Lawsuit Claims Associated Banc-Corp Loaded Retirement Plan with ‘Poorly Performing’ Options

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A proposed class action claims Associated Banc-Corp has failed to act in the best interest of participants in its 401(k) and employee stock ownership plan by loading it with imprudent investment options associated with a subsidiary and failing to monitor the plan’s recordkeeping expenses.

Per the case, the defendants’ decision to maintain poorly performing investment options and allow “excessive” administrative fees to be paid to Associated Bank’s subsidiary has benefited Associated Banc-Corp and injured plan participants to the tune of millions of dollars.

“Defendants have not acted in the best interest of the Plan and its participants,” the complaint alleges. “Instead, Defendants used the Plan to promote Associated Bank’s proprietary financial products and earn profits for Associated Bank.”

According to the lawsuit, the defendants—Associated Banc-Corp and its employee retirement plan’s administrative committee—have breached their fiduciary duties to plan participants in violation of the Employee Retirement Income Security Act (ERISA) and chosen instead to benefit themselves and the holding company’s subsidiary, Associated Bank. 

The defendants’ process for selecting and monitoring the plan’s investment options was, the suit says, “disloyal and imprudent,” especially when considering that the proprietary investments included in the plan were, according to the case, “overwhelmingly rejected” by plans of similar size in favor of better performing nonproprietary alternatives. The lawsuit claims the defendants’ choice to retain “unpopular and poorly performing” proprietary funds over superior nonproprietary options indicates that the process for choosing the plan’s investment options was “tainted by self-interest.” 

The lawsuit goes on to cite several examples in which the defendants retained funds associated with subsidiary Associated Bank despite the funds’ “poor track record” and the availability of significantly better-performing options. According to the suit, the retention of the Associated Bank funds has cost plan participants millions in lost investment returns since the statutory period began in 2015.

Moreover, the lawsuit claims the defendants failed to properly monitor and control the plan’s recordkeeping expenses and allowed millions in administrative fees to be paid to Associated Bank’s subsidiary, Associated Trust Company, N.A. Given that the market for recordkeeping is “highly competitive,” the defendants could have leveraged the plan’s size to negotiate lower fees, the lawsuit claims, yet instead allowed the plan to be charged “substantially higher” fees than the market rate for similar plans.

The suit says the plan paid in 2016 as much as three times the amount per participant as it could have been charged for recordkeeping fees had the defendants negotiated an “appropriate fee.”

The lawsuit looks to represent all participants and beneficiaries of the Associated Banc-Corp 401(k) and Employee Stock Ownership plan any time on or after January 13, 2015.

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