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Frontier Communications Retirement Plan Asset Concentration ERISA Class Action

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This class action concerns the investments in the Frontier Communications 401(k) Savings Plan. The complaint alleges that Frontier Communications Corporation  and its Retirement Investment & Administration Committee did not fulfill their fiduciary duties to the plan, including maintaining adequate diversification, thus violating the Employee Retirement Income Security Act (ERISA).

The class for this action is all persons who were participants in or beneficiaries of the Frontier Communications 401(k) Savings Plan, at any time from December 31, 2012, and whose Plan accounts included investments in Verizon common stock, including the Verizon Stock Fund. Excluded from the class are the defendants and their immediate family members.

In 2010, Verizon spun off a subsidiary operating in certain locations which then merged with Frontier. According to the complaint, between July 2010 and December 2011, the Plan acquired about $150 million in Verizon stock. In April 2016, it acquired still more Verizon stock and offered investments in a Verizon Common Stock Fund.

The complaint makes a number of allegations. First, it claims that Frontier did not liquidate enough Verizon stock, and did not do it in a timely manner, allowing the plan to become undiversified.

Second, the plan continued to offer the Verizon Common Stock Fund through July 2018, even though the lack of diversification made for a riskier plan.

Third, the complaint claims that the Verizon stock was even riskier because the plan was already heavily invested in AT&T stock. The two companies’ stock together made up about 15% of the plan’s total assets. Verizon and AT&T are both telecommunications companies, so the plan was heavily invested in that single industry.

Fourth, Verizon stock was an imprudent place to concentrate investments, the complaint says, because the stock is volatile. In the year prior to the plans’ 2016 additional investment in Verizon stock, the complaint says, “Verizon common stock was approximately 31% more volatile than the stock market as a whole.”

Fifth, the complaint claims that Frontier and the Committee knew even before the 2011 acquisition that Verizon stock should be sold, but it did not do so in a timely manner and even acquired more in 2016. It claims that had the stock been sold, “all or at least most Plan Participants would have divested their Verizon Stock Fund holdings by the beginning of the class period or, in the case of participants acquired in 2016, at or shortly after their accounts were acquired by the Plan.”

The complaint claims, “Prudent fiduciaries of retirement plans would not have permitted such a concentrated investment in the volatile stock of a single company, particularly for so long.” Because it did not do so, the complaint says, Frontier and its Committee “caused the Plan and the Class to suffer more than $100 million in losses.”

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