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Allianz Asset Management Settles ERISA Lawsuit for $7.5 Million

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Lawsuit claims Allianz reneged on prior settlement agreement

Santa Ana, CAOn August 18, Allianz Asset Management of America, LLC and the Investment Committee of the Allianz Asset Management of America 401(k) Savings and Retirement Plan agreed to settle a breach of fiduciary duty ERISA lawsuit brought by former participants in the plan. The $7.5 million payout will go to roughly 5,139 participants and beneficiaries in the 401k plan, according to the filing.

The remarkable thing about Chad Rocke et al. v. Allianz Asset Management of America is not the settlement, but the fact that plaintiffs are seeking to enforce the terms of a previous settlement agreement. Allianz allegedly simply ignored some of the conditions of that first settlement.

2015 ERISA lawsuit

The plaintiffs in the first ERISA lawsuit claimed that plan fiduciaries had engaged in self-dealing. Plan participants were offered only investments managed by either Allianz Global Investors or Pacific Investment Management Company LLC. Both were subsidiaries of Allianz, according to the Complaint. The all-proprietary fund lineup included expensive, underperforming investments that benefitted the plan sponsor rather than the participants and beneficiaries, as required by ERISA. These actively-managed investment options arguably cost plan participants tens of millions of dollars in lost benefits.

2017 settlement

The parties reached a settlement of the 2015 ERISA lawsuit in December 2017. Allianz paid $12 million into a common fund for the benefit all participants and beneficiaries between October 2009 and December 2017. In addition, the settlement required Allianz to retain an “unaffiliated investment consultant” to provide an annual evaluation of the plan’s investment lineup and review its investment policy.

2023 ERISA lawsuit

In January, a new set of plaintiffs filed a new Complaint against Allianz, alleging that little had changed. The new lawsuit alleges that:  

“Despite agreeing as part of the settlement to retain an independent consultant to evaluate the Plan’s lineup and investment policy statement for a period of up to three years, Defendants still maintain an all-proprietary lineup. Although a handful of proprietary funds have been removed since the settlement (most of which were removed in conjunction with the fund’s liquidation), Defendants still retain underperforming proprietary funds where an objective and prudent review of comparable investments in the marketplace would have revealed numerous superior nonproprietary investments.”

Further, the new plaintiffs argue that the opportunity for profits after 2017 was even greater because the plan then held nearly $2 billion in assets. This was more than twice as much as it held when the 2015 ERISA lawsuit was filed.

ERISA requirements

ERISA requires plan fiduciaries to act prudently, diversifying plan investments in order to minimize the risk of large losses. They must act solely in the interest of participants and beneficiaries and to pay the reasonable expenses of the plan. To be clear, however, plan fiduciaries in a defined contribution plan, like the Allianz 401k plan, do not guarantee an investment result or a defined benefit at the time of retirement.

A plan’s decision to use proprietary or actively-managed options is not a per se breach of the duty of prudence or loyalty, but it attracts attention. Because ERISA focuses on good and prudent efforts, rather than outcomes, courts look closely at the decision-making process.

How were investment options selected and monitored? Was there some unbiased evaluation of whether those investment options would meet the needs of plan participants? Independent advice is the key.

But in the 2023 ERISA lawsuit, the inquiry seems to have moved beyond ERISA’s requirements to focus on Allianz’s compliance with the terms of the 2017 settlement agreement. It’s a contract argument. Did Allianz do what it promised to do in order to end the 2015 lawsuit?

The 2023 plaintiffs argue that Allianz did not.

2023 settlement

Under the proposed settlement terms, Allianz will pay $7.5 million into a common fund for the settlement of claims brought by participants and beneficiaries from 2017 through the date of settlement. In addition, the settlement also provides for “meaningful prospective relief,” for a period of no less than three years. Allianz has agreed to retain an unaffiliated investment consultant to provide:
  • an evaluation as to the suitability of the plan’s investment structure, including the number of investments, asset classes, and investment styles (passive vs. active) offered;
  • an annual evaluation of each of the plan’s investments, including each investment’s fees and performance compared to a suitable peer group and specific, unaffiliated options in the same asset class; and
  • an evaluation of the suitability of replacing the plan’s current capital preservation option with a less volatile fund.

Oversight is essential

Breach of fiduciary duty ERISA lawsuits, can become very technical and statistical, so it can be easy to lose sight of the big picture. Participants and beneficiaries must depend on plan fiduciaries must depend on plan fiduciaries to manage their retirement savings wisely. Trust is fine, in its place, but this task requires careful monitoring.


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