Philips North America reaches $17 million settlement in 401(k) lawsuit

Excessive fees, as well as the retention of a low-yielding money market fund, were at the heart of the lawsuit

May 15, 2018 @ 12:28 pm

By Greg Iacurci

Philips North America has agreed to pay $17 million to settle a lawsuit alleging that the company breached its fiduciary duty in connection with the management of its 401(k) plan.

The settlement, which also included nonmonetary provisions, still must be approved by a judge. The Philips retirement plan has more than $3 billion.

"In addition to the compensation, the participants will be getting an improved plan with significant protections for them to build their retirement assets in the future," said Jerome Schlichter, a pioneer of 401(k) fee litigation who represented plaintiffs in the case.

Silvie Casanova, a Philips spokeswoman, said the company opted to settle despite disagreeing with the lawsuit's claims.

"The settlement allows Philips to avoid a protracted lawsuit and to put additional money toward plan participants' retirement savings rather than spending it on a costly legal battle," she said. "In agreeing to settle the matter, Philips did not make any admission of any facts, liability or wrongdoing and denies that it has engaged in any wrongful conduct."

Plaintiffs alleged that Philips caused its 401(k) plan to pay excessive investment management and administration fees, retain the Vanguard Prime Money Market Fund as the sole capital preservation option despite "microscopically low" yields, and keep the underperforming Principal Diversified Real Asset Fund.

(More: 10 big settlements in 401(k) excessive-fee lawsuits)

Philips agreed to other provisions, including hiring an independent consultant to review the fund lineup and make recommendations about whether to retain the money market fund and add a stable value or comparable fund, and conducting a request for proposal process for record-keeping services.

The case, Todd Ramsay et al v. Philips North America LLC, was settled early in the litigation process. Plaintiffs filed the lawsuit Thursday in Illinois District Court, and the parties filed their joint motion for preliminary approval of the settlement just one day later, on Friday.

(More: What a court decision teaches 401(k) advisers about choosing stable-value funds)

However, the parties had been in contact for more than 18 months, with Philips producing documentation for the plaintiffs after they pursued legal action; the parties entering into "arm's length negotiations" six months ago, according to the settlement filing.

"There's been a process that's been lengthy arriving at this," Mr. Schlichter said. "A case like this has to be approved by a federal court. So the case had to be filed for the court to approve the settlement."


What do you think?

View comments

Recommended for you

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

Featured video


How men and women think differently about philanthropy

Women are more emotionally connected to their gifts, and want to donate time as well, says special projects editor Liz Skinner.

Latest news & opinion

Cetera brokers may go elsewhere with no stay bonuses on horizon

Some may feel spurned and leave, while others will simply shrug off latest slight and stay.

Morgan Stanley CEO is happy that brokers are staying put

Firm has seen little attrition since it dumped the broker protocol last fall, Gorman says.

Bills to reform adviser regulation, increase sophisticated investors and protect seniors pass House

Measures included in package of 32 bipartisan bills meant to ease rules, spur investment

Genstar Capital buys majority stake in Cetera Financial Group

The private-equity firm has previously invested in such companies as Mercer Advisors and AssetMark.

Cetera Financial Group close to announcing its acquisition by private equity

Details of sale to one or more P-E firms could be announced as early as today.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print