As we reported last month, Nationwide settled a 13-year-old revenue sharing lawsuit for a whopping $140 million — more than 10 times greater than other recent, high-profile settlements. The suit, Haddock v. Nationwide, alleged that Nationwide violated ERISA when it kept fees that it received from nonproprietary mutual funds that it offers through its DC platform.
The plaintiffs, which included trustees of five qualified retirement plans, alleged that the refunds of management fees that Nationwide received from nonproprietary mutual funds were, in fact, plan assets that should have been returned to the plans. Moreover, by not revealing these "kickbacks," they claimed that Nationwide misrepresented the level of fees it was receiving, and that Nationwide purposefully chose to include outside mutual funds with high management fees in order to maximize the "undisclosed kickbacks.”
The plaintiffs claimed that the revenue payments were subject to ERISA because Nationwide acted as fiduciaries in not only selecting investment options for plan investment menus, but reserving a “unilateral” right to replace investment options.
