Trustees of a 401(K) plan are set to pay an astounding $124.6 million to settle claims of mismanagement. This settlement is a stark reminder of the importance of diligent oversight in managing retirement funds.
The case was brought forward by the US Department of Labor and private plaintiffs who alleged the trustees, including DST Systems and New York City-based investment management firm Ruane, Cunniff & Goldfarb, failed to diversify the plan’s assets adequately.
This lack of diversification led to significant losses when the plan over-invested in a single pharmaceutical stock – Valeant Pharmaceuticals.
The stock, which at one point constituted more than 45 percent of the plan’s assets, plummeted dramatically in price.
The fallout was devastating for the plan’s participants, who saw their retirement savings dwindle significantly. This case serves as a stark reminder of the risks associated with putting all your eggs in one basket, especially when it comes to retirement savings.
Interestingly, neither DST Systems, acquired by SS&C Technologies in 2018, nor Ruane, Cunniff & Goldfarb admitted any wrongdoing in this case. However, the hefty settlement amount speaks volumes about the gravity of the situation and the potential consequences of mismanaging employee profit-sharing plans.
According to the Department of Labor, approximately 9,000 participants are due a share of the settlement. The exact amount each participant will receive depends on their current status.
Current participants will have their share deposited directly into their accounts, while former participants will receive a check in the mail.
However, there is a deadline looming for those who wish to roll over the funds into another qualified retirement account.
Participants who maintained a positive balance in the plan at any time from March 14, 2010, through July 31, 2016, but did not have an account with a positive balance as of August 3, 2023, must file a claim by October 12.
The Assistant Secretary for Employee Benefits Security, Lisa M. Gomez, stated that the settlement restores hard-earned retirement funds for more than 9,000 participants in DST Systems’ retirement plan.
She further emphasized the Department of Labor’s commitment to investigating and seeking remedies for potential violations of the Employee Retirement Income Security Act.
This case serves as a wake-up call for all Americans saving for retirement. It underscores the importance of diversification in investment portfolios and the need for vigilant oversight of retirement plans.