By Jonathan Stempel
(Reuters) – Former Bed & Beyond employees sued the committee that oversees its 401(k) pension plan on Thursday after the furniture retailer filed for bankruptcy, saying “malpractice” cost it millions of dollars.
The proposed class action, filed in Newark, New Jersey, federal court, stems from the Aug. 1 termination of Bed Bath & Beyond’s 401(k) plan, three months after the company sought Chapter 11 protection.
Former employees say they lost more than $5 million when their MassMutual “guaranteed investment account” suffered a 10% loss as rising interest rates hurt the value of underlying investments.
He said the 401(k) committee breached its fiduciary duty by failing to replace the account with similar investment options, such as money market funds and stable value funds, arguing that the company’s bankruptcy was less than the original risk.
Bed Bath and other attorneys did not immediately respond to requests for comment after business hours. A spokeswoman for the organization that oversees 401(k) plan terminations did not immediately respond to requests for comment.
He purchased Overstock.com and now operates the website under the name Bed Bath & Beyond. He is not a defendant, and a spokeswoman said the company was not involved in terminating the 401(k).
In guaranteed investment accounts, an insurer invests in stocks and bonds, and pays investors a fixed return.
The former employee’s MassMutual account was primarily invested in long-term bonds, which could lose value if interest rates rise. They also said MassMutual has the right to recover damages if the contract is terminated.
According to the complaint, Bed Base and Beyond claimed that its business model was unviable. They announced in early 2019, and had a “broad opportunity” to replace the bill in 2020 and 2021 before rates begin to rise.
If it had done so, “MassMutual would have terminated the contract with notice and eliminated the risk of potential plan losses from BBB’s bankruptcy and devaluation of GIA’s underlying portfolio,” the complaint said.
The suit seeks to recover all losses in violation 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 for the District of New Jersey, No. 23-20376.
(Reporting by Jonathan Stemple in New York; Editing by Diane Craft and Christopher Cushing)
