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Friday, September 20, 2019

Class action: Walgreens mismanaged retirement funds, cost workers $300M by investing in underperforming funds

Federal Court

By Cook County Record | Aug 9, 2019

A new class action asserts Walgreens owes tens of thousands of retirees and employees money for allegedly mismanaging their retirement accounts by leaving investments in underperforming funds, costing employees more than $300 million in retirement savings.

On Aug. 9, a group of Walgreens workers and retirees filed suit in Chicago federal court, asserting Walgreens violated federal law for allegedly knowingly leaving about $3 billion in worker retirement investments in poorly performing investment vehicles.

The lawsuit was filed by attorneys Charles Field, Paul Blankenstein, David Tracey and Danielle Fuschetti, of the firm of Sanford Heisler Sharp LLP, of San Diego, Washington, D.C., New York and San Francisco; and Mark E. Maddox, of Maddox Hargett & Caruso P.C., of Fishers, Ind.

The lawsuit centers on investments made by Walgreens’ Retirement Plan Committee as part of the company’s Profit-Sharing Retirement Plan.

Particularly, the lawsuit points to investment decisions made in 2013, when the plan’s managers allegedly “loaded the plan with a suite of poorly performing funds,” which it identified as “the Northern Trust Target Retirement Trusts.”

The complaint described those funds as “target date funds,” which “are designed to achieve certain investment results based on an investor’s anticipated retirement date.

The complaint notes such investment vehicles can account for as much as 21% of all retirement funds, , and may hold at least $734 billion of retirement savings.

According to the complaint, Walgreens selected these particular Northern Trust funds as the default investment vehicle for workers participating in its retirement plans.

However, the complaint said, these Northern Trust funds underperformed the market, leaving workers’ retirement funds short of what they otherwise could have been.

“Despite a market teeming with better-performing alternatives, Walgreen selected the Northern Trust Funds,” the complaint said. “When Walgreen added the Funds to the Plan in 2013, the Funds already had a history of poor performance. They had significantly underperformed their benchmark indexes and comparable target date funds since Northern Trust launched the Funds in 2010.

“Predictably, the Northern Trust Funds continued underperforming through the present. For nearly a decade, these investment options performed worse than 70 to 90 percent of peer funds.

“Still, Walgreen refuses to remove the Funds.”

According to the complaint, the Northern Trust target date funds currently hold more than $3 billion in Walgreen worker retirement money, or about 30% of the Walgreens’ retirement plan assets.

The complaint asserts data compiled by Morningstar Inc. has allowed the plaintiffs to “project the (Walgreens) Plan lost upwards of $300 million in retirement savings since 2014 because of Walgreen’s decision to retain the Northern Trust Funds instead of removing them.”

They assert this means “the average Plan participant could earn $193,925 less in retirement savings than employees in top-rated retirement plans of a similar size,” which they said “translates to an additional 10 years of work per participant.”

The complaint asks the court to allow the lawsuit to proceed as a class action, which could include tens of thousands of Walgreens workers.

The complaint asks the court to order Walgreens to “make good” to the retirement plan the alleged $300 million in estimated underperformance “and to otherwise restore the Plan to the position it would have occupied but for the breaches of fiduciary duty.” They also request attorney fees for class counsel, identified as the firm of Sanford Heisler Sharp LLP.



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Organizations in this Story

Sanford Heisler The Walgreen Company U.S. District Court for the Northern District of Illinois

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