National Bank Parent Company Hit with ERISA Complaint

Plaintiffs have brought a class action lawsuit before the U.S. District Court for the District of Minnesota—claiming breach of fiduciary duty by plan fiduciaries operating the company 401(k) plan—against U.S. Bancorp, the parent company of U.S. Bank.

The complaint alleges the recordkeeping and administrative service fees charged for workers contributing to the U.S. Bancorp retirement plan and investing for retirement in an available managed account service were excessive, according to the complaint, Ana L. Dionicio and Alejandro M. Wesaw v. U.S. Bancorp et al.

U.S. Bancorp, the board of directors, the retirement plan benefits administrative committee and investment committee are named as defendants to the lawsuit, brought under the Employee Retirement Income Security Act.

“Defendants unreasonably failed to leverage the size of the plan to pay reasonable fees for plan [recordkeeping administrative services] and managed account services, and [breached fiduciary duty] by [not] undertaking a competitive bidding process to see if [the] same level and quality of services could be had by the plan for less,” the complaint states. “During the class period, defendants failed to regularly monitor the plan’s bundled RK&A fees paid to Alight [Solutions].”

The plan comprised about $9.87 billion in total assets in 2021, the complaint shows. The plan held and invested the retirement plan contributions for 86,195 participants in 2021, according to attorneys for the plaintiffs.

“[I]t is axiomatic in the retirement plan services industry that the more participants in a plan, the lower the effective RKA fee per participant the plan can negotiate,” the complaint states. “All prudent plan fiduciaries and their consultants and advisors are aware of this industry dynamic.”

From 2016 through 2021, based upon the plan’s Department of Labor Form 5500 filings, the plan paid recordkeeping and administrative services fees of $41 per participant, according to the complaint.

“The plan had more participants than 99.99% of the defined contribution plans in the United States that filed 5500 forms for the 2021 plan year,” the complaint states. “Similarly, with $9,869,704,841 in assets in 2021, the plan had more assets than 99.99% of the defined contribution plans in the United States that filed 5500 forms for the 2021 plan year.”

Comparator plans serviced by Alight or other recordkeepers charged “much less” for the same quality of services—shown by a table of recordkeeping administrative fees for similarly sized plans—with fees in a range between $18 and $28 per participant, according to the complaint. Attorneys for the plaintiffs argued for two counts of breach of prudence to participants—against the plan committee for administering a plan with excessive fees for recordkeeping and administrative services and for the allegedly excessive fees charged for the managed account service, according to the complaint.

Citing information from Form 5500s going back to 2009, the complaint said Alight Solutions or its predecessor corporation, Hewitt Associates, has been the recordkeeper for the plan for at least 15 years.

The professional management aspect of the managed accounts, provided by Alight Financial Advisors, can be used to personalize a participant’s investments and to tailor allocations to an individual’s circumstances, rather than a worker remaining invested in a supposedly less tailored target-date fund.

The plan’s managed account service charged professional management fees, deducted from the account each month, based on the size of a participant’s retirement account. The fee for the first $100,000 of participant assets was 60 basis points; for the next $150,000, 45 basis points; and for more than $250,000, 30 basis points, according to the complaint.

The plaintiffs’ attorneys argued that U.S Bancorp’s 60 bps managed account service fee rate is higher than the fees for similar plans, according to the complaint. Comparator plans were charging between 0 and 40 bps for the first tier; between 25 and 45 bps for the second; and between 10 and 30 bps for the third tier, the complaint states.  

The complaint notes the plan’s managed account provider, Alight Financial Advisors is a wholly-owned subsidiary, of Alight Solutions.

The plaintiffs are Ana Dionicio and Alejandro Wesaw. The complaint was submitted for the plaintiffs and the proposed class (which includes approximately 87,000 members, according to the complaint) by law firms Miller & Stevens, of Lake Forest, Minnesota, and Walcheske & Luzi, of Brookfield, Wisconsin.  

Attorneys for the plaintiffs seek class certification for all retirement plan participants and benefits of the U.S. Bank 401(k) Savings Plan, beginning January 5, 2017, though the date of judgement.

A spokesperson for U.S. Bancorp, in an email, declined comment on the litigation.