Class Action Says Trucking Company ‘Frittered Away’ Millions in Retirement Savings On Excessive Third-Party Fees

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A proposed class action alleges Southeastern Freight Lines has “wasted” millions of dollars of employee retirement savings by allowing unreasonable and excessive fees to be paid to a third-party service provider.

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The 36-page lawsuit says that the trucking company has run afoul of the federal Employee Retirement Income Security Act (ERISA) by failing to prudently control and monitor the compensation paid to T. Rowe Price Retirement Plan Services (TRP), the Southeastern Freight Lines 401(k) plan’s recordkeeper since at least 2012.

The suit claims that since 2018, Southeastern has caused more than 10,000 retirement plan participants to pay the third-party recordkeeper almost $5 million in fees, while a reasonable sum should have landed around $1.5 million for that same time period.

“Southeastern wasted nearly $3,500,000 of retirement plan participant savings,” the case contends. “Plan participants will continue to pay grossly excessive fees, and millions and millions of retirement savings will be frittered away going forward unless this action moves forward.”

The complaint charges that the trucking company went at least six years without soliciting competitive bids from other service providers in the marketplace, a process that plan fiduciaries such as the defendant should conduct at least every three years in order to compare fees and review services provided by their current recordkeepers. By neglecting to undergo this process at regular intervals, Southeastern allowed plan participants to overpay TRP for recordkeeping services, the filing argues.

The defendant reported that it paid TRP in 2021 $564,765 in direct compensation, meaning the third party received approximately $56 per plan participant, the lawsuit relays.

“This amount alone is excessive,” the suit argues, as a reasonable total for such recordkeeping services “ought to have been no more than $25 per person or $252,000.”

Aside from direct fees, TRP also receives indirect compensation via “float” on plan participant funds, the case says. When an individual deposits or withdraws money from their account, the funds first pass through a TRP clearing account, where the money stays for up to three days, the complaint explains. According to the filing, the defendant allows TRP to keep the investment returns and any interest earned on the funds while they are in the clearing account.

Southeastern reported that there was more than $150 million transferred in and out of its retirement plan accounts in 2021 alone, the lawsuit shares, adding that if the recordkeeper “earned just 1% on this money, then it would have earned $1.5 million in compensation from the Plan via float in 2021.”

As the suit tells it, TRP also receives indirect compensation through a revenue sharing arrangement with Southeastern, wherein the third party is paid based on the amount of assets in the retirement plan. Thanks to this agreement, as the plan’s assets increase, “so do the recordkeeper’s fees,” the case summarizes.

Although the number of retirement plan participants shrunk by 138 individuals between 2016 and 2021, the plan’s assets increased by more than $384 million, the complaint describes. Consequently, the compensation reaped by TRP through revenue sharing “sky-rocketed,” while the actual services it provided decreased in conjunction with the shrinking number of participants, the filing contests.

The lawsuit looks to represent anyone who was a participant in or beneficiary of the Southeastern Freight Lines savings plan at any time since January 1, 2018.

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