Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
An unusual lawsuit challenging the fees associated with a union 401(k) plan is moving forward after a federal judge trimmed some of the proposed class action’s claims.
Employees covered by the Supplemental Income 401(k) plan, a $922 million union plan providing retirement benefits to about 27,000 Teamsters and other workers, got the green light to proceed with claims that the plan charged excessive fees for record-keeping services. Their challenge to the plan’s use of retail mutual funds didn’t fare as well: The judge dismissed this claim for lack of standing but gave them a chance to try again.
Large companies including Verizon, Chevron, American Airlines, and Anthem have been accused of similar 401(k) plan violations, but class actions challenging the fees of union retirement plans are rare. In recent years, litigation over 401(k) plan fees has trickled from the billion-dollar plans of large public companies to more modest plans, including those of Checksmart Financial LLC ($25M), Gucci America Inc. ($97M), and Novitex Enterprise Solutions Inc. ($157M). Elite universities, including Yale, Duke, and Vanderbilt, also have been targeted.
The lawsuit against the union plan is one of a growing number of Employee Retirement Income Security Act cases to argue that plan fiduciaries should be held liable if they offer expensive retail share classes when identical institutional share classes are available at a lower cost. Federal courts have disagreed over whether this is a viable claim under ERISA. Judges have allowed these claims to proceed against Cornell, Emory, and MIT, while Johns Hopkins, Columbia, and the University of Pennsylvania saw these claims dismissed.
In this case, the judge said the workers had a valid complaint against the plan’s record-keeping fees, which allegedly ranged between $143 and $175 per person, per year. The plan trustees tried to dismiss this claim as untimely and for lack of standing, which relates to whether the workers have been or will be harmed by the fees. The judge rejected each of the trustees’ arguments.
However, the judge rejected the workers’ challenge to the plan’s use of retail share classes. The workers lacked standing to bring this claim because they never identified which retail funds they owned, the judge said. He gave the workers 20 days to file a new complaint with more information supporting this claim.
Judge James V. Selna of the U.S. District Court for the Central District of California wrote the April 24 decision.
The workers are represented by Frank Sims & Stolper LLP and Franklin D. Azar & Associates PC. The plan trustees are represented by Morgan Lewis & Bockius LLP.
The case is Ybarra v. Bd. of Trs. of Supplemental Income Tr. Fund, C.D. Cal., No. 8:17-cv-02091-JVS-E, order partly granting motion to dismiss 4/24/18.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)