BlackRock settles 401(k) lawsuit for nearly $10 million

Plaintiffs sued BlackRock Institutional Trust Co. in 2017, alleging that the firm engaged in self-dealing and breached its fiduciary duty by including numerous in-house products on the plan menu.

BlackRock is paying nearly $10 million to settle a long-running class-action lawsuit involving its own 401(k) plan, court documents filed this week show.

The settlement is monetary only and does not require the company to change anything about its plan. Payments will be made to about 17,000 class members, about 30% of whom are former participants in the company’s 401(k), according to the proposed settlement submitted Tuesday. Of the total $9.65 million settlement, as much as $2.8 million, or 29%, will go to attorneys’ fees.

Last month, BlackRock and the plaintiffs notified the court that they had reached a settlement, though no details about the total amount were disclosed publicly.

“BlackRock is pleased to have reached an agreement to settle a lawsuit concerning our 401(k) retirement plan. The settlement is not an admission of wrongdoing nor of any flaw in the plan. It is a reasonable approach to avoid the additional expense of continuing litigation,” the company said in a statement.

In 2017, plaintiffs sued BlackRock Institutional Trust Co. alleging that the company engaged in self-dealing and breached its fiduciary duty by including numerous in-house products on the plan menu.

Those products allegedly charged “undisclosed, excessive fees related to securities lending that exposed the plan to additional risk of loss,” the most recent amended complaint stated. That included BlackRock’s LifePath target-date series, which, along with other options, held underlying investments in more than two dozen BlackRock products, according to the complaint.

The plaintiffs sought two different classes in the case – one for participants in BlackRock’s plan and another for 401(k) savers in outside plans that include certain BlackRock collective investment trusts. The latter class was not certified by the court, and the recent settlement does not apply to it.

BlackRock’s 401(k) plan represented more than $2.7 billion in assets among more than 11,000 participants as of 2019, according to data from the Department of Labor.

In this week’s court filings, the parties said that the settlement was fair, as it represents nearly a third of the potential damages the plaintiff class allegedly incurred, based on their expert witness’s account, or about $33.7 million.

Law firms Cohen Milstein Sellers & Toll and Feinberg Jackson Worthman & Wasow represent the plaintiffs and the class.