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$3.8 Million Settlement Struck in Excess Fee Suit

Another 401(k) provider has come to terms with participants of its own plan who alleged fiduciary obligations were violated by putting relatively high-fee in-house investment funds on the plan menu.

The case involved Transamerica Corp. which, in addition to the monetary damages agreed to a number of plan design changes in the settlement. According to a report by BloombergBNA, the settlement agreement requires Transamerica to make the following changes to its 401(k) plan:

  • cap the fees on its separate account investments;

  • add a third-party low-fee bond fund to the plan’s lineup;

  • maintain a low-fee S&P 500 index fund in the plan’s lineup;

  • use an unaffiliated investment consultant to annually review the plan’s lineup; and

  • revise and clarify the plan’s summary plan description.

Additionally, the settlement calls for Transamerica to continue:

  • rebating mutual fund revenue sharing and sub-adviser fees;

  • providing record-keeping services at no cost; and

  • offering a “wide range” of nonaffiliated mutual funds through a brokerage window.

According to BloombergBNA, Judge Edward J. McManus of the U.S. District Court for the Northern District of Iowa entered the preliminary approval order on June 24, but in another order entered the same day, McManus told the parties that they should be prepared to show how the proposed plan changes will affect the amount of plan assets invested in Transamerica’s in-house investment funds.

McManus said he “expects the Plan as changed to have fees as low” as peer plans, or for the parties to “show good cause why not.”

The case is Dennard v. Transamerica Corp., N.D. Iowa, No. 1:15-cv-00030-EJM, order preliminarily approving settlement 6/24/16.