A judge has denied Wells Fargo’s request to dismiss a class-action lawsuit that claims the mega bank mismanaged its more than $40 billion 401(k) plan.
Brought on behalf of participant Yvonne Becker in U.S. District Court for the District of Minnesota, the class-action lawsuit asserts that some high-level executives at Wells Fargo — who were named as the retirement plan’s fiduciaries — selected and retained 17 Wells Fargo proprietary funds, many of which performed below the benchmark that the bank had picked “as an appropriate broad-based market index for each Wells Fargo Fund.”
Becker further alleges that the Wells Fargo Funds included “newly launched funds that lacked a performance history necessary to evaluate them, and that the Wells Fargo Funds charged greater fees than similar non-proprietary funds.”
Michelle Yau, a partner at Cohen Milstein in Washington and chair of the firm’s Employee Benefits/ERISA practice group, who represents Becker and the other plaintiffs, told ThinkAdvisor in a recent interview that she’s “glad to see” that Judge Donovan Frank, in denying Wells Fargo’s request to dismiss the case, “understood why the case matters.”
Yau said: “You have 350,000 current and former Wells Fargo employees who, for many of them, their only retirement savings is their 401(k) plan. … They don’t get to pick the funds in the 401(k) plan, so they’re relying on the fiduciaries of their plan to pick prudent and loyal options; and ERISA requires it.”
Wells Fargo’s plan had $48.2 billion in assets with 340,353 total participants as of year-end 2019, according to Judy Diamond Associates, a business unit of ALM Media (which is the parent company of ThinkAdvisor). Assets in Wells Fargo’s plan increased by $8.3 billion from 2016 to 2019, the most recent year for which data is available, Judy Diamond’s research shows.