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Compliance November 24, 2021
Latest ERISA Excessive Fee Lawsuit Filed Against VCA
The plaintiffs argue the $500 million retirement plan’s fiduciaries failed to leverage the plan’s substantial bargaining power to benefit participants and beneficiaries.
Reported by John Manganaro
Plaintiffs have filed a new Employee Retirement Income Security Act (ERISA) lawsuit in the U.S. District Court for the Central District of California, naming as defendants veterinary hospital network VCA Inc. and several retirement plan administration and compensation committees appointed by the company’s leadership.
According to the complaint, the VCA retirement plan at issue has nearly 12,000 participants holding account balances worth more $563 million in net assets, as of December 31, 2019. The plaintiffs say the plan’s fiduciaries failed to leverage the plan’s substantial bargaining power to benefit participants and beneficiaries.
“Upon information and belief, during the class period, the defendants breached their duties owed to the plan, to the plaintiffs and all other plan participants by failing to monitor the retirement plan service fees paid by the plan to ensure that they were reasonable and, as a result, authorizing the plan to pay objectively unreasonable and excessive retirement plan service fees, relative to the retirement plan services received,” the complaint states. “[The defendants also failed] to take standard and customary actions to understand the market for retirement plan services to monitor for reasonableness the retirement plan service fees paid by the plan in relation to the retirement plan services received.”
The lawsuit claims the plan paid as much as $105 per participant annually for retirement plan recordkeeping and administration services. The plaintiffs suggest reasonable retirement plan service fees for a plan of this size would have averaged $38 per participant annually.
“The defendants did not engage in prudent decisionmaking processes, as there is no other explanation for why the plan paid objectively unreasonable fees for retirement plan services,” the complaint states. “The plaintiffs were injured by the defendants’ actions because the defendants permitted all plan participants to be charged excessive retirement plan service fees, which reduced the plaintiffs’ plan account balances and caused them significantly diminished investment returns.”
Asked for comment about the lawsuit, a VCA representative offered the following: “VCA is committed to improving the health and well-being of all associates. As a general rule, we do not comment on active litigation.” The full text of the lawsuit is available here.
By way of background, practically identical claims have been filed against numerous other large and midsized employers across the United States over the past several years, meeting various degrees of success depending on the facts and circumstances underpinning each case. Broadly speaking, the success of such suits ties back to the ability (or lack thereof) of the plaintiffs to demonstrate that the payment of allegedly high fees or the provision of underperforming investments was likely the result of fiduciary breaches. In other words, merely stating that a plan paid fees that were higher than many of its peers or offered investments that underperformed other possible investment options is not enough to establish standing under ERISA.
