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Compliance December 6, 2011
Wal-Mart and Merrill Lynch to Pay $13.5M for Excessive Fee Suit
Wal-Mart Stores and Merrill Lynch have agreed to pay $13.5 million to settle a class-action lawsuit.
Reported by Tara Cantore
Wal-Mart and Merrill Lynch, its retirement plan administrator, allegedly breached their fiduciary duty for nearly two million past and present Wal-Mart employees in the company’s 401(k) plan, according to news reports.
According to papers filed in a Kansas City federal court, the two defendants admitted no wrongdoing. However, Wal-Mart said it would “further its goal to offer investment options with fees that are reasonable,” remove mutual funds that charge high fees and provide more financial education to its employees.
Matthew Card, a spokesperson for Bank of America, said to PLANADVISER: “We are pleased to have been able to work with Wal-Mart to resolve this matter and continue to serve its employees with a high-quality 401(k) platform.”
Wal-Mart employees will not directly receive the $13.5 million from the settlement. The settlement will go toward reducing future 401(k) plan fees. However, named plaintiff Jeremy Braden will receive $20,000 from the settlement funds. Lawyers representing the class could receive as much as $4 million of the settlement. A court hearing that will approve the settlement and the fees will be held at a future date.
The lawsuit was originally filed in 2008 by Braden, a Wal-Mart employee in Highlandville, Missouri. The lawsuit charged that Wal-Mart did not do enough to get lower fees for its mutual fund offereings. The lawsuit alleged various violations of fiduciary duty and federal pension law (see "Wal-Mart Hit with Excessive 401(k) Fee Suit").
The trial judge’s dismissal of the case was reversed by the federal court of appeals in St. Louis, Missouri. In an amended complaint, Braden added Merrill Lynch to the suit as a defendant, alleging the investment firm received undisclosed kickback payments from outside mutual fund companies just for allowing them to be in the plan, reports Forbes (see "Wal-Mart Captures Resounding Excessive Fee Suit Victory" and "Court Says Wal-Mart 401(k) Suit Requires Further Discussion").