NCL Corporation, Ltd offers a retirement plan for its employees, the NCLC 401(k) Plan. This class action sues NCL and the plan’s administrator, NCL (Bahamas), Ltd., alleging they have breached their fiduciary duties of loyalty and prudence to the plan, by choosing poorly-performing investments, high-cost share classes, and recordkeeping services that charge excessive fees.
The class for this action is all persons, except the defendants in this case, who were participants in, or beneficiaries of, the plan, at any time between September 4, 2016 and the present.
The plan is subject to the Employee Retirement Income Security Act (ERISA). It has more than $218 million in assets and 2, 357 participants, and the complaint alleges this gives it “tremendous bargaining power” in the market for services and in selecting share classes that could be used to the benefit of the participants.
Fiduciaries, the complaint alleges, have a duty to monitor investments in a retirement plan and to get rid of those that are imprudent.
“During the class period,” the complaint alleges, NCL and the plan’s administrator “failed to prudently monitor the Plan to determine whether the Plan was invested in the lowest-cost share class available for the Plan’s mutual funds, which are identical to the mutual funds in the Plan in every way except for the their lower cost.” A table compares expense ratios for funds that were in the plan along with lower-cost share classes for the same fund, and the net expense ratio.
Recordkeepers provide a range of services for plans, and the complaint alleges that the market for these services is very competitive. The recordkeeper for the plan has been Prudential Retirement and Annuity Company. “Upon information and belief,” the complaint alleges, the company and plan’s administrator “have failed to undertake an RFP during the class period.” If they had done so, the complaint claims, they would have found that Prudential’s compensation for the job has been “unreasonable and excessive.”
The complaint shows direct recordkeeping compensation for the years of the class period, which ranges from a low of around $22 to a high of around $80. The complaint alleges that Prudential did not get only the direct compensation recorded in the chart, but received even more through revenue-sharing payments.
The complaint alleges that “the best practice is a flat price based on the number of participants in a plan[.]” It claims, “The total amount of recordkeeping fees (both through direct and indirect payments) currently is at least $150 per participant annually (or more), when are reasonable fee ought to be no more than $25 per participant annually.”