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June 25, 2013 at 07:19 AM
In another blow to excessive fees in 401(k) plans, defendants in the Nolte v. Cigna Corp. case have agreed to settle the class-action lawsuit for a record $35 million.
Plaintiffs in the case were current and former participants in CIGNA’s own in-house 401(k) plan — the largest plan in CIGNA’s retirement division — which CIGNA had sold to Prudential in 2004 for more than $2 billion.
The plaintiffs alleged that CIGNA operated the 401(k) plan not in the best interests of employees, as required by ERISA, but for the benefit of CIGNA’s bottom line.
CIGNA plan managers took unreasonable fees from participant accounts, used the company’s own funds, never put plan services out for competitive bidding, and engaged in prohibited transactions with plan assets, their suit alleged.
Furthermore, the suit said, plan participants received none of the profit CIGNA received from the sale to Prudential. Rather, a secret “gentlemen’s agreement” between CIGNA and Prudential allowed Prudential to continue earning the same unreasonable and prohibited fees as CIGNA had.
