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The
proposed class action filed in Newark, New Jersey, federal court
arose from Bed Bath & Beyond's termination of the 401(k) plan on
Aug. 1, a little over three months after the company sought
Chapter 11 protection.
Former employees said they lost more than $5 million when their
MassMutual "guaranteed investment account," which they thought
had little risk, suffered a 10% loss because rising interest
rates hurt the value of its underlying investments.
They said the 401(k) committee breached its fiduciary duties by
failing to replace the account with similar investment options,
such as money market funds and stable value funds, that carried
less principal risk if the company went bankrupt.
Lawyers for Bed Bath & Beyond did not immediately respond to
requests for comment after market hours. A spokesman for a firm
overseeing the 401(k) plan's termination did not immediately
respond to requests for comment.
Overstock.com bought and now operates its website under the Bed
Bath & Beyond name. It is not a defendant, and a spokeswoman
said the company had no involvement in terminating the 401(k).
In guaranteed investment accounts, an insurer typically invests
in stocks and bonds, and pays investors a fixed return.
The former employees said the MassMutual account was invested
mainly in long-term bonds that could lose value if interest
rates rose. They also said MassMutual had the right to make up
losses if its contract were terminated.
According to the complaint, Bed Bath & Beyond knew as early as
2019 that its business model was not viable, and had "ample
opportunity" in 2020 and 2021 to replace the account before
rates began rising.
Had it done so, "it would have terminated the MassMutual
Contract by notice and avoided the risk of Plan losses that
could result from BBB's bankruptcy and a decrease in value of
the GIA's underlying portfolio," the complaint said.
The lawsuit seeks to recoup all losses resulting from violations
of the federal Employee Retirement Income Security Act, which
generally protects 401(k) investors.
The case is Harvey et al v Bed Bath & Beyond Inc 401(k) Savings
Plan Committee et al, U.S. District Court, District of New
Jersey, No. 23-20376.
(Reporting by Jonathan Stempel in New York; Editing by Diane
Craft and Christopher Cushing)
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