Ameriprise to pay $27.5 million settlement in 401(k) fiduciary breach suit

Firm denies allegations made by its own retirement plan participants

Mar 26, 2015 @ 11:18 am

By Darla Mercado

+ Zoom

Ameriprise Financial Inc. Thursday settled a four-year-old lawsuit that was filed by its own retirement plan participants who claimed the company cost them millions of dollars in excessive fees.

The case, which was filed in the U.S. District Court in Minnesota, was set to go to trial on April 13. Instead, Ameriprise and the plaintiffs agreed on a settlement of $27.5 million, filing with the court a joint motion of approval for the settlement. The financial services giant denied the allegations and stood by its finding that it did not commit any fiduciary breaches.

“We have a strong 401(k) plan that is administered for the sole interests of participants,” Ameriprise spokesman John Brine said. “The settlement doesn't require any changes to our plan, which will maintain the existing broad and competitive selection of options and features.”

Mr. Brine added that the plan has always featured funds managed by the firm as well as investment options from other providers, and a brokerage window.

(More: New areas for 401(k) lawsuits emerge)

Nevertheless, the settlement came with a variety of non-monetary improvements to the plan.

“The non-monetary relief obtained, in addition to the financial terms, not only significantly benefits Ameriprise's employees and retirees, but also sets a standard for best practices for plan sponsors,” the plaintiffs' attorney, Jerry Schlichter, managing partner at Schlichter Bogard & Denton, noted in a statement.

“Competitive bids and enhanced communications and disclosure will increase the value of the employees' and retirees' 401(k) plans for years to come,” he said.

This case is one of many 401(k) excessive fee and fiduciary breach suits pursued by Mr. Schlichter. Most notably, he is also representing the plaintiffs in Tibble v. Edison, a pivotal 401(k) fiduciary breach case that's being considered by the U.S. Supreme Court.

BREACH OF FIDUCIARY ALLEGATIONS

In 2011, Roger Krueger and a group of Ameriprise plan participants filed suit against the firm and the committees that oversaw its employee benefits administration and 401(k) investments.

The Ameriprise plaintiffs claimed that investments in the company's 401(k) plan included funds from the firm's subsidiary RiverSource Investments, which is now known as Columbia Management Investment Advisers.

(More: 401(k) bond funds get a makeover)

Plaintiffs also said that RiverSource and Ameriprise Trust Co., which was the record keeper of the plan, received fee revenue from employees' plan dollars. The plan participants also allege that the funds were costly. For instance, they alleged in their suit that the cost of target date funds from RiverSource ranged from 84 to 92 basis points, which was 74 basis points more than an alternative from Vanguard.

IMPROVEMENTS AHEAD

Though Ameriprise will not be changing its plan per the settlement, the agreement requires the company to conduct a request-for-proposal bidding process for recordkeeping services and investment consulting services, along with a number of other updates to its processes for the next three years.

(More: Retirement plan advisers are preparing for major changes)

The agreement calls on Ameriprise to continue refraining from receiving payment for administrative services provided to the plan other than reimbursement of direct expenses from the plan, to continue paying fees to the record keeper on either a flat fee or per-head basis, provide necessary disclosures of plan fees to the participants and to consider the use of collective investment trusts and separately managed accounts.

Most notably, the plan's fiduciary committee for investment selection will not include any member who is an executive with Columbia Management Investment Advisers or its investment management affiliates.

Mr. Brine at Ameriprise said that they never had a member who is an executive with Columbia on the fiduciary committee for investment selection, and that this was from inception. “We did this voluntarily,” he said.

0
Comments

Did Ameriprise or the employees come out on top in this settlement?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Oct 17

Conference

Best Practices Workshop

For the fifth year, InvestmentNews will host the Best Practices Workshop & Awards, bringing together the industry’s top-performing and most influential firms in one room for a full-day. This exclusive workshop and awards program for the... Learn more

Featured video

Events

Pershing's Cirrotti: What's next for the fiduciary rule?

The Department of Labor's new fiduciary rule will have a lasting impact on this industry. Have we finally reached the finish line? Pershing's Rob Cirrotti explains what is to come.

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

Labor's Alexander Acosta and SEC's Jay Clayton tell lawmakers they will work together on fiduciary rule

In separate appearances before Senate panels, the regulators stressed the cooperation that Republican legislators and opponents of the DOL fiduciary rule are demanding.

Brian Block denies cooking the books at Schorsch REIT

Former CFO claims everything he did was 'appropriate' and 'correct.'

Interns will take on several roles at advisory firms this summer

College students are helping with client prep, firm visioning and long-term projects, among other duties.

10 funds with largest 3-year outflows

Even well-managed funds that have beaten the S&P 500’s 10.1% average annual gain have watched investors flee.

Wirehouse training programs are back

At one time, major brokerage houses ran large, expensive training programs for thousands of young brokers, and now it looks as if they are about to return to that model.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print