Class Action Claims Deloitte Retirement Plans Racked up Millions in ‘Unreasonable’ Fees

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Deloitte, LLP, its board of directors and the committee in charge of the global accounting firm’s retirement plans face a proposed class action that alleges nearly 90,000 participants and beneficiaries have lost millions as a result of excessively high recordkeeping and administrative fees. 

According to the 29-page lawsuit, Deloitte’s defined contribution 401(k) and profit-sharing plans, which held more than $7.3 billion and $7.2 billion, respectively, in assets under management in 2020, have racked up unreasonable fees since October 2015 as a result of the defendants’ unlawful failure to adequately monitor the plans’ administrative and recordkeeping costs. 

The lawsuit contends that the defendants, i.e., the fiduciaries of the Deloitte plans, which qualify as “jumbo” plans in the defined contribution marketplace given the amount they hold in assets, failed to try to reduce the plans’ fees and expenses or exercise appropriate judgment to scrutinize each investment option despite possessing substantial bargaining power. 

“Defendants’ mismanagement of the Plans, to the detriment of participants and beneficiaries, constitutes a breach of the fiduciary duty of prudence, in violation of the [federal Employee Retirement Income Security Act (ERISA)],” the lawsuit alleges. “Their actions were contrary to actions of a reasonable fiduciary and cost the Plans and its [sic] participants millions of dollars.” 

Per the suit, ERISA imposes strict fiduciary duties of loyalty and prudence upon employers and others who oversee retirement plans. Fiduciaries are tasked with acting solely in the interest of plan participants and beneficiaries and must give substantial consideration to the cost of investment options, a responsibility that includes minimizing the costs imposed upon a plan in the form of additional fees, according to the case. 

The lawsuit stresses that prudent and impartial retirement plan sponsors should thus monitor both the performance and cost of investments selected for a plan and investigate alternatives in the marketplace to ensure that well-performing, low-cost investment options are being made available to participants. 

The complaint alleges that although Deloitte, with at least $4.2 billion in assets at all times since October 2015, had substantial bargaining power regarding the fees and expenses charged against plan participants’ investments, the accounting firm fell short of its obligation to ensure recordkeeping costs were kept reasonable. The case argues the defendants, given the assets under management and number of participants in the Deloitte plans, should have been able to negotiate with recordkeeper Vanguard costs in the low $20 range since October 2015 to the present. 

According to the suit, recordkeeping costs for Deloitte’s 401(k) and profit-sharing plans hit $65.92 and $221.29 per participant, respectively, in 2019. The case calls these fees “astronomical when benchmarked against similar plans.” 

The lawsuit looks to represent all persons who were participants in or beneficiaries of the Deloitte 401(k) and profit-sharing plans at any time between October 13, 2015 and the date of judgment in the case. 

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