Old Dominion Freight Line faces 401(k) lawsuit

Old Dominion Freight Line Inc. has become the latest Triad corporation or nonprofit to face an employee lawsuit involving the administration and pricing of retirement plan offerings.

The lawsuit was filed Nov. 18 by employee Harvey Davis in the federal Middle District of N.C.

Davis filed the lawsuit on behalf of the Old Dominion 401(k) Retirement Plan. It covers the time period of Nov. 18, 2016, to the present.

According to the lawsuit, the 401(k) plan held $2.02 billion in assets as of Dec. 31, 2021.

Old Dominion could not be reached for comment on the lawsuit.

Davis is requesting class-action status that could cover as many as 24,033 plan participants. Old Dominion said on Oct. 26 it had on average 24,587 full-time employees during the third quarter.

The plaintiff accuses the company of "breaching its fiduciary duties of prudence in violation of the (federal) Employee Retirement Income Security Act."

Great-West Financial Retirement Plan Services LLC, an affiliate of Empower Financial, is the plan's recordkeeper.

Specifically, the lawsuit claims the company has allowed the plan to charge excessive fees on investments.

According to the lawsuit, the expense ratio was typically about one-tenth of a percent higher than similar options within the same fund.

"Defendant selected and retained for the plan high-priced investments when the identical investment were available to the plan at a fraction of the cost," according to the lawsuit.

The lawsuit claims the higher fees "caused the plan and its participants to wrongfully lose roughly $3 million in retirement savings over the course of the relevant time period."

The lawsuit claims damages are ongoing.

"A prudent fiduciary conducting an impartial review of the plan's investments would have identified the prudent share classes available and selected those for the plan, instead of the identical, but higher-priced investments," according to the lawsuit.

"Except for the extra fees, the share classes are/were identical."

Corporate lawsuits

There have been several similar ERISA or retirement plan lawsuits filed against corporations or not-for-profit health-care systems in recent years.

In September, Wells Fargo & Co. agreed to a settlement with the U.S. Labor Department in which it will pay a nearly $13.2 million penalty and return more than $131.8 million to the bank's retirement plan participants.

As part of the settlement, GreatBanc Trust Co. will no longer act as a fiduciary to a public company in connection with any future transaction involving an employee stock-ownership plan "unless the plan acquires only publicly traded stock and pays no more than the fair market value."

The penalties stem from a department investigation that found the plan overpaid for preferred company stock by $33 to $90 per share. The stock was purchased for the plan from 2013 through 2018.

In December 2018, BB&T agreed to pay $24 million to settle a federal class-action lawsuit targeting the bank and managers of its 401(k) plan. The lawsuit was filed by 12 named plaintiffs in May 2016.

The BB&T plan had more than $1 billion in assets at the end of 2014 within six proprietary Sterling Capital Management LLC funds. Altogether, 63% of the plan's $2.93 billion in assets were invested in proprietary BB&T options as of Dec. 31, 2014.

The agreement was reached even though BB&T disputed the allegations and denies liabilities for any alleged fiduciary breaches or ERISA violations.

The lawsuit claims participants are being charged excessive fees for often underperforming proprietary mutual funds.

There was the potential for 67,000 current and former employee claimants, considering the settlement time frame of Sept. 4, 2009, to Oct. 25, 2018.

Health-care lawsuits

Wake Forest Baptist Medical Center and other defendants are being sued by three former employees who are asking a federal judge to approve reimbursement for certain retirement-plan fees.

The lawsuit was filed in June 2021 in the federal Middle District of N.C. by Tanajah Clark, Shelley Garnick and Zoe Jones. The lawsuit involves the system's 403(b) plan and covers the period from June 4, 2015, to at least the date when the complaint was filed.

The lawsuit lists the plan as overseeing $2.3 billion in assets at the end of 2019. At that asset level, it is considered as a "jumbo plan" in the defined contribution plan marketplace. The lawsuit cites the 403(b) as among the largest of its kind nationally.

"As a jumbo plan, the plan has substantial bargaining power regarding the fees and expenses that were charged against participants' investments," according to the lawsuit.

"Defendants, however, did not try to reduce the plan's expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the plan to ensure it was prudent."

Baptist said in its response that the plaintiffs' complaint "depicts no misconduct or self-dealing."

"Instead, plaintiffs make generalized allegations that some - but not all - of the investment options were too 'expensive,' and that fees paid to the plan's record-keepers were too high because they exceed industry averages."

Baptist claims the three plaintiffs lack standing to pursue the complaint.

In September 2016, Novant and plaintiffs in a class-action lawsuit agreed to a settlement plan valued at $101 million. The lawsuit was filed in March 2014.

That includes a final settlement fund of $32 million that included attorneys fees, along with $69 million that represented "the value of the reduction in administrative and investment management fees" of the Novant defined contribution retirement plans. The named plaintiffs received an additional $25,000 settlement payment.

Novant was accused of breaching its fiduciary duties by causing plan participants to pay millions of dollars in fees for excessive record-keeping and administrative services to third-party service providers Great West Life & Annuity Insurance Co. and brokerage firm D.L. Davis & Co. of Winston-Salem.

There were about 25,000 affected Novant employees who had been enrolled automatically in the retirement plan since 2009. The lawsuit covered the period from Oct. 1, 1998, to Sept. 30, 2015, and has 70,683 potential beneficiaries.

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