Parties in a lawsuit accusing the Board of Trustees of the Supplemental Income 401(k) Plan of not using its bargaining power to obtain lower investment and recordkeeping fees have agreed to a settlement.
The settlement creates a non-reversionary common fund of approximately $8.75 million, which is the full amount remaining under the defendants’ “burning limits” fiduciary liability policy. The defendants have also agreed under the settlement to hire an experienced third-party to oversee a request for proposals (RFP) related to the plan’s future recordkeeping and administrative services.
In the lawsuit filed in December 2017, the plaintiffs—participants in the plan via their employment with San Bernardino Steel—allege that the board of trustees and its individual members breached their fiduciary duties of prudence and loyalty under the Employee Retirement Income Security Act (ERISA) by offering retail class mutual fund shares when identical lower cost institutional class shares were available. They also accused the defendants of overpaying for recordkeeping by paying the plan recordkeeper, John Hancock Retirement Plan Services and its predecessor, New York Life Insurance Company, excessive fees through revenue-sharing arrangements with the mutual funds offered as investment options under the plan.
According to a memorandum of points and authorities in support of the motion for preliminary approval of the settlement, the plaintiffs believe the plan’s board has not issued an RFP in more than 15 years.“Plaintiffs are confident that the request for proposal will result in lower recordkeeping and administrative fees, providing significant future savings for the plan and its participants,” the memorandum says.