Schlichter targets Ameriprise over retirement losses

St. Louis Business Journal
by Evan Binns

Law firm Schlichter Bogard & Denton of St. Louis is gaining national recognition in employee benefits circles.

The firm was noticed by the New York Times Oct. 14 for filing a lawsuit against Ameriprise Financial Inc., the largest employer of certified financial employers in the country.

Schlichter Bogard has filed about a dozen lawsuits over the past five years against employers relating to 401(k) plans and the management of retirement funds. But the Ameriprise suit is the first Schlichter has filed against a financial services company on behalf of its own employees.

Plaintiffs in the case claim that Ameriprise's alleged breach of fiduciary duties caused its retirement plan to suffer more than $20 million in losses as a result of the excessive fees and expenses, according to court documents filed Sept. 28 in U.S. District Court in Minneapolis. The suit is seeking class action status.

In a statement, Ameriprise said the suit "has no merit." Ben Pratt, senior vice president of public relations and communications, said the lawsuit was "a copycat of many other 401(k) lawsuits, most of which have been unsuccessful."

"Our 401(k) plan provides employees with a very broad range of investment options including the option to self-direct their investments," said Pratt. "The premise that employees were forced to invest their 401(k) funds in our products is simply untrue."

Ameriprise is represented by law firm O'Melveny & Myers.

In 2010 and 2011, Schlichter Bogard & Denton, which has 20 lawyers in offices downtown and in Belleville, obtained more than $50 million in settlements for employees and retirees enrolled in the 401(k) plans of Caterpillar, General Dynamics and construction company Bechtel Corp. in San Francisco.

"These kinds of lawsuits have been around since 1974 when the Employee Retirement Income Security Act (ERISA) was first enacted," said Elizabeth Pendo, associate dean for academic affairs at Saint Louis University School of Law. "Employers' fiduciary duties are the same, but there has been more focus on the pension side" of employee benefits given the increase in lawsuits.

The lawsuit against Ameriprise claims the financial planner used its own underperforming mutual funds in its employees' 401(k) plan.

"We contend that there was a failure by plan fiduciaries (at Ameriprise) to focus on their employees' interests and on best serving their employees," said Managing Partner Jerry Schlichter. "There has been a sea change in the American retirement system over the last five years, and we have had more and more people contact us concerned about having enough money to retire on."

Legal observers say growth in the number of new retirees, combined with hits to retirement plans during the economic downturn, has caused an increase in the number of lawsuits filed over employee benefits.

"In a way it's a perfect storm because we have the most significant boost of new retirees who don't have traditional pension plans," said Greg Ash, a partner specializing in employee benefits at Spencer Fane Britt & Browne's Overland Park, Kan., office. "Coupled with the stock market volatility and the hits that most retirement funds took, a lot of folks are playing close attention to their money."

Given the ongoing economic woes and employees' concerns about retiring comfortably, Ash said litigation was "bound to ensue."

However, Ash said the suit against Ameriprise should not be a source of additional angst among most employers, because the suit is targeting a financial services firm that invested some of its employee 401(k) funds into its own financial products, placing Ameriprise in a small subset of employers.

"This lawsuit is targeted at financial institutions that sponsor their own 401(k) plans and use their own products in those plans," he said. "Those institutions have more to worry about from this lawsuit than traditional employers."