Wells Fargo named in new 401(k) lawsuit
The company has been sued again over its use of its own products in its retirement plan
Wells Fargo has been sued, again, over the use of the company’s own investment products in its 401(k) plan.
Plaintiff Yvonne Becker, who was a participant in Wells’ $40 billion 401(k) plan and an employee for 26 years, filed a class-action lawsuit against Wells Fargo Friday in U.S. District Court in the Northern District of California.
Ms. Becker alleges that the company, along with the 401(k) plan committee, several individuals and Galliard Capital Management, violated sections of the Employee Retirement Income Security Act.
The allegations center on the inclusion of several collective investment trusts in the plan, including Wells Fargo’s target-date series. The suit alleges that the investments were poorly chosen, as less expensive, better-performing products were available from third parties.
The target-date CIT series was created in 2016, which in itself was a problem, the plaintiff wrote.
“Despite the lack of a track record, the committee defendants ‘mapped,’ or transferred, nearly $5 billion of participant retirement savings from the plan’s previous target date option into the target date CITs,” the complaint stated. “At a minimum, prudent fiduciary process requires a three-year performance history for an investment option prior to its inclusion in a plan.”
Since the time the products were launched, the plan allegedly suffered at least $100 million in “losses” due to underperformance, the plaintiff wrote.
The target-date CITs also invested in underlying CITs that were Wells Fargo products, according to the complaint.
It is not the first time the company has faced allegations of improper self-dealing in its 401(k) plan.
A separate class-action case involving the prior target-date series used in the plan was unsuccessful. That case was dismissed in 2017, and an appeals court upheld the dismissal in 2018. In that lawsuit, a plaintiff alleged that Wells Fargo acted improperly by including its target-date mutual fund series in the plan menu when a less expensive option from Vanguard was available.
The lead plaintiff in the new lawsuit is represented by law firm Cohen Milstein Sellers & Toll, which also represented plaintiffs in the prior lawsuit involving the target-date mutual funds.
A Wells Fargo spokesman said in an email that the firm is reviewing the allegations.
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