Walgreens’ Workers Negotiate $13.75M 401(k) Settlement in Class Action

In Michael W. Allegretti et al. v. Walgreen Co. et al., (Case No. 1:19-cv-05392), (N.D. Ill.), a certified class of nearly 200,000 401(k) plan participants requested an Illinois federal judge to approve their $13.75 million deal resolving specific claims against Walgreens. The most severe claim was that the pharmacy chain cost workers $300 million by investing their retirement savings in mutual funds that generated substandard returns.

The lawsuit containing alleged violations of the Employee Retirement Income Security Act (ERISA) targeted Walgreens, the retirement plan committee of the 401(k) plan, the trustees of the retirement plan trust, and Walgreens’ board of directors. Data from the plan’s recordkeepers shows there are roughly 195,000 class members.

Under the proposed settlement, Walgreens and the other defendants will create a $13.75 million fund and remove the Northern Trust Focus Retirement Trusts from the 401(k) plan known as the Walgreen Profit-Sharing Retirement Plan. An independent fiduciary will also review the settlement for fairness. The defendants also agreed to enlist an investment adviser to monitor the plan.

The settlement was reached following extensive discovery, a mediation session, and several months of negotiation. “This extensive process allowed the parties to fully understand the value of their claims and the risks of litigation,” according to the motion for preliminary approval.

The plaintiffs filed their lawsuit in August 2019, alleging that Walgreens crammed its profit-sharing retirement plan with poorly performing target-date retirement funds in 2013, refusing to remove them “despite a market teeming with better-performing alternatives.” As a result, plan participants alleged that they lost nearly $300 million in retirement savings since 2014, according to the suit. 

The plaintiffs further claimed that the Northern Trust funds performed worse than 70% to 90% of similar funds for almost an entire decade. In addition, the funds consistently failed to meet their benchmark indexes since launched by Northern Star in 2010.

Walgreens unsuccessfully requested the court dismiss the lawsuit, claiming that the funds were conservative and inexpensive compared to other options. In addition, the company claimed the plaintiffs did not mention any specific wrongdoing. 

The class said the settlement provides fair and reasonable compensation while avoiding the “significant risk” of continued litigation. Experts calculated damages as approximately $34 million. The motion requesting approval of the settlement states that it compares favorably to other ERISA settlements. The motion also adds that there is currently no opposition to the settlement and all the class representatives support the deal.

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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