Schlichter targets MEP Pentegra in latest lawsuit against excessive 401k fee

A lawsuit was filed earlier this week in New York U.S. District Court against Pentegra Retirement Services Inc. by two defined contribution plan members represented by Schlichter Bogard & Denton, an attorney specializing in excessive fees for 401k.

The prosecution, Khan v. Bd. Of Pentegra Defined Contribution Plan Administrators, SDNY, No 7: 20-cv-07561, claims Pentegra engaged in proprietary trading and charged excessive fees in multiple employer plan (MEP) of $ 2.1 billion that it administers for more than 27,000 employees at nearly 250 financial institutions.

This is the second lawsuit against excessive fees that Schlichter Bogard & Denton has recently brought against a MEP, following a case in May against an ADP MEP.

Plaintiffs Imran Khan and Joan Bullock, individually and as representatives of a class of participants and beneficiaries on behalf of Pentegra’s Defined Contribution Plan for Financial Institutions, filed the new lawsuit on September 15 accusing Pentegra and the defendants. related to breach of fiduciary obligations and prohibited transactions under ERISA.

Instead of using the bargaining power of the plans for the benefit of members and beneficiaries, the defendants acted to enrich themselves, including Pentegra, by allowing exorbitant and unreasonable expenses to be charged to plan members for administering the plan. , indicates the pursuit.

The Pentegra defendants, the lawsuit argues, filled the plan with too expensive mutual funds and used plan assets for improper purposes, such as luxury hotel expenses.

As of December 31, 2018, the plan had over 27,000 members and $ 2.1 billion in assets, placing it among the top 0.07% of all defined contribution plans in the United States based on plan assets. The massive size of the plans, the lawsuit claims, give it enormous negotiating power to impose very low administrative fees on its participants.

The board failed to monitor and control the record keeping and administration fees levied on plan assets by Pentegra, which soared as fees declined across the industry, the lawsuit said. Pentegras’s fees are extremely excessive compared to fees charged by other providers for similar services.

The lawsuit further states that the plan paid Pentegra millions of dollars each year in excessive fees for record keeping and administrative services, at least from 2014 to 2018, during a period of declining fees in the services market. administration of pension plans. According to the plan’s Forms 5500, in 2014, when the plan had 26,469 members, the plan paid Pentegra at least $ 9.52 million in direct bookkeeping and administration fees, an average of $ 359. $ 70 per participant. By 2018, the plan had grown to 27,227 participants and Pentegras’ fees had risen to $ 10.58 million, or $ 388.77 per participant, the lawsuit said.

Depending on the characteristics of the plans, the nature and type of record keeping and administrative services provided by Pentegra, the number of plan participants, participating employers and the market, a reasonable administrative fee does not exceed 1.7 million dollars per year (an average of 65 -participant), the pursuit continues. This amount is significantly higher than the fees that other large plans administered by leading companies were able to obtain after requests for proposals during the period.

To remedy these alleged breaches of duty, the plaintiffs seek to compensate the plan for any losses resulting from each breach of fiduciary duty and to restore the plan’s profits realized through the use by the defendants of plan assets. Further, depending on the lawsuit, the plaintiffs seek fair or remedial relief for the plan, as the court deems appropriate.

Pentegra released its first public comment on the trial on Friday afternoon, with Robert D. Alin, Senior Senior Vice President and General Counsel at Pentegra, saying: To date we have not been served but are aware of the complaint. We reject the claims and intend to mount a vigorous defense against them. In fact, Pentegra looks forward to firmly defending this lawsuit and defending the valuable services we provide to participating employers and their employees.

Plaintiffs’ attorney, Schlichter Bogard & Denton, LLP, has been named class counsel in more than 30 other ERISA class actions relating to excessive fees in large defined contribution plans. The courts in these cases have consistently and repeatedly recognized the firms’ unprecedented success in the excessive money-defined contribution fee litigation.

The company has won lawsuits against some of the nation’s largest companies, obtaining relief valued at more than $ 1.5 billion to date on behalf of hundreds of thousands of American workers and retirees.

Editor’s Note: This article was updated Friday afternoon to include Pentegra’s comment above.

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