Class Action Claims Allstate Failed to Maintain Prudent Investment Options for Employee Retirement Savings Plan

New to ClassAction.org? Read our Newswire Disclaimer

A proposed class action lawsuit claims The Allstate Corporation and the committees that manage its employee retirement savings plan have harmed participants by failing to prudently select and monitor the plan’s investment options.

More specifically, the case out of Illinois alleges the defendants—The Allstate Corporation, The Allstate 401(k) Committee, The Allstate 401(k) Administrative Committee and The Allstate 401(k) Investment Committee—have loaded the Allstate 401(k) Savings Plan with poorly performing targeted retirement-age funds, called the Northern Trust Focus Target Retirement Trusts, and kept the funds on the plan’s investment menu for nearly a decade despite their “abysmal underperformance.”

Even though the defendants had hundreds of other target date funds to choose from when selecting investment options, they selected the Northern Trust Focus funds as the plan’s default investment option, the suit states. According to the case, the 11 funds have consistently performed worse than 70 to 90 percent of peer funds while they remained options in the defendants’ plan.

Alleging violations of the Employee Retirement Income Security Act (ERISA), the lawsuit claims Allstate’s decision to continue offering and enrolling participants in the Northern Trust Focus funds has had a “large and tangible impact” on participants’ retirement accounts, with Morningstar, Inc. projecting that the plan has lost more than $65 million in retirement savings since 2014 as a result of the defendants’ failure to remove the underperforming funds.

Per the complaint, the plan’s more than $5 billion in assets should have provided “tremendous leverage” to demand superior investment options, yet the defendants failed to effectively utilize this leverage to identify and select prudent investment choices for the plan’s tens of thousands of participants and beneficiaries.

The significant underperformance of the Northern Trust Focus funds suggests the defendants’ decision to include and maintain the funds “was tainted by a failure of competency or effort,” the case avers, contesting that the decision has had a “profound and lasting effect” on the savings plan and its participants and beneficiaries.

The lawsuit looks to cover all participants and beneficiaries of the plan who invested in any of the Northern Trust Focus funds between October 30, 2014 and December 31, 2019.

Get class action lawsuit news sent to your inbox – sign up for ClassAction.org’s newsletter here.