Nationwide Seeks Class Certification Removal as 401(k) Fee Trial Looms

Nationwide Mutual Insurance Co. has asked a federal judge in Ohio to revoke the class certification of the plaintiffs in a complaint against Nationwide’s 401(k) plan, arguing that a recent ruling by the U.S. 4th Circuit Court of Appeals means the plaintiffs should not receive class status.

The motion is one of the first tests of the 4th Circuit’s ruling in Trauernicht v. Genworth Financial Inc., in which the appellate court ruled that claims involving individualized monetary losses cannot be pursued as a mandatory class action. Specifically, the 4th Circuit held that Employee Retirement Income Security Act claims seeking recovery for investment losses in defined contribution plans are inherently individualized. Because these claims depend on each participant’s unique investments and other circumstances, the court found the participants cannot be certified as making up a mandatory class without opt-out rights under Federal Rule of Civil Procedure 23(b)(1).

If the Genworth ruling applied to the Nationwide complaint, it could effectively thwart the case altogether. Class action status allows a group of employees to bring similar complaints into a single lawsuit, relevant when the singular personal injury is too small to justify a complaint, but the group injury is significant.

The 4th Circuit has jurisdiction over cases heard in federal courts in Maryland, North Carolina, South Carolina, Virginia and West Virginia. The Nationwide dispute, however, is subject to the U.S. 6th Circuit Court of Appeals, which hears appeals from federal courts in Kentucky, Michigan, Ohio and Tennessee, and which has not handed down a ruling similar to Genworth.

Case Background

The Nationwide complaint, originally filed in March 2020, accuses the company of overcharging employees who invested in a company-backed retirement fund. The case, currently before the U.S. District Court for the Southern District of Ohio, Eastern Division, was allowed to proceed to trial earlier this year.

The original complaint stated that Nationwide’s 401(k) plan improperly included an affiliated stable value fund that gave company employees less favorable terms than those available to investors outside the defined contribution plan. According to Nationwide, its guaranteed investment fund, which offers a fixed annuity that serves as a component of the plan’s default investment option, should receive safe harbor protection.

U.S. District Judge Sarah Morrison, the district court’s chief judge, wrote in her decision to proceed to trial that “palpable tension” exists in the case because Nationwide hired Callan as an independent consultant to review the fund. However, it then withheld information from Callan, such as fees and spread, and later refused to follow the consultant’s recommendation to exit the fund. Morrison said these actions “demand further exploration.”

The class was initially certified by Morrison in March 2024, but Nationwide made its motion for reconsideration in light of the Genworth ruling. A decision to decertify the class would likely derail the complaint, but it would not resolve the underlying fiduciary breach claims.

The Nationwide Savings Plan had approximately $8.3 billion in assets with nearly 43,000 participants at the end of 2024, according to its latest Form 5500 filing.

Zagrans Law Firm LLC and Cohen Milstein Sellers & Toll PLLC represent the plaintiffs, and Jones Day represents Nationwide.

A Nationwide spokesperson said the company “acted responsibly, fairly, and thoughtfully in evaluating investment options for the plan,” and that the GIF “has consistently outperformed comparable conservative investment strategies.”

“In volatile markets, the GIF gave plan participants the ability to protect their contributions, preserve their investments, and still earn a positive return,” the spokesperson added. “Plaintiffs effectively concede the value of the fund, as they are not seeking to remove the GIF from the plan’s investment lineup. Participants also remained free to move their assets to other investment options at any time, without penalty. We upheld our fiduciary responsibilities throughout, and we believe the record supports our position.”