Nestle 401(k) Duties of Prudence and Loyalty ERISA Class Action

The plaintiff in this case brings suit on behalf of the Nestle 401(k) Savings Plan, against Nestle USA, Inc. and its board of directors. The Employee Retirement Income Security Act (ERISA) governs company-employee retirement accounts, and the complaint alleges that those responsible for Nestle’s 401(k) plan violated their fiduciary duties of loyalty and prudence under the law.

The class for this action is all participants in and beneficiaries of the Nestle 401(k) Savings Plan between October 9, 2014 and the date of judgment in this case.

Nestle and its board of directors have control of the 401(k) plan, the complaint claims, and are therefore fiduciaries of the plan.

ERISA requires that fiduciaries pay attention to costs. The complaint quotes from an earlier case’s findings: “Expenses, such as management or administrative fees, can sometimes significantly reduce the value of an account in a defined-contribution Plan.” This is because the participant loses not only the immediate amounts of the fees but the additional money those amounts would have earned had they stayed in the account over many years.

The complaint alleges that Nestle and its board breached their fiduciary duties in a number of ways:

  • By letting the plan pay excessive fees for recordkeeping and administration (RK&A).
  • By letting it pay excessive fees for managed account services.
  • By practicing self-dealing in administering the plan.

The plan has nearly 40,000 participants, making it larger than 99% of similar plans in the US. It also has more than $4 billion in assets. The complaint alleges that it therefore had plenty of bargaining power to obtain fees on the lower end of the spectrum.

The complaint shows charts to claim that RK&A fees per participant averaged around $60 per participant for the period in question while other plans with smaller amounts in assets paid in considerably less. It argues that the Nestle Plan should have paid around $28 per participant. Other charts claim to show that managed-account service fees were also much higher than necessary.

Additionally, the complaint alleges Nestle and its board “did not sufficiently attempt to … exercise appropriate judgment to monitor each investment option to ensure it was a prudent choice.”

Finally, Nestle seems to have paid itself more than $2.5 million during the period in question for providing other administrative services to the plan.

The complaint alleges, “Upon information and belief, the services purportedly provided to the Plan by ‘Nestle USA’ did not provide any value to the Plan, were not provided for the exclusive benefit of the Participants, and did not warrant the payment of the fees to Nestle USA.” In fact, the complaint says, “[u]pon information and belief the services purportedly provided to the Plan … are standard services that can be provided by the Plan’s recordkeeper…”

Nestle’s taking of these fees out of the plan’s assets are therefore “a clear conflict of interest with the Plan and Plan participants and violates the duty of loyalty it owes” to the participants.

Article Type: Lawsuit
Topic: Employment

Most Recent Case Event

Nestle 401(k) Duties of Prudence and Loyalty ERISA Complaint

October 9, 2020

The plaintiff in this case brings suit on behalf of the Nestle 401(k) Savings Plan, against Nestle USA, Inc. and its board of directors. The Employee Retirement Income Security Act (ERISA) governs company-employee retirement accounts, and the complaint alleges that those responsible for Nestle’s 401(k) plan violated their fiduciary duties of loyalty and prudence under the law.

Nestle 401(k) Duties of Prudence and Loyalty ERISA Complaint

Case Event History

Nestle 401(k) Duties of Prudence and Loyalty ERISA Complaint

October 9, 2020

The plaintiff in this case brings suit on behalf of the Nestle 401(k) Savings Plan, against Nestle USA, Inc. and its board of directors. The Employee Retirement Income Security Act (ERISA) governs company-employee retirement accounts, and the complaint alleges that those responsible for Nestle’s 401(k) plan violated their fiduciary duties of loyalty and prudence under the law.

Nestle 401(k) Duties of Prudence and Loyalty ERISA Complaint
Tags: ERISA Violations, Employment Violations, Retirement Plan Mismanagement