Employees of a Cedar Rapids investment company are suing their employer for allegedly costing them millions of dollars in poorly performing retirement accounts.
Three employees of Transamerica allege in a class action lawsuit filed in federal court in Iowa on Dec. 28 that poor performance of their employers' funds cost them and thousands of other current and former employees between $15 million and $20 million. The company's corporate headquarters is in Baltimore but it has major operations in Cedar Rapids.
The investment, retirement and life insurance firm provides internally managed investment funds so its employees can save for retirement. The lawsuit alleges six of those funds underperformed market benchmarks by significant margins over a 10-year period.
The low performance should have been apparent to the company in real time, the employees allege. One fund, the International Equity Portfolio, underperformed its benchmark, the Morgan Stanley All-World Country Index ex-USA, by about 30 percent between 2008 and 2017.
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Scott Lempert, a Washington, D.C., attorney at Cohen Milstein who handles employee benefits cases, said the fact that the funds consistently fell short of their benchmarks is "a huge red flag." Lempert is not involved in the Transamerica case but reviewed the lawsuit at the Des Moines Register's request.
"One signal that these claims are strong as it relates to performance is the benchmark, that they didn’t meet the benchmark year after year after year, quarter after quarter after quarter," Lempert said.
The lawsuit accuses Transamerica of neglecting its duty to monitor its plans’ performances by continuing to offer the same proprietary portfolios in the face of low performance.
"It appears that Transamerica was not kind of minding the store," Lempert said.
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