Columbia, IBM settle 401(k) lawsuits

International Business Machines agreed to a $4.75 million settlement to a 2015 lawsuit over stock losses that affected employees’ 401(k) assets.

The case had gone all the way to the U.S. Supreme Court, which last year remanded it to district court to consider whether certain new arguments could be made. Plaintiffs have alleged that IBM failed in their fiduciary duty to participants by not protecting them from stock losses that resulted from an unprofitable chip manufacturing unit. In 2013 and 2014, the company “gave false and misleading guidance about its prospective earnings and progress toward its [microelectronics business’s] transformation,” according to the complaint. The company had to “write off $4.7 billion” related to that business, and its stock price later tumbled by 20%, affecting the value of participants’ 401(k) assets, the plaintiffs wrote in 2015.

The class in the lawsuit is represented by law firm Zamansky.

COLUMBIA SETTLES LONG-STANDING LAWSUIT

The trustees of Columbia University on Tuesday reached a settlement in a class-action case filed in 2016 over the school’s 403(b) plans — just days before a trial was to begin.

The case was one of many filed in a deluge of litigation several years ago against elite colleges and universities, with law firm Schlichter Bogard & Denton leading the charge against allegedly excessive fees in 403(b) plans. That firm represents the class in the Columbia lawsuit.

This week’s settlement notice to the court did not include terms. The parties requested a stay in the case until May 24, giving time to draft the agreement.

The trial was slated to begin on Monday.

The 2016 complaint filed against the school cited unnecessarily high investment-management and administrative fees. The plans, which at the time represented more than $4.6 billion and included more than 100 investment options, did not use the lowest-cost share classes of mutual funds available and therefore paid “kickbacks” baked into the fund costs to service providers, the plaintiffs wrote. Like cases against other schools, the Columbia lawsuit included allegations over revenue sharing fees included in the TIAA and Cref annuity options in the plans. The TIAA Traditional Annuity also charged some participants a 2.5% surrender fee if they pulled their money from it within 120 days of leaving employment, according to court records.

The lawsuit pointed to the use of two separate record keepers — TIAA and Vanguard — as disadvantageous to participants, compared to going with just one plan provider.

BATTERY MAKER'S POSITIVE FEES WERE NEGATIVE FOR SAVERS

High administrative charges were like acid on one plan’s 401(k) assets, according to a class-action lawsuit filed against a battery maker.

East Penn Manufacturing Company, a family-owned business that operates “the largest single-site, lead battery manufacturing facility in the world,” allegedly breached its fiduciary duty to plan participants by allowing higher than average administrative fees. That is according to the April 7 complaint filed in U.S. District Court in the Eastern District of Pennsylvania.

The case was brought by law firms Franklin D. Azar & Associates and Chimicles Schwartz Kriner & Donaldson-Smith, the former of which has built a presence in 401(k) plan litigation over the past several years.

Between 2015 and 2020, participants in the $567 million 401(k) plan paid between $100 and $113 annually in record-keeping fees, according to the complaint. By comparison, a reasonable fee for similarly sized plans would be about $43, the plaintiffs claimed. There were about 11,000 participants in the plan as of the end of 2019, according to data from the Department of Labor.