Settlement details have emerged from the U.S. District Court for the Eastern District of Virginia in Employee Retirement Income Security Act (ERISA) litigation involving the National Rural Electric Cooperative Association (NRECA).
The NRECA is a national service organization that represents more than 1,000 rural electric cooperatives around the United States. One of NRECA’s primary functions is to administer three ERISA plans covering member cooperatives’ employees—a health and welfare plan, a traditional pension plan and a 401(k) plan.
The litigation arose after participants in the 401(k) plan accused the association and plan fiduciaries of engaging in prohibited transactions with respect to the plan in violation of ERISA, to the detriment of the plan and its participants. The complaint alleges the plan’s administrative costs are grossly excessive. It notes that the plan is one of the 75 largest defined contribution (DC) plans in the United States, out of more than 650,000. As a result, it says, the defendants have access to the most competitive pricing and services in the marketplace.
“While fiduciaries of similarly sized plans typically incur administrative expenses well under $100 per participant, the plan’s administrative costs are wildly out of scale at more than $400 per participant,” the complaint states.
It now appears the parties in the lawsuit have reached a settlement agreement, including a cash payment to the plan of $10 million to be divided among current and former participants according to a detailed plan of allocation to be established by an independent, court-approved fiduciary. The settlement agreement permits as much as a third of the gross settlement amount to be paid as attorney fees.
Other stipulations in the settlement involve requiring fee reviews and analyses to occur on at least a triannual basis. These are likewise to be conducted and overseen by an independent fiduciary and consultant. The settlement agreement further mandates that NRECA will undergo a formal request for proposals (RFP) process for recordkeeping services at least once every six years.