Without any admissions of liability as to any claims, or as to the weakness or strength of either party’s respective claims or defenses, the parties in a lawsuit alleging Citigroup violated its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by offering and keeping affiliated funds in its 401(k) plans when better-performing, lower-cost funds were available have reached a settlement agreement.
According to the document submitted to U.S. District Judge Sidney H. Stein of the U.S. District Court for the Southern District of New York, Citigroup will pay $6,900,000 to settle the lawsuit. The settlement amount includes all attorneys’ fees, incentive awards, litigation expenses, administration costs, taxes and costs of any kind associated with the resolution of the suit.
Specifically, no later than the fifth business day after Stein enters an order approving the motion for preliminary approval of the settlement, Citigroup will be responsible to pay $350,000 to an escrow account whose terms and agent the parties will jointly select. This first settlement payment will be used by class counsel to cover settlement administration and notice costs. No later than the fifth business day after Stein gives final approval of the settlement agreement, Citigroup will wire a $6,550,000 payment to the escrow account.
The original lawsuit, filed in 2007, said fiduciaries to Citigroup’s 401(k) plan failed to act prudently and solely in the interest of the plan and its participants and beneficiaries when selecting investment products and services, but instead “put Citigroup’s interests ahead of the 401(k) Plan’s interests by choosing investment products and pension plan services offered and managed by Citigroup subsidiaries and affiliates, which generated substantial revenues for Citigroup at great cost to the 401(k) plan.”