The deal is expected to benefit more than 400,000 people who invested in Wells Fargo target date funds through the company’s $40 billion 401(k) plan. The settlement amount represents 40% of the plan participants’ estimated damages, according to the filing.
The settlement, filed April 1 in the U.S. District Court for the District of Minnesota, comes one year after Judge Donovan W. Frank allowed the Employee Retirement Income Security Act lawsuit to advance over the bank’s motion to dismiss. Frank said that unlike a similar lawsuit that Wells Fargo defeated in the Eighth Circuit in 2018, the complaint in this case included meaningful benchmarks by which to assess the challenged Wells Fargo funds.
The lawsuit challenges the Wells Fargo target date collective investment trusts in the company’s 401(k) plan, which are the default options for participants who don’t select their own investments. Wells Fargo transferred about $5 billion worth of plan assets to these target-date trusts in 2016, even though the trusts were newly established and had “no prior performance history or track record which could demonstrate that they were appropriate,” according to the lawsuit.
Dozens of recent ERISA lawsuits have targeted financial companies that put their own mutual funds in their workers’ 401(k) plans. These cases have now garnered more than $470 million in settlements in recent years, with settling employers including Reliance Trust Co. ($39.8 million), McKinsey & Co. ($39.5 million), SunTrust Banks Inc. ($29 million), and Deutsche Bank ($21.9 million).
The case is currently pending before Judge Katherine M. Menendez.
The Wells Fargo plan participants are represented by Cohen Milstein Sellers & Toll PLLC, Zimmerman Reed LLP, and Keller Rohrback LLP. Wells Fargo is represented by Proskauer Rose LLP and Dorsey & Whitney LLP.
The case is Becker v. Wells Fargo & Co., D. Minn., No. 0:20-cv-02016, motion for settlement approval 4/1/22.