This article first appeared on the Boston Business Journal’s website.
The company that operates Market Basket has agreed to pay $17.5 million to settle a class action lawsuit that claims it mismanaged its retirement plan for employees by making super-conservative investments.
Demoulas Super Markets Inc. has also agreed to change the way it manages its plan, according to a proposed settlement filed in federal court in Boston earlier this month. Going forward, no more than 10% of the plan’s assets would be held in cash or cash equivalent accounts, and the plan would increase its annual return target by 100 basis points, or 1%.
An ex-Market Basket employee named Paul Toomey brought the proposed class action last year, accusing the Tewksbury-based chain of employing a “wildly unsuccessful” investment strategy. The company aimed to put 70% of the plan’s assets in fixed-income accounts and used a one-size-fits-all approach for all employees regardless of age, the lawsuit said. At one point, about two-thirds of the plan’s assets were allegedly in cash accounts that earned .05% or less in interest.
The settlement, if approved, is open to participants in the company’s plan from July 2013 through November 2020, according to a legal filing. The class is believed to number about 18,600. Market Basket is one of the state’s 10 largest employers, according to Business Journal research.
The company puts profits into a fund that acts as a retirement savings plan for employees. When a worker retires or leaves Market Basket, they receive their portion of the fund, either as a lump sum or in installments. As of the end of 2019, the plan had $861 million in total assets, according to a Demoulas financial report.
In a letter to plan participants about the settlement, President and CEO Arthur T. Demoulas said most of the settlement amount would be paid by the company’s insurers. He said the company was “very pleased” to report the agreement.
“The Plan will continue to be managed with associates’ security foremost in the minds of the Trustees and the investment management firms that will continue to advise us,” Demoulas said.
The company had fought the lawsuit, arguing the allegations carried “no merit” and that the fund’s average annual return over the decades was over 6%. U.S. District Judge Leo Sorokin in April rejected the company’s bid to throw out the lawsuit.
On Tuesday, the judge granted preliminary approval of the settlement. He set a settlement conference for April 2021.
Attorneys’ fees and other expenses would be taken out of the $17.5 million fund. Attorneys for the proposed class, from the Minnesota law firm Nichols Kaster PLLP and the Boston firm Block & Leviton LLP, have yet to detail their fees for the case.
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December 02, 2020 at 07:00PM
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Market Basket to pay $17.5M to settle lawsuit over retirement plan - MassLive.com
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