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Compliance August 8, 2024
Tyson Foods Defeats 401(k) Lawsuit Alleging Excessive Recordkeeping Fees
Employees had accused the company of overcharging participants for bundled recordkeeper fees and failing to solicit competitive bids for lower-fee options.
Reported by Remy Samuels
A federal judge in U.S. District Court for the Western District of Arkansas on Tuesday dismissed a lawsuit filed against Tyson Foods Inc., which had accused the company of overcharging participants for recordkeeping fees.
In Ruebel v. Tyson Foods Inc., filed in December 2023, three employees alleged that the amount the Tyson 401(k) plan charged to its participants for account management auditing and other basic recordkeeping tasks—called “bundled RKA fees” for short—was “unreasonably high” when compared to fees that similar retirement plans charged their participants for the same basic services.
Bundled RKA fees are deducted from plan participants’ accounts at the end of each calendar year. The plaintiffs sought to recoup in damages the tens of millions of dollars in fees they claim plan participants overpaid to the plan’s recordkeeper over a period of years.
On the first count of the complaint, the employees alleged that Tyson violated its fiduciary duty of prudence, as required by the Employee Retirement Income Security Act, by permitting the plan to pay “exorbitant” bundled RKA fees to Northwest Plan Services, the plan’s recordkeeper since 2009.
In the second count, the employees claimed Tyson failed to critically evaluate the amounts that Northwest was charging participants in bundled fees by not soliciting competitive bids from other recordkeepers.
In a motion to dismiss the case, Tyson argued that the plans listed by the plaintiffs in their amended complaint as comparable were actually not similar to Tyson’s—both in terms of bundled RKA services and plan size. Tyson also argued that the plaintiffs were well aware that Northwest’s recordkeeping fees included more services than those provided by the other plans’ recordkeepers.
U.S. District Judge Timothy L. Brooks wrote in his ruling that the plaintiffs admitted that Northwest “may provide extra bundled RKA services to Tyson’s plan that are not included in the standard and fungible services that all recordkeepers provide.”
“Plaintiffs’ admission that the comparator plans were charged certain fees for basic bundled RKA services, but Tyson may have been charged higher fees for extra services means that plaintiffs have failed to state a plausible recordkeeping-fee claim,” Brooks wrote.
Brooks found that the employees “failed to allege a plausible inference” that Tyson’s plan and the comparator plans charged different fees for the same bundled services, and Brooks therefore dismissed the breach of fiduciary duty claims.
Additionally, Brooks wrote that the case must be dismissed because the comparator plans were not similar enough to Tyson’s in terms of asset size to allow for meaningful comparisons. Even though the U.S. 8th Circuit Court of Appeals has not explicitly defined what “similarly sized” plans mean, Brooks disagreed with the plaintiffs’ argument that a plan can be similar to another if the number of plan participants is roughly the same.
Ultimately, Brooks ruled that the plaintiffs needed to have provided a meaningful benchmark of comparison, not just allege that costs were too high or returns were too low.
According to its most recent Form 5500 filing, the Tyson Foods Inc. Retirement Savings Plan has more than $3.2 billion in assets and 120,135 participants.
Law firms Walcheske & Luzi LLC and Carney Bates & Pulliam PLLC represented the plaintiffs in the case, and law firms Morgan, Lewis & Bockius LLP and Mitchell Williams Selig Gates Woodyard PLLC represented Tyson.
