In yet another ERISA-related case, aerospace and defense technology firm L3Harris found itself in the crosshairs of an excessive fee lawsuit. Plaintiffs alleged that the retirement plan’s massive size should have given them the leverage to negotiate more competitive recordkeeping and administrative options, as well as lower fees. The company recently arrived at a settlement, though not before enduring a two-year legal battle.
Plaintiff’s Plan of Attack
The L3Harris’s Retirement Savings Plan houses around $13 billion in assets, according to its most recent Form 5500 filing. Prior to the suit, standard plan procedure meant that if participants felt they were entitled to benefits they hadn’t received, they were to submit a request for review by the Administrative Committee, which had 90 days to be processed. After exhausting this internal remedy, plaintiffs took collective legal action, claiming that recordkeeping fees were too high for the “jumbo” plan and that certain imprudent funds were included in the lineup. (The class action suit covered a group of 52,000 employees at the organization.
Defensive Strategies
L3 Harris’s first tactic was an attempt to dismiss the suit altogether. But in March 2023, a judge ruled that the case should proceed. The company’s defense stated that to prove that sponsors had acted imprudently, “a plaintiff has to offer a ‘meaningful benchmark,’” and that the existence of some less expensive funds didn’t in and of itself mean that fiduciary duty had necessarily been breached. Essentially, plaintiffs argued that plan sponsors hadn’t properly benchmarked their funds and services, while the defendants countered that the plaintiffs hadn’t provided a benchmark to prove imprudence.
ERISA Battle Armistice
While the plaintiffs originally assessed their maximum potential losses at around $3 million, the legal teams eventually agreed on a settlement of $650,000. According to the settlement, “given that the Settlement amount represents roughly 22% of the likely best-case outcome for Plaintiffs, Plaintiffs believe the Settlement Amount is fair and adequate.”
Get Battle Ready With a Tactical Benchmarking Strategy
With ERISA suits on the rise, it’s more important than ever to make sure you’re meeting your fiduciary duty. Benchmarking a plan more often than the standard three- to five-year schedule is a great way to reinforce your plan’s defense against excessive fee litigation. PlanFees’ suite of benchmarking tools lets you access up-to-date data that can help you and your client make the best decisions, helping protect the interests of both the plan and its participants. From quick fee range comparisons with Prism Total Fees Benchmarking to Prism365 Advisor Fee & Services Benchmarking and instant quotes from top providers with RFP Express, you can better serve your clients and help fulfill your fiduciary duty.
Sometimes, the best defense isn’t a good offense — it’s a good benchmark.
Sources:
www.napa-net.org/news-info/daily-news/multi-billion-dollar-401k-settles-excessive-fee-suitnews.bloomberglaw.com/employee-benefits/l3harris-401k-fee-suit-covers-class-of-52-000-workers-say
