Anheuser-Busch Employee Files Class Action Alleging Pick of Risky QDIA Was a Breach

Pension & Benefits Daily: All Issues

An Anheuser-Busch Cos. employee filed a proposed class action June 25 alleging the company breached its Employee Retirement Income Security Act fiduciary duties by using a risky qualified default investment alternative (QDIA) (Parsons v. Anheuser-Busch Cos., M.D. Fla., No. 3:09-cv-584-J-25MCR, lawsuit filed 6/25/09).

The lawsuit, filed in the U.S. District Court for the Middle District of Florida by employee David K. Parsons, alleged that Anheuser-Busch had an obligation to use a less risky QDIA to hold the cash proceeds employees received after it converted the common stock in its pension plan following a stock sale to InBev N.V./S.A. last November.

According to the complaint, InBev acquired Anheuser-Busch last November after it paid Anheuser-Busch shareholders $70 per share for their common stock. The shareholders included Anheuser-Busch employees who invested in the company stock through their pension plan.

The complaint alleged that just after the sale was completed, Anheuser-Busch circulated a flyer to its employees that informed them they would have until Nov. 7, 2008, to elect an investment fund that would hold the cash they received from the sale of their company stock to InBev. The flyer stated that if employees did not elect an investment fund, the cash assets from the sale of their company stock would be transferred to an “Indexed Balanced Fund.”

Parsons alleged that although the flyer said the Indexed Balanced Fund would be the QDIA, the plan itself mandated that the QDIA for employees who failed to elect an investment choice for their cash assets would be a “Short-Term Fixed Income Fund.”

According to the complaint, Parsons did not make his investment election by the Nov. 7, 2008, deadline and Anheuser-Busch and the plan’s trustee, BNY Mellon Bank, transferred $271,024 of Parsons’s cash proceeds from the InBev acquisition to the Indexed Balanced Fund. The money transferred to the Indexed Balanced Fund remained in the fund for just under two days, when Parsons took steps to move it to the Short-Term Fixed Income Fund. In those two days, Parsons allegedly lost $20,000 due to the market volatility of late 2008.

Parsons Challenges QDIA Choice

Parsons then sent a letter to Anheuser-Busch, requesting that he be reimbursed for his $20,000 investment loss. Parsons argued in the letter that his cash assets from the InBev sale were transferred by BNY Mellon to the Indexed Balanced Fund without Parsons’s authorization. According to the complaint, Anheuser-Busch responded by telling Parsons the Indexed Balanced Fund was selected as the plan’s default investment because it was a diverse fund and satisfied the requirements for a QDIA.

In his lawsuit, Parsons argued that the Indexed Balanced Fund did not comply with the Labor Department’s QDIA regulations because reasonable notice of the QDIA was not given, there was a limited election window to direct a transfer to another investment fund, and there was no description of the Indexed Balanced Fund in the flyer mailed out by Anheuser-Busch.

“Anheuser-Busch with little or no thought and no documentation elected on its own accord to take the Plan’s cash proceeds from the InBev transaction and transfer and invest them into the Indexed Balanced Fund at a time when the equity and bond markets in the United States were experiencing the greatest volatility in their history,” the complaint said.

Parsons requested in the lawsuit that Anheuser-Busch and BNY Mellon be directed to “make good to the plan” for any losses the plan incurred that were caused by the defendants’ alleged breach of their fiduciary duties.

The lawsuit was filed by Robert J. Winicki and Debbie K. Winicki of Winicki Law Firm, Jacksonville, Fla.

By Jo-el J. Meyer