Participants Allege Fiduciary Breach at National Rural Electric Cooperative

Participants of the National Rural Electric Cooperative Association’s retirement plan filed a complaint against the organization alleging years of financial mismanagement and self-dealing in the administration of NRECA’s 401(k) Pension Plan.

Filed in United States District Court for the Eastern District of Virginia by two current plan participants seeking to represent a class of more than 77,000, the complaint claims that NRECA and its fiduciary committee breached their obligations under the Employee Retirement Income Security Act of 1974, costing plan participants millions in excessive administrative fees.

According to the complaint, NRECA ignored clear fiduciary warnings, including a 2012 Department of Labor settlement requiring it to restore $27.3 million to employee benefit plans for similar violations. The complaint argues that rather than making adequate changes, the organization continued to overcharge participants and diverted plan assets to subsidize its own operations.

The complaint also accuses NRECA of manipulating internal cost-sharing structures to shift an increasing financial burden onto the 401(k) plan, while reducing costs to its other benefits programs. The plaintiffs are seeking restitution of lost funds, a reform of plan practices and court oversight to prevent further violations.

The class action marks the third major legal challenge NRECA has faced over its retirement practices in the last 15 years. After restoring $27.3 million to the plan in a 2012 settlement, NRECA also settled a 2019 lawsuit on similar grounds for $10 million.

In the latest complaint, the plaintiffs are asking the court to force NRECA to return the allegedly misused funds and require changes to the plan for improved compliance.