Wells Fargo faces a new lawsuit claiming 401(k) self-dealing on the part of $3 billion of employee retirement savings. Plaintiffs allege the company funneled 401(k) plan assets into “expensive, under-performing” proprietary target date funds to enrich itself.
Reuters reports the proposed class-action lawsuit, filed on Tuesday in federal court in Minnesota, accused the third-largest U.S. bank of steering 401(k) contributions to its Wells Fargo Dow Jones Target Date funds.
The lawsuit, filed by employees, seeks to “recoup excess fees and unrealized profits stemming from Wells Fargo’s alleged breach of fiduciary duties to all 401(k) participants over the last six years,” according to the complaint.
It added that Wells Fargo’s target date funds cost 2.5 times more than similar funds from such rivals as Fidelity Investments and Vanguard Group.
This “generated substantial revenues for Wells Fargo” and provided “critical seed money that kept the funds afloat by boosting market share,” the complaint said.
The news service notes employees could have earned $323 million more in returns in the five years ended June 30 had Vanguard target date funds been used.
Wells Fargo’s 401(k) plan has about $35 billion in assets and more than 350,000 participants.
Wells Fargo is already facing legal action over allegations that employees opened supposedly fake customer accounts to fraudulently achieve sales quotas. The resulting scandal and fallout led to the resignation of John Stumpf, the bank’s longtime chief executive.
The news comes soon after The Walt Disney Co. successfully repelled its own 401(k) lawsuit from employees by convincing a federal judge to dismiss a proposed class action 401k fiduciary lawsuit over investments included in its 401(k) plan.