Verizon 401(k) lawsuit settles for $30 million

investmentnews.com:

Verizon will pay $30 million to settle a 2016 lawsuit over an underperforming hedge fund the plaintiffs alleged the company dragged its feet in removing from its retirement plan.

That large settlement followed the court’s denial of summary judgment earlier this year for the defendants. A trial was set to begin this week, although the parties reached an agreement a month ago. The details of that agreement, including the $30 million figure, were published in court records filed Friday.

As much as a third of the amount will go to the law firms representing the class. The remainder will go to plan participants, as tax-deferred contributions to their accounts or rollovers into traditional IRAs, according to the agreement.

The development sends an uncomfortable message to retirement plan advisors and other fiduciaries, said Daniel Aronowitz, principal of Euclid Specialty Managers, a fiduciary liability insurance firm.

“I find this disappointing, because when we analyzed the Verizon case, based on the public records, it appeared the Verizon retirement plan fiduciary committee were very active in monitoring the investments,” Aronowitz said.

Much of the reason why the plaintiffs survived a motion for summary judgment was because of testimony from two expert witnesses who claimed that Verizon should have removed the hedge fund, which was used within the plan’s target-date series, after three years of underperformance. Although Verizon had switched weightings and managers within that fund, it waited longer before outright removing the investment, as the firms providing investment-monitoring guidance used a lengthier timeframe for evaluating returns, Aronowitz noted.

“That’s a troubling decision, and it led to this disappointing,