Parties in a lawsuit against Wells Fargo 401(k) plan fiduciaries have filed a motion for preliminary approval of a settlement.
According to a memo filed by the plaintiffs in support of the motion, under the terms of the proposed settlement, the defendants will pay a gross settlement amount of $32.5 million into a common fund for the benefit of the proposed settlement class. As the memo notes, “This is a significant monetary recovery for the class.” And, it says, the settlement “falls well within the range of court-approved settlements in similar [Employee Retirement Income Security Act] cases.”
The original lawsuit, filed in March 2020, claims that upon the creation of the Wells Fargo/State Street Target collective investment trusts, or Target Date CITs, in 2016, the committee defendants added the CITs to the plan even though the funds had no prior performance history or track record which could demonstrate that they were prudent. Despite the lack of a track record, the committee defendants “mapped” nearly $5 billion of participants’ retirement savings from the plan’s previous target-date option into the Target Date CITs.
In addition, the lawsuit alleges the committee defendants used the plan’s assets to seed the Wells Fargo/Causeway International Value Fund, as evidenced by the fact that the plan’s assets constituted more than 50% of the total assets in the fund at year-end 2014. “Without such a substantial investment from the plan, Wells Fargo’s ability to market its new, untested fund would have been greatly diminished,” the complaint states.
The lawsuit further alleges that plan fiduciaries selected and retained for the plan 17 Wells Fargo proprietary funds, many of which underperformed the benchmark that the defendants selected as an appropriate broad-based market index for each fund.
Last May, Judge Donovan W. Frank of the U.S. District Court for the District of Minnesota refused to dismiss the suit, deciding that the “numerous and specific allegations are sufficient to support an inference of imprudence and disloyalty.” He also said the “allegations are far more than general assertions, and that accepted as true, show that defendants engaged in prohibited transactions.”