Court Refuses to Dismiss Lawsuit Over Recordkeeping Fees
The U.S. District Court for the Northern District of Illinois has ruled in favor of the plaintiffs in a motion to dismiss a lawsuit against Pactiv Evergreen Services, Inc., which claims it breached its fiduciary duty to a 401(k) plan it sponsors. The participants argued that the sponsor allowed for overly expensive recordkeeping and administrative fees by pointing to similarly sized plans that were able to obtain less expensive services. The court accepted the plaintiff’s contention that recordkeepers to plans of its size (about 10,000 participants) provide nearly identical services, and the cost comparison was a reasonable basis for pursuing the lawsuit. The court also pointed to facts which suggested the sponsor failed to solicit bids from competitor recordkeepers to ensure it was receiving a fair quote for the services. The court went on to distinguish this case from other recent cases which have looked at similar arguments, but where the sponsor had solicited competitive bids. Other courts have found that recordkeepers are not “fungible”, and that a relying on price alone is an “apples to oranges” comparison that cannot be the sole basis to bring a claim.