Costco 401(k) Retirement Plan Breach of Fiduciary Duty Class Action

Company retirement plans are governed by the Employee Retirement Income Security Act (ERISA). The complaint for this class action claims, “The law is settled that ERISA fiduciaries have a duty to evaluate fees and expenses when selecting investments as well as a continuing duty to monitor fees and expenses of selected investments and remove imprudent ones.” The complaint alleges that Costco Wholesale Corporation, its Board of Directors, and the Costco Benefits Committee are fiduciaries of the Costco 401(k) Retirement Plan but do not fulfill their fiduciary duties in selecting and monitoring the investments available in the plan.

The class for this action is all participants and beneficiaries of the Costco 401(k) Retirement Plan, from June 23, 2014 through the date of judgment in this case.

High fees can considerably reduce the value of participant accounts in retirement plans. The complaint quotes an earlier case as saying that high fees do this “by decreasing its immediate value, and by depriving the participant of the prospective value of funds that would have continued to grow if not taken out in fees.” In other words, the accounts lose not only the amounts paid out as fees but also the additional money those amounts would have earned if they had remained in the account.

Specifically, the complaint level three allegations at the responsible parties in terms of fees:

  • That they allowed the plan to pay “unreasonably high fees” for recordkeeping.
  • That they did not review the plan’s investment options with due care to ensure that all the options were prudent in light of its costs.
  • That they kept certain funds among the options even though similar investment options were available with lower costs or better performance histories.

It also alleges that “the Plan generally chose more costly ‘actively managed funds’ rather than ‘index funds’ that offered equal or better performance at substantially lower cost.”

The complaint includes charts that show funds in the plan against alternatives and the comparable expense ratios.

It claims that “the administrative fees charged to Plan participants were consistently greater than the fees of most comparable 401(k) plans, when fees are calculated as cost per participant or when fees are calculated as a percent of total assets.”

According to the complaint, “These investment options and unreasonable fees cannot be justified. [Costco’s] failures breached the fiduciary duties they owed” to the participants in the plan. Fiduciaries are required to be prudent, which the complaint alleges means “continuously monitor[ing] administrative fees against applicable benchmarks and peer groups to identify unreasonable and unjustifiable fees.”

Article Type: Lawsuit
Topic: Employment

Most Recent Case Event

Costco 401(k) Retirement Plan Breach of Fiduciary Duty Complaint

June 23, 2020

Company retirement plans are governed by the Employee Retirement Income Security Act (ERISA). The complaint for this class action claims, “The law is settled that ERISA fiduciaries have a duty to evaluate fees and expenses when selecting investments as well as a continuing duty to monitor fees and expenses of selected investments and remove imprudent ones.” The complaint alleges that Costco Wholesale Corporation, its Board of Directors, and the Costco Benefits Committee are fiduciaries of the Costco 401(k) Retirement Plan but do not fulfill their fiduciary duties in selecting and monitoring the investments available in the plan.

Costco 401(k) Retirement Plan Breach of Fiduciary Duty Complaint

Case Event History

Costco 401(k) Retirement Plan Breach of Fiduciary Duty Complaint

June 23, 2020

Company retirement plans are governed by the Employee Retirement Income Security Act (ERISA). The complaint for this class action claims, “The law is settled that ERISA fiduciaries have a duty to evaluate fees and expenses when selecting investments as well as a continuing duty to monitor fees and expenses of selected investments and remove imprudent ones.” The complaint alleges that Costco Wholesale Corporation, its Board of Directors, and the Costco Benefits Committee are fiduciaries of the Costco 401(k) Retirement Plan but do not fulfill their fiduciary duties in selecting and monitoring the investments available in the plan.

Costco 401(k) Retirement Plan Breach of Fiduciary Duty Complaint
Tags: Breach of Fiduciary Duty, ERISA Violations, Employment Violations, Retirement Plan Mismanagement