Since last month’s edition of The Speed Reader, the Internal Revenue Service and the U.S. Department of Labor have been quiet on the retirement plans front. Perhaps this was a result of their pending work drafting guidance pursuant to the SECURE Act, which was summarized in last month’s edition of this newsletter. Thus, this month’s edition simply provides my monthly ERISA litigation update.
ERISA Litigation Update: A sample of cases that were recently filed, or for which a procedural ruling was issued, is provided below.
- Intravaia v. National Rural Electric Cooperative Association (procedural ruling issued on January 2, 2020 by the U.S. District Court for the Eastern District of Virginia): The plaintiffs, who are participants in the defendant plan sponsor’s 401(k) plan, have also named the plan’s committee as a defendant. The plaintiffs allege several ERISA violations, stemming mainly from the plan’s alleged “increasing administrative costs…in a marketplace which is otherwise exhibiting a downward trend.” In this phase of the litigation, the court ruled on the defendants’ motion to dismiss the case. The court stated that per the plaintiffs’ allegations, a similar plan only “incurs approximately 25%” of the plan’s administrative expenses. The court then opined that such allegation “nudges the claim over the line from merely possible to plausible,” and the court denied the defendants’ motion as a result. Thus, the case will move forward.
- Freck v. Cerner Corporation (complaint filed on January 21, 2020 in the U.S. District Court for the Western District of Missouri): This proposed class action case is another example of the most common type of ERISA case filed since approximately 2006. Namely, the plaintiffs (participants in the defendant plan sponsor’s 401(k) plan) have also named the Board of Directors and the plan’s committee as defendants. The plaintiffs allege that the defendants breached their fiduciary duties by failing to use the plan’s “substantial bargaining power” (because of its assets of more than two billion dollars) regarding fees and expenses that were charged against participants’ accounts. More specifically, the defendants allegedly: (1) failed to “objectively and adequately review the Plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost;” (2) maintained certain investment funds in the plan “despite the availability of identical or similar investment options with lower costs and/or better performance histories;” (3) “failed to utilize the lowest cost share class for many of the mutual funds within the Plan, and failed to consider collective trusts, commingled accounts, or separate accounts as alternatives to the mutual funds in the Plan, despite their lower fees;” and (4) failed to prudently manage and control the plan’s recordkeeping costs (e.g., there is allegedly no evidence that the defendants have undertaken an RFP since 2007 in order to compare the recordkeeper’s costs with those of others recordkeepers in the marketplace). The plaintiffs seek to have the defendants restore to the plan all losses resulting from the alleged breaches of their fiduciary duties and to pay the plaintiffs’ attorneys’ fees and court costs.
- Glasscock v. Serco, Inc. (complaint filed on January 28, 2020 in the U.S. District Court for the Eastern District of Virginia): In yet another example of the most common type of ERISA case filed since approximately 2006, the plaintiffs in this proposed class action case are participants in the defendant plan sponsor’s 401(k) plan. They offer two main assertions regarding the defendant’s alleged breach of ERISA fiduciary duties. First, with respect to “at least 21 of the 30 mutual funds share classes available within the Plan, the same issuer offered a different share class from that selected by the Plan that charged lower fees, and consistently achieved higher returns; the Plan, however, inexplicably failed to select these lower fee-charging and better-return producing share classes.” Second, “administrative fees charged to Plan participants were consistently greater than the fees of more than 90 percent of comparable 401(k) plans, when fees are calculated as cost per participant or when fees are calculated as a percent of total assets.” As remedies, the plaintiffs seek to have the court order the defendant to restore to the plan all losses resulting from the alleged breaches of their fiduciary duties and to pay the plaintiffs’ attorneys’ fees and litigation costs.