Retirement plan participants have brought a class action lawsuit against the International Union of Elevator Constructors and the multiemployer 401(k) retirement plan on behalf of members of the elevator constructors union. The suit alleges excessive fees for plan services.
The named defendants to the lawsuit include the executive board of the union, the board of trustees of the Elevator Constructors Annuity and 401(k) Retirement plan, and 30 unnamed individuals.
“The plan was saddled by outrageous per participant fees,” the complaint states.
The plaintiff’s complaint asserts two counts against the international union and board defendants—alleging fiduciary breach of prudence to participants, against the committee and failure to monitor other fiduciaries to the plan.
“Defendants did not adhere to fiduciary best practices to control plan costs … such as monitoring investment management fees for the plan’s investments, resulting in several funds during the class period being more expensive than comparable funds found in similarly sized plans—conservatively, plans having over [$]in assets,” the complaint states. “Had a prudent process been used, the plan would not have been saddled with a total plan cost that was more than 160% higher than the median for similar plans.”
The plan had at least $2.6 billion in assets under management during the class period, the court filing shows and over 29,000 participants as of 2020. The plan’s asset amount qualifies it as a jumbo plan in the defined contribution plan marketplace, and among the largest plans in the United States, according to the plaintiff’s complaint.
Attorneys for the plaintiffs have alleged that the plan’s recordkeeper, Mass Mutual, charged between $95 and $125 per participant—from 2016 to 2020—for recordkeeping and administration services.
The complaint argues, as a ‘jumbo’ plan, fiduciaries for the union plan should have been able to negotiate lower recordkeeping costs, ranging from $14 to $30 per participant.
“Anything above that would be an outlier especially later in the class period when [recordkeeping and administrative] costs per participant should have been at the cheapest,” the complaint states.
Plaintiffs’ have alleged against fiduciaries near identical excessive fee claims for the plan’s investment management fees and the 401(k) target-date fund that was used as the plan’s qualified default investment alternative, in the complaint.
From 2016 to 2019, the plan’s target-date suite was the T. Rowe Price Advisor Class series, that carried expense ratios from 92 basis points to 97 basis points for the 2060 fund, the court filing shows. In 2019, the plan moved to the T. Rowe Price Investor Class Series that had expense ratios ranging from 53bps for the 2030 fund to 59bps for the 2060 fund.
“The Investor class was a choice which was still not the best choice for the plan,” the complaint states.
Plaintiffs allege plan fiduciaries move to the less expensive suite “was too little too late as to the damages to the plan had already been baked in,” and further, management failed to use remaining, less costly options for plan participants, according to the complaint.
“[T]he plan could certainly have qualified for the [collective investment trust] version of this target-date fund,” the complaint states. “The CIT version is nearly identical to its mutual fund version in all material respects having the same fund managers and same underlying investments.”
The complaint shows that a version of the CIT carried a 46bps fee for all target-date years from 2020 to 2060.
“Had either the CIT version of this target-date suite or the Investor Class version been selected from the inception of the class period, the plan would have realized greater savings, which would have compounded over the years,” plaintiffs allege.
Citing Supreme Court precedent from the ruling in the 2022 decision Hughes v. Northwestern Univ., the plaintiffs asserted plan fiduciaries have a continuing duty to monitor investments and remove underperformers.
While the complaint is typical of excessive fee claims, it is uncommon for such lawsuits to target a multiemployer plans’ defined contribution plan.
The complaint erroneously termed the Taft-Hartley union plan “a multiple employer plan.” The plan is, in fact, a multiemployer plan for union members.
Plaintiff’s attorneys, from Harrisburg, Penn.-based law firm Capozzi Adler, filed the complaint in the U.S. District Court for the Eastern District of Pennsylvania. The attorneys argued for the court to certify the class period as any time between October 13, 2016, through the date of judgment.
The Elevator Constructors Annuity and 401(k) Plan was a 2019 finalist for Plan Sponsor of the Year.
The International Union of Elevator Constructors is headquartered nationally in Washington, D.C. The principal place of business is in Newton Square, Penn.
Requests for comment to the union on the lawsuit were not returned.