Eaton Vance settles 401(k) lawsuit for $3.45 million

Class-action suit alleged the firm mismanaged its own retirement plan and profited at the expense of employees

May 8, 2019 @ 11:52 am

By Greg Iacurci

Eaton Vance will pay $3.45 million to settle a class-action lawsuit alleging it mismanaged its company 401(k) plan and profited at the expense of its employees by offering them in-house mutual funds.

The settlement furthers a trend playing out among financial services companies, especially those like Eaton Vance that are focused on actively managed investment strategies, many of which have been sued for self-dealing in their retirement plans. This has played out against a backdrop of increased litigation targeting employers for imprudently managing their retirement plans.

The plaintiff — Shannon Price, a former employee — claimed Eaton Vance breached its fiduciary duties by offering proprietary investments, failing to monitor investment options and remove poorly performing ones, and offering insufficient fund selection. Eaton Vance's funds were the only actively managed options available in the 401(k) plan.

Eaton Vance's settlement, reached Monday in Massachusetts district court, still needs court approval. The settlement covers roughly 2,600 participants in the Eaton Vance 401(k) Profit Sharing and Savings Plan between October 2012 and the date of the settlement's final approval.

Robyn Tice, spokeswoman for Eaton Vance, declined comment.

The $3.45 million settlement in the case, Price v. Eaton Vance Corp., is on the lower end of those in other similar lawsuits: Branch Banking & Trust Co. ($24 million), Deutsche Bank ($21.9 million), Franklin Templeton Investments ($14 million), Allianz ($12 million), Citigroup Inc. ($6.9 million), TIAA ($5 million), Waddell & Reed Financial Inc. ($5 million), Jackson National Life Insurance Co. ($4.5 million) and New York Life Insurance Co. ($3 million).

Other lawsuits, such as one filed against American Century Investments, have been dismissed.

Following a trial in Missouri district court, the judge in the American Century case, Greg Kays, said it "isn't disloyal as a matter of law" to offer only in-house funds to participants.

"In fact, it is common for financial service companies to offer their own investment funds in their retirement plans," he said. "And there is no duty to offer more than one investment company's funds."


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