Lowe’s Cos. has filed a partial settlement with a participant in the company’s 401(k) plan after a lawsuit alleged the company violated the Employee Retirement Income Security Act (ERISA) by making imprudent investment choices.
Filed in the U.S. District Court for the Western District of North Carolina, the partial settlement was reached with Lowe’s Cos. Inc. and its administrative committee. It excludes co-defendant Aon Hewitt Investment Consulting. Last week, Aon Hewitt and the plaintiff told the court they were unable to resolve the case through settlement, and claims against Aon Hewitt moved forward.
The core of the lawsuit challenges the selection and retention of the Aon Hewitt Growth Fund for the plan. The plaintiff says Lowe’s selected the fund, in consultation with Hewitt, “despite the fact that (1) the Hewitt Growth Fund was a new and largely untested fund at the time it was added to the plan; (2) the Hewitt Growth Fund was underperforming its benchmark at the time it was added to the plan and continued to underperform after it was added to the plan; and (3) the Hewitt Growth Fund was not utilized by fiduciaries of any similarly sized plans and was generally unpopular in the marketplace.”
Among other things, the settlement agreement between Lowe’s and the plaintiff provides for a $12.5 million settlement fund that will be allocated to eligible class members after deductions for attorneys’ fees and costs, administrative expenses and a class representative service award, according to court documents.
The net settlement amount will be allocated to all participants and beneficiaries of the Lowe’s 401(k) plan whose plan account balances were invested in the Hewitt Growth Fund on or after October 1, 2015. Settlement class members who have a positive balance in their plan account as of the date of final approval of the settlement will automatically receive an allocation directly to their plan accounts so long as they maintain a positive balance through distribution. Those who had a positive balance in their plan account during the class period but who no longer own a plan account or do not have a positive balance will receive a settlement payment in the form of a check or as a tax-qualified rollover to an individual retirement account (IRA) or other eligible employer plan.
In accordance with the agreement, the court appointed Analytics Consulting LLC as a settlement administrator. It will distribute notices to the settlement class for first class mail at no later than 30 days following preliminary approval. The company will also be responsible for establishing a settlement website and toll-free telephone line relating to the settlement at no later than 30 days following preliminary approval.
Payments will only be made if the court approves the settlement. The court has not reached yet a date to consider the agreement.