Employer Files 401(k) Fee Case against Its Own 401(k) Plan

An interesting twist today in 401(k) fee litigation—an employer filed a lawsuit against the fiduciaries of its own 401(k) plan.

McCaffree Financial Corp. is a participating employer in the ADP TotalSource Retirement Savings Plan—a multiemployer plan sponsored by Total Source. McCaffree alleges (on behalf of a class of employers) that the $4 billion plan had “significant bargaining power” and the “ability to demand low-cost administrative and investment management services” from the market. The complaint alleges that ADP (as a fiduciary of the plan) allowed the plan to incur “unreasonable” recordkeeping fees and that the plan includes investments with expense ratios in excess of what would have been prudent.

The allegations in the complaint are not novel—they are found in most 401(k) “fee” case. But the type of plaintiff is new. The results of the case are, of course, uncertain. But the case highlights that an ERISA plan’s right to sue is a plan asset. And like all plan assets, it needs to be managed consistent with ERISA’s fiduciary rules and duties. ERISA fiduciaries should ensure they are properly managing such “assets.”