Judge Allows National Rural Electric Cooperative Fiduciary Breach Case to Continue

A federal judge denied the National Rural Electric Cooperative Association’s motion to dismiss a complaint against the organization’s retirement plan that alleged years of financial mismanagement and self-dealing.

U.S. District Judge Michael Nachmanoff, in U.S. District Court for the Eastern District of Virginia, did not provide a written explanation for this decision, but court records show he held a hearing to consider the motion on September 19.

Nachmanoff was assigned to the case on September 16, replacing the original judge assigned to the case, U.S. Senior District Judge Claude Hilton, according to court records.

The complaint was filed by two current participants of the NRECA retirement plan who seek to represent a class of more than 77,000 individuals. They allege that NRECA and its fiduciary committee violated their duties under the Employee Retirement Income Security Act, reportedly resulting in plan participants losing millions of dollars due to excessive administrative fees.

Furthermore, the complaint alleges that NRECA manipulated its internal cost-sharing structures to shift an increasing financial burden onto the 401(k) plan while reducing costs for its other benefits programs. The plaintiffs are seeking restitution for lost funds, reforms to plan practices and court oversight to prevent further violations.

The case represents NRECA’s third significant legal challenge regarding its retirement practices in the past 15 years. Following a 2012 settlement that restored $27.3 million to the plan, NRECA also settled a related lawsuit in 2019 for $10 million.

In the current complaint, the plaintiffs are asking the court to compel NRECA to return the allegedly misappropriated funds and to enforce changes to the plan for improved compliance.

Baron & Budd P.C. represents the plaintiffs, and Goodwin Procter LLP represents the defendants.