J.P. Morgan has agreed to pay $75 million to settle litigation alleging it invested its stable value funds in risky assets, causing losses to retirement plan participants.
The consolidated litigation alleges that the defendants managed the plaintiffs’ investments imprudently in violation of its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by causing its stable value funds to invest heavily in the Intermediate Bond Fund (IBF) and the Intermediate Public Bond Fund (IPBF). The defendants managed the IBF and IPBF in the same way and invested them both in risky, highly leveraged assets, including, among other things, mortgage-related assets. At the filing of the first lawsuit, J.P. Morgan Chase & Co. announced it would shed mortgage debt from its stable value funds.
Earlier this year, U.S. District Judge Vernon S. Broderick of the U.S. District Court for the Southern District of New York certified a class and two subclasses of participants in the lawsuit. The named plaintiffs, of which there are 12, invested in five of JPMC’s stable value funds through nine 401(k) retirement plans, each overseen by a different employer plan sponsor. They sought to represent participants in more than 300 retirement plans which were invested in 78 stable value funds.
The settlement has been agreed to by the parties and a motion has been filed with the court for preliminary approval.