The parties responsible for the Kimberly-Clark Corporation’s 401(k) defined contribution pension plan allowed it to incur “objectively unreasonable” fees for retirement plan services, a class action alleges.
The parties responsible for the Kimberly-Clark Corporation’s 401(k) defined contribution pension plan allowed it to incur “objectively unreasonable” fees for retirement plan services, a proposed class action alleges.
The 36-page lawsuit against Kimberly-Clark Corporation and its board of directors and benefits administration committee alleges the parties fell short of their legal obligations to evaluate fees and expenses when selecting service providers and investments and continually monitor fees and expenses while removing imprudent ones, as well as adequately disclose what plan participants were paying in fees.
According to the complaint, participants in and beneficiaries of Kimberly-Clark’s 401(k) and profit sharing plan have paid excessive fees as a result of the defendants’ failure to continuously monitor and compare fees against “applicable benchmarks and peer groups” to objectively identify “unreasonable and unjustifiable” costs. The case says that had the defendants acted in the exclusive best interest of plan participants from 2015 through 2019, the plan would have paid “significantly less than an average of approximately $1,360,044 per year” in fees, which equated to an average of roughly $78 per participant per year.
“Defendants did not engage in a prudent decision-making process, as there is no other explanation for why the Plan paid these objectively unreasonable fees for [retirement plan services],” the lawsuit alleges, claiming the two plaintiffs and proposed class members have suffered “ongoing financial harm.”
Per the suit, the Kimberly-Clark plan currently has roughly $4,000,000,000 in assets in the care of the defendants, i.e. the plan’s fiduciaries. The complaint argues that the plan, with nearly 16,800 participants as of 2019, had “substantial bargaining power” with regard to the fees and expenses charged against participants’ investments. The defendants, however, “did not sufficiently attempt to reduce the Plan’s expenses or exercise appropriate judgment to monitor each investment option to ensure it was a prudent choice,” the case alleges.
Under the federal Employee Retirement Income Security Act (ERISA), a retirement plan’s fiduciaries are subject to strict standards of loyalty and prudence, the suit relays. Those standards, per the case, extend to the selection of the providers of essential recordkeeping and other administrative services for a retirement plan, which are offered through standard bundles by third-party providers. According to the suit, standard retirement plan services can include, in addition to recordkeeping, transaction processing, participant communications, maintenance of an employer stock fund, plan document and consulting services, accounting and audit services and compliance support and testing.
Additional, separate essential retirement plan services, which command additional fees for a plan, include loan processing, brokerage services/account maintenance, distribution services and processing of qualified domestic relations orders, the lawsuit says.
Stressed in the suit is that a sizeable defined contribution plan such as Kimberly-Clark’s should have been able to command lower services costs per participant given the cost structure dynamic and competition among providers of plan services, who, the case says, “are willing (or competitively required) to accept a lower and more competitive fee as a result of, among other things, the competitive pressures created by greater information becoming available to plan fiduciaries and the reduction in opaque fee structures.” According to the case, the defendants, during the class period, “knew and/or were aware that a Plan with more participants can and will receive a lower effective per participant RPS fee when evaluated on a per participant basis.”
“These excessive fees led to lower net returns than participants in comparable 401(k) Plans enjoyed,” the suit claims.
The lawsuit alleges Kimberly-Clark retirement plan participants paid from 2015 to 2019 a “total, cumulative amount in excess of $6,273,391” in plan services fees.
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