Nordstrom Hit with ERISA Suit over Excessive 401(k) Fees, Misuse of Forfeited Funds
The firm mismanaged its $3.4 billion 401(k) plan by overpaying for administrative services and misusing money forfeited by former employees, the class-action lawsuit alleges.
Nordstrom has cost its 104,811 workers millions in savings by mismanaging its $3.4 billion 401(k) plan, overpaying for administrative services and using money forfeited by former employees for its own benefit, allege employees in a class-action lawsuit filed last week. The employees have filed suit under the Employee Retirement Income Security Act (ERISA) for breach of ERISA’s fiduciary duties.
The Nordstrom plan’s annual fees for recordkeeping and managed account services were at least $63 per person over the past few years, when a reasonable fee would have been closer to $22 per person, the employees say. The company’s failure to monitor these fees or negotiate a better deal cost the plan tens of millions of dollars, according to the complaint.
The lawsuit (McWashington v. Nordstrom Inc.), filed by Curtis McWashington and four other current and former employees, alleges that the fiduciaries of the participant plan “failed to fulfill their fiduciary duties to prudently and loyally ensure the plan’s total recordkeeping and other administrative expenses were reasonable and not excessive, as well as engaged in self-dealing with regard to plan forfeitures in violation of ERISA fiduciary prohibited transaction rules.”
Further, the suit asserts, “the plan’s participants paid vastly more than what comparable very large retirement plans pay for comparable recordkeeping, administrative, and managed account services.”
Also, the suit alleges, Nordstrom’s 401(k) plan “failed to use the plan’s forfeitures to reduce the plan’s expenses, and instead used that money to benefit Nordstrom by reducing Nordstrom’s obligation to make future benefit contribution to plan.”
Recently, there have been a rash of plan-forfeiture lawsuits, which allege a company used assets forfeited by worker workers for its own financial gain. Also last week, Bank of America was sued by 401(k) plan participants over misuse of forfeited funds. Wells Fargo, Honeywell, Mattel, and Clorox have been hit with forfeiture lawsuits in the past few years, as well.
Alight, the Nordstrom plan’s recordkeeper, “is not providing anything exceptional, unusual, or customized, with regard to the bundled [recordkeeping and administrative (RKA)] services provided to the plan and its participants,” the suit alleges.
Because Nordstrom did not act with prudence, compared with other plans of similar sizes, “the plan actually cost its participants a total minimum amount of approximately $11,081,680 in unreasonable and excessive bundled RKA fees.”
From: BenefitsPRO