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.
“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.