Compliance March 4, 2025

PPL Corp. Agrees to $8.2M Settlement due to ‘Underperforming’ TDFs

Workers at the energy company claimed that PPL included underperforming target-date investments from Northern Trust in four of its retirement plans.

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PPL Corp., an energy company headquartered in Allentown, Pennsylvania, has agreed to an $8.2 million class action settlement with workers who alleged the company violated the Employee Retirement Income Security Act of 1974 by including “underperforming” target-date funds in four of PPL’s retirement plans.

The settlement will cover all participants (and their beneficiaries) in the four retirement plans between 2016 and 2020 who invested in a Northern Trust Focus Fund through an individual retirement plan account, according to the agreement.

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The gross settlement fund will pay for administrative expenses, $20,000 service awards for each of the six named plaintiffs and attorneys’ fees and costs.

Schlichter Bogard LLP is representing the current and former participants involved in the lawsuit, which was initially filed in 2022 in the U.S. District Court for the Eastern District of Pennsylvania.

PPL selected Northern Trust Focus Funds as the plan’s TDF investment option in 2013, and the plaintiffs alleged that, since their inception, the Focus Funds consistently underperformed similar funds. Northern Trust, however, as the investment manager, was not named as a defendant in the lawsuit.

U.S. District Judge Mia Roberts Perez had denied PPL’s motion to dismiss the case, Binder et al. v. PPL Corp. et al., in March 2024, but also stated that the plaintiffs’ claims were limited to “breaches that occurred from January 12, 2016 and thereafter.” As a result, Perez stated that “[d]efendants’ 2013 selection of the Focus Funds may not constitute a breach in itself, and the Court will disregard allegations that suggest the opposite.”

The plaintiffs also claimed that from 2016 to 2020, PPL selected and caused the plan to pay higher-cost shares of the Focus Funds when “identical, lower-cost shares were available.” PPL argued the plaintiffs had failed to create a “meaningful benchmark,” but Perez sided with plaintiffs, stating that PPL’s argument in the motion to dismiss was “displaced.”

The suit named the PPL Employee Savings Plan, PPL Deferred Savings Plan, PPL Employee Stock Ownership Plan and the LG&E and KU Savings Plan, all overseen by the same fiduciaries.

In June 2024, PPL Corp. moved for summary judgement, and the court denied the motion in December 2024. The parties reached the settlement agreement on January 14, and it was eventually signed on February 28.

In a memorandum in support of the settlement agreement, the plaintiffs requested that the court schedule a final fairness hearing for the purpose of receiving evidence, argument and any objections to the settlement agreement. The hearing is requested to be held no later than June 27.

Following the fairness hearing, the court must grant a final approval of the settlement.

Ask the Experts March 4, 2025

How Are Wages Considered to Determine the Need for Roth Catch-up Contributions?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

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Q: We are a large healthcare organization that owns multiple hospitals. Two of those hospitals each sponsor separate 403(b) plans, though both are members of the same controlled group. We have one employee who works for both entities, with projected FICA wages of $80,000 at each entity in 2025. Assuming actual FICA wages match projections, for purposes of the mandatory Roth catch-up for 2026, will the employee be considered to have earned $160,000, and thus only be eligible to make catch-up deferrals as Roth? Or is the compensation broken down by each plan sponsor, and would thus permit a pre-tax catch-up election?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

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A: This is a complicated scenario, but one common in large, health-care-controlled groups. Fortunately, the IRS did address this issue in the proposed regulations published on January 13. Specifically, the proposed regulation states that only FICA wages with the employer sponsoring the plan are taken into account. The employer sponsoring the plan is defined as only the employee’s direct common-law employer, and not the controlled group. Thus, in your case, with two separate entities employing your employee, with each sponsoring separate 403(b) plans, the $80,000 in FICA wages that the employee earned at each employer would not be combined for purposes of the mandatory Roth catch-up for 2026. This employee would be free to elect pre-tax or Roth for any catch-up contributions.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issmarketintelligence.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.

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