PNC Financial Services Sued Over ‘Grossly Excessive Fees’ Charged to Employee Retirement Plan [UPDATE]

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The PNC Financial Services Group, Inc. has allowed its employee incentive savings plan to incur unreasonably excessive recordkeeping and administrative expenses to the detriment of participants and their beneficiaries, a proposed class action claims.

Filed against PNC and its savings plan’s administrative committee, the 20-page case alleges that although the plan’s size and bargaining power should have allowed for the negotiation of low administrative fees, the plan has been charged between 143- to 306-percent more than it should have due to PNC’s apparent failure to engage in “any modestly prudent approach” to ensuring fees were kept reasonable.

Put simply, PNC either thoroughly fell short in performing its due diligence with regard ensuring costs and fees for the plan didn’t balloon to unacceptable levels, or knew what was happening and failed to act, the lawsuit claims.

“As such, it is clear that Defendants either engaged in virtually no examination, comparison, or benchmarking of the recordkeeping and administrative fees of the Plan to those of other similarly sized defined contribution plans, or were complicit in paying grossly excessive fees,” the complaint states. “Had Defendants conducted any examination, comparison, or benchmarking, Defendants would have known that the Plan was compensating its service providers at levels inappropriate for its size and scale.”

The lawsuit, which alleges a breach of fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA), contests that the excessive fees have ultimately harmed the retirement plan’s participants, who have achieved “considerably lower retirement savings” as a result.

According to the suit, the plan pays its administrative and recordkeeping expenses out of its assets, either directly from participant accounts or through revenue sharing, with the impact of such high fees compounded over time to the “significant detriment” of plan participants.

The complaint provides that, according to one industry publication, the average cost for recordkeeping and administration in 2017 for defined contribution plans “much smaller than [PNC’s] Plan,” which sits in the top 0.1 percent of defined contribution plans by size, was $35 per participant. The defendant’s retirement plan, however, paid administrative fees of between $85.18 and $89.70 per participant from 2014 to 2018, with annual recordkeeping fees exceeding $50 during the same time frame, the suit says.

In addition to recordkeeping fees, the plan paid administrative fees for legal counsel, auditing services, investment advisory services and pension consulting services, as well as an average of over $235,000 per year to PNC Financial Services for “certain administrative services” performed as the plan administrator, the case claims.

Given the size of the PNC plan and its according negotiating power, the defendants “unquestionably” should have been able to obtain significantly lower administrative and recordkeeping fees, especially considering comparable plans paid no more than $14 to $21 per participant for similar services during the same time frame, according to the complaint.

“Defendants clearly failed to scrutinize the going rates for the recordkeeping services the Plan received,” the complaint alleges, “and for which participants shoulder the financial responsibility to the detriment of their retirement savings.”

Per the case, the burden of these “grossly excessive fees” was placed on plan participants and their beneficiaries, who suffered a significant reduction in their retirement savings as a result of the defendants’ apparent breach of their fiduciary duties.

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