Safeway and Aon Hewitt Investment Consulting Inc. have agreed to pay $8.5 million to settle a proposed class-action ERISA lawsuit brought by participants in the Safeway 401k Plan. The workers claim that Safeway and Aon breached their fiduciary obligations by offering high-cost investment options that benefitted the investment manager at the expense of participants.
The lawsuits, Terraza v. Safeway and Lorenz v. Safeway are two of a spate of recent ERISA lawsuits that focus on the obligation of fiduciaries to offer prudent investment options within the framework of 401k plans.
Beyond the evidence this settlement offers that aggrieved plaintiffs can succeed in these lawsuits, two things are notable. First, Safeway’s retirement benefits committee members were unfamiliar with the plan’s investment policy statement, summary plan description and other basic documents, and were thus ill-equipped to monitor the plan’s investment opportunities. Second, the fees paid by the plan to third-party service providers involved a revenue-sharing component.