Credit: RomanR/Adobe Stock
While $38.8 million was awarded in damages to participants in the Pentegra Retirement Services multiemployer 401(k) settlement in April, Pentegra, aleading retirement plan provider to banks, has now agreed to pay nearly $10 million more – in a case that alleged the company charged unreasonable fees and engaged in prohibited transactions.
Last week, in the U.S. District Court for the Southern District of New York, Pentegra agreed to settle the complaint with 26,000 bank employees and retirees for $48.5 million in a case tied to a multiemployer 401(k) plan, administered by fiduciaries of Pentegra’s more than $2 billion Multiple Employer Defined Contribution Plan for Financial Institutions. Now, the terms must be approved by the court.
The Pentegra multiple employer plan (MEP) was adopted by 250 banks for their employees. In Khan et al. v. Board of Directors of Pentegra Defined Contribution Plan, the jury found that fiduciaries of Pentegra’s 401(k) plan breached their fiduciary duties under ERISA by paying unreasonable recordkeeping and administrative fees.
The class action case, which alleged “that the fees paid by participants have far exceeded the rates of comparable plans,” was originally filed in a New York district court in 2020 by employees Imran Khan, Joan Bullock and Pamela Joy Wood, who represented themselves and all others with retirement savings in the plan since September 15, 2014.
According to the lawsuit, in 2014, the plan paid Pentegra at least $9.52 million in direct recordkeeping and administration fees, or an average of $359.70 per participant, while a comparable plan, Nike’s 401(k) plan, with approximately 19,000 to 26,000 participants, paid $21 per participant for recordkeeping services in 2012 and 2016.
In a rare jury trial, Pentegra was accused of failing to regularly monitor administrative fees or to solicit competitive bids from third-party providers. Since the plan is considered a “mega” plan based on its assets, Pentegra had tremendous “bargaining power” to obtain low recordkeeping fees, alleges the lawsuit.
There’s been increased scrutiny of 401(k) plan performance and fiduciary practices following high-profile lawsuits, such as Southwest Airlines, which was sued earlier this year over the “disastrous” performance of a large-cap fund over a nine-year period and UnitedHealth, which just paid a record $69 million to settle a “poorly performing” 401(k) suit
Related: Pentegra settles 2nd claim in $38M multiemployer 401(k) excessive fees case
The Pentegra case is yet another win for law firm Schlichter Bogard, which has been representing many plaintiffs in the onslaught of 401(k) and 403(b) excessive fee cases over the last few years. Jerry Schlichter, founder of Schlichter Bogard, is a pioneer in legal action against 401(k) and 403(b) plan sponsors on behalf of retirees and savers.
Jury trials in Employee Retirement Income Security Act cases are rare because many courts have ruled that ERISA lawsuits seek equitable claims that must be heard by a judge, instead of money damages that can be submitted to a jury. However, some judges within the Second Circuit—which includes New York, Connecticut, and Vermont—have expressed greater willingness to allow jury trials in these cases
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.