Aetna 401(k) Plan Breach of Fiduciary Duty in Aetna-CVS Merger Class Action

What happens to 401(k) plans when two companies merge? This class action concerns the merger of Aetna, Inc. and CVS Health Corporation during which the Aetna 401(k) plan was converted into the CVS 401(k) plan. It brings suit on behalf of participants in the Aetna plan with Aetna stock in their accounts, claiming breaches of fiduciary duty and engagement in prohibited transactions, under the Employee Retirement Income Security Act of 1974 (ERISA).

The case concerns the merger between Aetna and CVS, which was announced on December 3, 2017. The agreement provided that “Aetna shareholders would receive a combination of cash and CVS stock for each share of Aetna stock. It was contemplated that the Aetna Stock Plan 401(k) participant[s’] units (not actual stock shares) would be exchanged one-for-one into CVS stock units (not shares) upon closing of the merger.”

After the announcement, Aetna’s and CVS’s share prices “traded in tandem.” However, the complaint says that analysts “were unaware of the deterioration in CVS[’s] Omnicare business and its value[.]” CVS’s stock price climbed, becoming artificially inflated, pulling Aetna stock up with it.

This means, the complaint says, that “CVS received valuable Aetna shares and/or units from the Plan in exchange for artificially inflated CVS stock and/or units.” CVS’s business continued to deteriorate, posing dangers for Aetna stockholders.

The complaint asserts that the deterioration of CVS’s assets was obvious to persons with access to CVS internal books [and] records.” It alleges that the defendants breached their fiduciary duties by “fail[ing] to provide the Plan and/or Plan participant with complete, truthful, and accurate information regarding the risk of investing in Aetna stock units after Aetna and CVS signed the Merger Agreement on December 3, 2018.”

Certain defendants, who were responsible for the selection, removal, and monitoring of the plan’s fiduciaries are charged in the complaint with failing to monitor the fiduciaries’ performance and failing to “remove and replace those whose performance did not meet the standards for fiduciary conduct under ERISA.”

According to the complaint, defendants also “breached their duties and responsibilities as co-fiduciaries by failing to prevent breaches by other fiduciaries of their duties of prudent and loyal management, complete and accurate communications, and adequate monitoring.”

Two classes have been defined for this action.

One is all participants in the Aetna 401(k) plan from December 3, 2017 through November 28, 2018 who were invested in the Aetna Stock Fund at any time during that period, and whose units were converted to CVS common stock units as a result of the merger.

The other is all participants in the CVS 401(k) plan from November 29, 2018 through February 20, 2019 who owned CVS stock units in the plan at any time.

Article Type: Investigation
Topic: Employment

Most Recent Case Event

Aetna 401(k) Plan Breach of Fiduciary Duty in Aetna-CVS Merger Complaint

September 4, 2020

What happens to 401(k) plans when two companies merge? This class action concerns the merger of Aetna, Inc. and CVS Health Corporation during which the Aetna 401(k) plan was converted into the CVS 401(k) plan. It brings suit on behalf of participants in the Aetna plan with Aetna stock in their accounts, claiming breaches of fiduciary duty and engagement in prohibited transactions, under the Employee Retirement Income Security Act of 1974 (ERISA).

Aetna 401(k) Plan Breach of Fiduciary Duty in Aetna-CVS Merger Complaint

Case Event History

Aetna 401(k) Plan Breach of Fiduciary Duty in Aetna-CVS Merger Complaint

September 4, 2020

What happens to 401(k) plans when two companies merge? This class action concerns the merger of Aetna, Inc. and CVS Health Corporation during which the Aetna 401(k) plan was converted into the CVS 401(k) plan. It brings suit on behalf of participants in the Aetna plan with Aetna stock in their accounts, claiming breaches of fiduciary duty and engagement in prohibited transactions, under the Employee Retirement Income Security Act of 1974 (ERISA).

Aetna 401(k) Plan Breach of Fiduciary Duty in Aetna-CVS Merger Complaint
Tags: Breach of Fiduciary Duty, ERISA Violations, Employment Violations, Merger-Related