DOL Announces DST Systems to Pay Over $124M to Settle 401(k) Plan Mismanagement

September 11, 2023
Hall Benefits Law, LLC

The U.S. Department of Labor (DOL) has announced the settlement of a class action Employee Retirement Income Security Act (ERISA) lawsuit for more than $124.6 million on behalf of the more than 9,000 participants in the DST Systems Inc. 401(k) plan. The DOL and private plaintiffs alleged that DST and other defendants, including New York City investment management firm Ruane, Cunniff, & Goldfarb Inc., had failed to manage the profit-sharing portion of its retirement plan properly.

The DOL filed suit against DST, a Kansas City information processing software and service provider, in a New York federal district court in October 2019. In its suit, the DOL claimed that DST and its fiduciaries had violated ERISA by failing to act prudently and loyally in diversifying the plan’s assets.

The DOL alleged that the plan managers invested plan assets primarily in a select group of securities that failed to minimize the risk of large losses to the participant investors. More specifically, the investment manager invested more than 45% of the plan assets in the stock of Valeant Pharmaceuticals International, which then decreased dramatically in value. As a result, plan participants experienced losses of over $100 million to their retirement savings. In this case, the settlement illustrates the fiduciary duty of investment managers to diversify plan holdings to maximize profits and minimize losses and the duty of other fiduciaries to monitor the investment managers’ actions.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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