According to an ERISA lawsuit recently filed against Nordstrom, it’s not just the handbags that come with a hefty price tag — the suit alleges their retirement plan fees were excessive too. Plaintiffs say the luxury retailer overcharged employees for administrative services and misused the forfeiture funds of former workers as well. While the suit is still pending, some of the details have already hit the runway.
This Suit Is on Trend
The action against Nordstrom, whose plan holds more than $3.4 billion in assets, is part of a recent spate of suits that extend beyond excessive fees. According to the complaint, Nordstrom’s total annual fees were nearly three times those of similar plans: $63 per person versus $22 per person, respectively. Altogether, the alleged excess fees amount to around $11 million. Recordkeeping fees alone were more than double, at $42 per person, compared to similarly sized plans, which were around $20 annually, the plaintiffs assert.
The suit also includes allegations of mismanaged fees that were forfeited by former employees. Forfeiture issues have been present in several high-profile ERISA suits lately, including those filed against Honeywell and Wells Fargo. According to the plaintiffs, Nordstrom “imprudently and disloyally failed to use the Plan’s forfeitures to reduce the Plan’s expenses, and instead used that money to benefit Nordstrom by reducing Nordstrom’s obligation to make future benefit contributions to Plan.”
Make Sure Your Plans Are Well-Tailored
The suit against Nordstrom illustrates the difference between an off-the-rack solution and a custom fit when it comes to retirement plan services and fees. Higher fees can sometimes be justified for highly personalized, high-touch service. But problems can arise when clients end up paying luxury prices for off-the-rack solutions.
By tailoring fees and services to provide a good fit for plan sponsors’ and participants’ needs, you can help mitigate the potential risk of a costly lawsuit later. Annual benchmarking, in addition to obtaining customary three-to-five-year live bids, can provide yet another layer of protection — and documentation in the event of legal action.
You can do a quick, 2-minute fee checkup with Prism Total Fees Benchmarking — and obtain real price quotes from top providers within 24 hours with RFP Express — to help make sure your plan fees don’t fall out of style. Dress your advisory practice for success with PlanFees.