Deloitte Retirement Funds Breach of Duty of Prudence ERISA Class Action

The Employee Retirement Income Security Act (ERISA) places the duty of prudence on fiduciaries of retirement plans. This class action names Deloitte, LLP, its Board of Directors and its members, and the Retirement Committee of Deloitte, LLP and its members as defendants. It alleges they breached their fiduciary duties to two retirement plans, the Deloitte 401(k) Plan and the Deloitte Profit Sharing Plan (PSP).

The class for this action is all persons (except the defendants and their immediate families) who were participants in or beneficiaries of the plans, at any time between October 13, 2015 and the date of judgment in this case.

ERISA requires that fiduciaries act “solely in the interest of the participants and beneficiaries” of a retirement plan, with the “care, skill, prudence, and diligence” that could be expected in managing such a plan.

The complaint also quotes the Department of Labor as saying that that employers who establish retirement plans must “establish a prudent process for selecting investment options and service providers” and “monitor investment options and service providers once selected to see that they continue to be appropriate choices.”

The complaint claims that the company, its Board, and its Retirement Committee breached their fiduciary duties in two ways: (1) they did not act with sufficient prudence, and (2) they did not monitor the fiduciaries.

During the class period in this case, the two plans each had a substantial amount under management—the 401(k) at least $4.5 billion and the PSP at least $4.8, and sometimes much more. These amounts qualify them as “jumbo” plans and mean that they have substantial bargaining power when it comes to fees and expenses.

However, the complaint alleges that the plan administrative and recordkeeping fees were unreasonable and that the fiduciaries “did not try to reduce the Plans’ expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the Plans to ensure they were prudent.”

The complaint displays charts of per-participant costs, which it calls “astronomical.” In particular, the PSP plan had per-participant costs of up to $331.01, as against what the complaint terms a reasonable rate of around $35 per participant.

It also compares the fees using a benchmarking process with expense ratios and finds them expensive by this measure as well: “In some cases, expense ratios for the Plans’ funds were 420% above the ICI Median (in the case of T. Rowe Price Spectrum Mod GR Allc Fund) and 110% above the ICI median (in the case of T. Rowe Price In’l Small Cap Equity Trust C) in the same category.”

Participants lose money in two ways: first, in losing the amount that was spent on fees, and second, in losing the amounts that money would have earned had it stayed in the account over many years.

Article Type: Lawsuit
Topic: Employment
Tags: Breach of Fiduciary Duty, ERISA Violations, Employment Violations, Retirement Plans