Ford Motor Co. violated the Employee Retirement Income Security Act by improperly using contributions to pay plan administrative expenses and excessive service-provider fees, plan participants allege in a proposed class action lawsuit.
Although plan documents stipulate that these expenses would be paid by the company or from forfeited matching contributions, the plaintiffs allege that Ford instead paid them from the plan assets of participants. The plans held more than $25 billion in assets and covered nearly 140,000 active participants as of the end of 2024, according to the legal action filed in U.S. District Court for the Eastern District of Michigan.
Between 2020 and 2024, Ford paid more than $100 million for administrative expense, the lawsuit said – approximately $70.4 million to Financial Engines for managed account services and roughly $21 million to recordkeeper Alight Solutions. Because the plans' forfeiture accounts were insufficient to pay these fees, participants' retirement savings were improperly used to make up the difference, resulting in plan losses in excess of $100 million.
Ford fiduciaries allegedly allowed Alight Solutions to receive excessive compensation through both direct recordkeeping fees and indirect payments tied to Financial Engines' managed account program. As a result, Alight's total compensation increased to as much as $57 per participant annually, nearly three times the plan's contracted $20-per-participant fee.
The plaintiffs accuse Ford of violating ERISA requirements by failing to adequately monitor service provider compensation or conducting sufficient competitive bidding processes when hiring providers. The lawsuit seeks repayment of alleged losses to the retirement plans, restoration of any profits improperly obtained through the use of plan assets, injunctive relief and other equitable remedies under ERISA.
This lawsuit differs from most recent retirement plan litigation, most of which concerns improper use of forfeiture funds. These cases typically accuse the plan sponsor of improperly using the funds to offset future contributions rather than paying down plan costs.
The Ford Motor Company Savings and Stock Investment Plan for Salaried Employees had more than $17 billion in assets with more than 52,000 plan participants at the end of 2024, according to its most recent Form 5500 filing, according to Plan Adviser. The Ford Motor Company Tax-Efficient Savings Plan for Hourly Employees had more than $8 billion in assets with 86,150 plan participants in the same period.
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