Allstate Faces Additional ERISA Fiduciary Breach Lawsuit

A new complaint filed in Illinois echoes allegations leveled against the insurance company in a complaint from November.

A new complaint filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, accuses Allstate of various breaches of fiduciary duty and prohibited transactions under the Employee Retirement Income Security Act (ERISA).

Many features of the lawsuit echo the numerous other ERISA fiduciary breach lawsuits filed against well-known employers—including a separate suit already filed against Allstate.

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“Throughout the class period, Allstate defendants breached these fiduciary duties,” the complaint states. “In 2011, and again in 2017, they loaded the plan with a suite of poorly performing funds called the Northern Trust Focus Target Retirement Trusts. Allstate defendants kept these funds throughout the class period despite their continued underperformance.”

Northern Trust is not a named defendant in the lawsuit, though the investment options in question here have been cited in other, previous lawsuits. For example, in August 2019, a group of current and former participants in the Walgreen Profit-Sharing Retirement Plan filed a similar complaint

The new complaint states that the Allstate defendants “mishandled the process of picking the Northern Trust funds.”

“Despite a market teeming with better-performing alternatives, Allstate selected the Northern Trust funds in 2011,” the complaint alleges. “At the time, the Northern Trust Funds were in their nascent stage, with only a one-year investment track record, and a poor one at that. From 2011 through 2014, the time leading up to the start of the relevant class period, the Northern Trust funds significantly underperformed both their benchmark indexes and comparable target-date funds [TDFs]. Predictably, the Northern Trust Funds continued underperforming from 2015 through the present.”

The complaint then states that “virtually all of these Northern Trust Funds performed in the 70th to 90th percentile—worse than 70% to 90% of their peer funds.” It suggests the plan has lost “upward of $70 million in retirement savings since 2015 because of Allstate’s decision to retain the Northern Trust funds instead of removing them.”

Though neither of the companies are named as defendants, the complaint also includes familiar allegations involving Financial Engines and Alight Financial Advisors.

“As fiduciary to the plan, Allstate arranged for two outside investment advisers—Financial Engines and Alight Financial Advisors—to provide investment advice directly to plan participants for a fee,” the complaint states. “In doing so, Allstate defendants are obligated to act for the exclusive benefit of the plan’s participants and beneficiaries, to assure that plan expenses are reasonable and to ensure the plan’s investments are prudent. Instead, Allstate neglected these sacrosanct duties. It allowed participants to pay unreasonably high fees to the plan’s investment advisers, first Financial Engines and later Alight Financial Advisors. It also constructed a plan with far too many layers of fees and turned a blind eye to a kickback scheme between Financial Engines and the plan recordkeeper, Aon Hewitt.”

Allstate has not yet responded to a request for comment about the new complaint, the text of which is available here.

Truist Sells 401(k) Recordkeeping, Advisory Businesses

Ascensus and Empower will take on parts of the 401(k) recordkeeping business, while OneDigital will assume the 401(k) investment advisory business.

Truist Financial’s 401(k) business has been acquired.

Its institutional 401(k) investment advisory services business was sold to OneDigital Investment Advisors in a transaction that closed December 31. Truist has signed definitive agreements to sell its institutional 401(k) recordkeeping businesses to Ascensus and Empower Retirement in transactions scheduled to close in the first quarter of 2021.

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Ascensus will acquire the heritage BB&T bundled recordkeeping retirement business from Truist Bank. Ascensus will now serve as the recordkeeper for the heritage BB&T plans, as well as the plans for which it currently serves as outsourced recordkeeper. The Truist business acquired by Ascensus covers more than 1,200 plans, with approximately 125,000 participants and $5 billion in assets.

The transaction will increase Ascensus’ retirement plan count to more than 115,000, its participant base to more than 3.4 million and its retirement plan assets under administration to more than $192 billion. Ascensus was ranked No. 5 by 401(k)s with less than $10 million in assets in PLANSPONSOR’s 2020 Recordkeeping Survey.

Ascensus explains that it has partnered with Truist for the past 12 years as the outsourced administrator for a segment of its retirement business. The long-standing relationship led Truist to select Ascensus to service both the current Ascensus-administered plans as well as the legacy plans that were previously administered in-house.

Empower will acquire the heritage SunTrust 401(k) recordkeeping business, which includes approximately 300 retirement plans consisting of more than 73,000 plan participants and $5 billion in plan assets. Empower was ranked No. 2 by total 401(k) assets in PLANSPONSOR’s 2020 Recordkeeping Survey.

Empower also has a long-standing relationship with Truist, currently providing recordkeeping services through its Empower Institutional unit. The company says for this reason, the transition is expected to be seamless and will not require conversions.

OneDigital Investment Advisors will acquire the investment advisory business for approximately 1,200 plans, representing $10 billion in plan assets. Empower says OneDigital will serve as the adviser to a majority of the plans that Empower will administer.

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