Excessive Recordkeeping Fee Claim Squeaks by a Motion to Dismiss

A federal court in Wisconsin recently allowed a putative ERISA class action in Lucero v. Credit Union Ret. Plan Ass’n to proceed to discovery on the claim that a 401(k) plan paid excessive recordkeeping fees. This decision highlights an important trend in ERISA litigation.

Lucero is part of an ongoing surge of ERISA class actions challenging recordkeeping costs of 401(k) plans. Plaintiffs in these cases claim their plans’ fiduciaries failed to prudently monitor recordkeeping costs, saddling plan participants with “excessive” fees.

Recently, defendants have had some success convincing courts to dismiss excessive recordkeeping fee claims early in litigation. Courts have started more aggressively requiring plaintiffs to identify similar plans that paid less for the same services—an apples-to-apples comparison—to get past a motion to dismiss.

Lucero illustrates how plaintiffs might meet or avoid that pleading requirement. The plan in Lucero was a multiple-employer plan with 20,000 participants, $1.5 billion in assets, and recordkeeping fees between $235 and $271 per participant. The court found a combination of the following four allegations plausibly suggested a breach of fiduciary duty:

• There is no meaningful difference in recordkeeping services offered by large plans and that whatever differences there are do not affect recordkeeping costs;
• The plan’s fees were 10 times higher than the fees of plans with a similar number of participants;
• The plan’s fees were substantially higher even than smaller plans of fewer than 1,000 participants; and
• The plan’s total costs were substantially higher than the average plan of a similar size.

While the defendants pointed out that plaintiffs’ comparator plans received different recordkeeping services, the court credited plaintiffs’ “allegation that differences in services don’t have a substantial impact on the fees charged by recordkeepers.” And the court accepted the comparisons even though plaintiffs compared “single-employer plans rather than multiple-employer plans like the plan at issue in this case.”

Citation: Lucero v. Credit Union Ret. Plan Ass’n, No. 22-cv-208-jdp, 2023 U.S. Dist. LEXIS 40702 (W.D. Wis. Mar. 9, 2023).