retirement Income Security Act of 1974. The company further claims statutory safe harbor protections apply, shielding it from legal responsibility.

Morrison dismissed the defenses, ruling Nationwide failed to demonstrate its entitlement to the safe harbors.

The complaint concerns Nationwide Life’s calculation of the fund’s crediting rate—the guaranteed return promised to participants. The plaintiffs allege that Nationwide Life buried excessive fees—referred to as the “spread”—within this rate and that plan fiduciaries neglected to monitor or renegotiate these charges. Nationwide maintains that tracking the crediting rate sufficed, as it incorporated all costs.

The court determined that conflicting expert analyses established factual questions about whether fees surpassed market rates and whether fiduciaries fulfilled their ERISA duties of prudence and loyalty. Morrison also noted evidence showing the investment committee restricted its consultant’s examination of the guaranteed investment fund, casting doubt on the adequacy of fiduciary oversight.

Morrison said that Nationwide created a “palpable tension” by hiring Callan as an independent consultant to review the fund, then withholding certain information—such as fees and spread—and refusing to follow recommendations to exit the fund. Morrison said these actions “demand further exploration.”

The court granted Nationwide partial summary judgment by dismissing the charge of breaching several fiduciary duties, but the court allowed the core fiduciary-duty, prohibited-transaction and self-dealing claims to proceed.

A Nationwide spokesperson said the company does not comment on pending litigation.

The Nationwide Savings Plan had approximately $8.3 billion in assets with nearly 43,000 participants at the end of 2024, according to its latest Form 5500 filing.

Zagrans Law Firm LLC and Cohen Milstein Sellers & Toll PLLC represent the plaintiffs, and Jones Day represents Nationwide.