Legal Complaint Targets Pfizer 401(k) Plan Committee, Board

The class action proposal seeks to recover retirement plan losses allegedly caused by fiduciary breaches leading to ‘unreasonable’ fees.

A former Pfizer Inc. employee is alleging the pharmaceutical company caused harm to retirement plan participants, according to a complaint filed last week in federal court in Michigan seeking class action status.

Plaintiff Matthew Miller, represented by Walcheske & Luzi LLC and the Haney Law Office PC, claims in the complaint that plan fiduciaries operating the Pfizer 401(k) Savings Plan breached their duties under the Employee Retirement Income Security Act by incurring unreasonable total recordkeeping and administrative fees and for failing to monitor other fiduciaries.

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The complaint, filed in U.S. District Court for the Western District of Michigan, Southern Division, named as defendants Pfizer Inc; the Board of Directors of Pfizer Inc; and the Savings Plan Committee of Pfizer Inc. Pfizer’s largest manufacturing site is based in Kalamazoo, Michigan.

“During the Class Period, and unlike a hypothetical prudent fiduciary, Defendants followed a fiduciary process that was ineffective given the objectively unreasonable Total RKA [recordkeeper and administration] fees it paid to Fidelity and in light of the level and quality of Total RKA services it received that were materially similar to services available through other recordkeepers and provided to other mega plans,” the complaint states.

Miller is seeking for the court to certify a class period as applying to all participants and beneficiaries in the Pfizer Savings plan (excluding defendants or any participant/beneficiary who is a fiduciary to the plan) beginning June 8, 2017, and running through the date of judgment. Fidelity Investments has served as the recordkeeper for the Pfizer plan throughout the putative class period, according to Brightscope, a data provider owned by Institutional Shareholder Services Inc., which also owns PLANSPONSOR. Fidelity was not named as a defendant in the complaint.

In 2021, the Pfizer plan comprised—as of the most recent available data from Brightscope—about $21.4 billion in retirement assets for 54,000 participants.

The defendants—as fiduciaries responsible for the plan and participants—should have lowered the plan’s total recordkeeping and administrative expenses by soliciting bids from vendors—via requests for proposals, requests for information and fee benchmarking from competing providers—and using their “massive size and correspondent bargaining power” to negotiate for fee rebates, but they did not do so or did so ineffectively, according to the complaint.

“From the years 2017 to 2022, based upon information derived from the Plan 5500 Forms and 404(a)(5) participant fee disclosures, because Defendants did not act prudently, and as compared to other Plans of similar sizes and with a materially identical level and quality of services, the Plan caused Plan participants to suffer losses (when accounting for compounding percentages/lost market investment opportunity) a total cumulative amount in excess of $10,542,525 in Total RKA fees,” the complaint states.

The complaint requests the court to designate Miller as class representative for the putative class and requests a judgment compelling the defendants to make good to the plan all losses to the plan resulting from the defendants’ alleged breaches of fiduciary duty, including restoring to the plan all losses resulting from paying unreasonable total RKA fees and restoring to the plan all profits which the participants would have made if the defendants had fulfilled their fiduciary obligations.

The plaintiff also requested a judgment directing Pfizer to disgorge all profits received from the plan; equitable relief in the form of accounting for profits, imposition of a constructive trust or surcharge against Pfizer as necessary to effectuate relief; and to prevent Pfizer’s unjust enrichment.

Miller’s attorneys, Walcheske & Luzi, are based in Brookfield, Wisconsin, and the Haney Law Office is based in Grand Rapids, Michigan. 

Pfizer representatives did not return a request for comment.

Retirement Plan Access Deficit Could Cost Fed, States $1.3 Trillion

The lack of access for private sector workers to a retirement savings plan is likely to cost the federal government more than $1 trillion, study finds.   

 

Almost 57 million private sectors workers lack access to a retirement savings plan through their employer, which could cost federal and state governments over $1.3 trillion between 2021 and 2040, according to a new research.

 

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The study, which was conducted by consultant Econsult Solutions for Pew Charitable Trusts, said that this lack of retirement savings could end up costing the federal government $990 billion over the 20-year period, with an additional $334 billion in costs expected to be shouldered by state governments during the same time period.

 

Pew Charitable Trusts hired ESI to investigate the potential economic and fiscal costs of existing trends in retirement savings. The study said that as the elderly population of the U.S. continues to grow, it is increasingly important for households to plan ahead to maintain their standard of living during their retirement years. The study aims to quantify the potential magnitude of national and state retirement savings shortfalls from 2020-2040 if current trends continue. It also defines the costs of the potential shortfalls to the U.S. and each state.

 

The report said that based on population projections from the U.S. Census Bureau, the population of people aged 65 and older in the U.S. is expected to increase 50% to 81.5 million in 2040 from 54.1 million in 2020. It also said the increase is about 10 times as fast as the non-elderly rate of growth and accounts for nearly two-thirds of the total population growth. Elderly Americans are also expected to make up 22% of the population in 2040, up from 16% in 2020.

 

“As the population changes, so too will the relative composition of elderly and non-elderly households,” said the report, which projected that there will be 54 elderly households for every 100 working age households by 2040, up from 37 in 2020. “This compositional shift will create significant fiscal pressure, since working age households form the core of the federal tax base.”

 

The report also said that if current trends continue, 61% of elderly households are projected to have an annual income below $75,000 in 2040, with the average annual income shortfall among the households relative to recommended replacement levels projected to be $7,050 in 2040. 

 

According to the report, the average elderly household would need to contribute approximately $140 per month, or $1,685 a year over a 30-year period to close the projected retirement income gap. 

 

“As the elderly population of the United States continues to grow, it becomes increasingly important that households plan appropriately to maintain their living standards in their retirement years,” said the report. “The retirement readiness of households also has significant implications for the trajectory of government expenditures on benefit programs.”

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