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Compliance July 14, 2021
Koch Industries Lawsuit Settlement Includes Recordkeeper Search
The memorandum in support of the settlement agreement says the plaintiffs in the case want to avoid the risk that the defendants will prevail and the cost of a lengthy legal process.
Reported by Rebecca Moore
Koch Industries has agreed to pay $4 million to settle a lawsuit alleging the company, Koch Business Solutions and the Koch Benefits Administrative Committee allowed excessive recordkeeping fees to be charged to participants in Koch-affiliated defined contribution (DC) retirement plans.
In addition to the monetary relief, the terms of the proposed settlement, which still need court approval, provide that the defendants will issue a request for proposals (RFP) for recordkeeping services for the plans within 180 days of the settlement effective date.
The original complaint noted that Alight has been the recordkeeper for the plans since 2009. It said the plan assets were all held in one master trust, and the size of the trust gave Koch “significant leverage to negotiate recordkeeping expenses.”
The complaint pointed out that, in addition to acting as the recordkeeper for the DC plans, Alight has also administered the Koch Industries Employees’ Pension Plan since 2009 and administers Koch Industries’ online benefits portal through which all employee benefits are managed. The plaintiffs suggested the firm’s fiduciary failures were either from lack of a prudent process or from interest in getting discounts from the recordkeeper on other services.
In the memorandum in support of a motion to approve the settlement, the plaintiffs’ attorneys say that although the plaintiffs still have confidence in their claims, the settlement eliminates the risk and cost of a lengthy legal process.
“At the time the parties reached a settlement, the defendants’ motion to dismiss was pending. In the event the motion was denied, there was a risk that the court might have dismissed the claims on summary judgment, as it did in another recent case,” the memo states. “Assuming the case proceeded to trial, the defendants still might have prevailed.”
The attorneys note that Employee Retirement Income Security Act (ERISA) cases often lead to lengthy litigation. “There is little doubt that continuing the litigation would have resulted in complex and costly proceedings, which would have significantly delayed relief to class members even if the plaintiffs ultimately prevailed,” the memorandum says.
