In a significant development for corporations and law firms involved in 401(k) plan fees disputes, the Tenth Circuit has introduced a new pleading standard. In a case of first impression, the Court mandated that a 401(k) plan participant alleging excessive investment management or recordkeeping fees must assert a “meaningful benchmark” to survive a motion to dismiss. This critical legal news comes from Proskauer – Employee Benefits & Executive.
Until now, there had been some variability in the specific requirements for plaintiffs alleging excessive fees within 401(k) plans. This ruling streamlines the approach and sets a standard all future claims under the Tenth Circuit will need to follow. This decision joins a growing trend in circuit courts across the country.
Importantly, the Tenth Circuit didn’t just establish this new pleading standard, it applied it. The Court rejected the commonly used “benchmarks” argued by the participants in this case because they were insufficiently meaningful. Interestingly, the Court took the uncommon step of dismissing the participants’ case outright, a departure from the approach used by certain other courts.
In this evolving landscape, legal professionals manage 401(k) plans should remain vigilant. They should reevaluate their fee structures and management practices in light of this strengthened expectation for “meaningful benchmarks.” It’s also recommended that they analyze every aspect of their 401(k) plan administration to avoid potential legal liabilities arising from this new rule.
This ruling certainly reinforces the importance of appropriate fee management and transparency in retirement plans. Only time will tell how it will impact future litigation and the broader retirement plan landscape. Stay tuned for more updates.