Retirement plan participants employed by Knight-Swift Transportation have filed a class action lawsuit alleging breach of fiduciary duty against the Phoenix-based trucking company’s 401(k) plan under the Employee Retirement Income Security Act.
Plaintiffs allege in the complaint that fiduciaries mismanaged the plan by having participants pay excessive fees for recordkeeping and administrative services to the plan’s recordkeeper, Principal. Additionally, plaintiffs have alleged a plan sponsor fiduciary breach caused by participants paying excessive revenue sharing as direct and indirect compensation to Principal, according to the complaint.
The Knight-Swift Transportation retirement plan uses revenue sharing to compensate Principal for the cost of providing recordkeeping services. Under the plan sponsor’s revenue-sharing arrangement, payments are derived from investments in the plan.
“The direct and indirect payments defendant caused the plan, participants, and beneficiaries to make for recordkeeping and administrative services during the class period were excessive and unreasonable,” the complaint states. “Defendant breached its duty of prudence by failing to monitor, control, negotiate, and otherwise ensure that indirect compensation plan participants’ pay to Principal [was] not excessive and unreasonable.”
The complaint explains that revenue-sharing payments are not “per se imprudent,” but must be closely monitored for reasonableness.
“Plaintiffs are not making a claim against defendant merely because it used revenue sharing to pay administrative expenses,” the complaint states. “However, when (as here) revenue sharing is left unchecked, it can be devastating for plan participants.”
The complaint further argues that the plan sponsor failed to implement a prudent fiduciary process to properly monitor and control the fees that plan participants were paying for recordkeeping costs, as “prudent fiduciaries implement three related processes to prudently manage and control a plan’s recordkeeping costs,” the complaint states.
According to the complaint, “this [proper fiduciary process] will generally include conducting a request for proposal process at reasonable intervals, and immediately if the plan’s recordkeeping expenses have grown significantly or appear high in relation to the general marketplace. [A]n RFP should happen at least every three to five years as a matter of course, and more frequently if a plan experiences an increase in recordkeeping costs or fee benchmarking reveals the recordkeeper’s compensation to exceed levels found in other, similar plans.”
The plan sponsor has not undertaken a “proper RFP,” since 2016, plaintiffs state in the complaint.
The plaintiffs alleged that the defendants failed to properly evaluate if the plan sponsor had caused participants to pay more than a reasonable fee for the services provided to the plan. The complaint also argued the plan sponsor failed to stay informed on trends in the marketplace regarding fees paid by similar plans, as well as the recordkeeping rates available in the marketplace.
The complaint also alleged the plan sponsor breached its fiduciary duty to participants by selecting more expensive share classes of investments instead of less expensive institutional shares of the same funds. By causing plan participants to pay more for identical investments, the plan sponsor failed to uphold its statutory duty under ERISA to prudently monitor and defray costs of the plan, plaintiffs argued in the complaint.
“Plan participants, in most cases, are paying about double to invest in the imprudent share classes,” the complaint states.
The lawsuit was brought before the United States District Court for the District of Arizona. Attorneys for the plaintiffs and the proposed class are from Scottsdale, Arizona-based law firm McKay Law, Tampa law firm Morgan and Morgan and Tampa law firm Wenzel Fenton Cabassa, the court document shows.
Knight-Swift Transportation did not respond to a request for comment on the lawsuit.
« Women Have Significantly Less Wealth than Men at Retirement