Insights From Encore Fiduciary on Fiduciary Liability & Other Risk Exposures of Employee Benefit Plans


Insights From Encore Fiduciary on Fiduciary Liability & Other Risk Exposures of Employee Benefit Plans

Debunking the “Excess” Recordkeeping Fee Claims in the U.S. Bancorp Case

debunking myths

By Daniel Aronowitz

Given the near record number of excess fee and investment imprudent cases filed in 2022 [88 by our count], it is not surprising that the pace of filings has been slower so far in 2023 [14 year-to-date], as plaintiff law firms digest the high volume of pending cases.  But the reduced number of filings does not mean that the quality of the lawsuits has increased.  To the contrary, the same plaintiff law firms continue to file purported excess recordkeeping fee claims that are based on false facts and supported by misleading comparators.

The most egregious recent example of a false claim of excess recordkeeping fees is the lawsuit by the Walcheske & Luzi law firm on January 5, 2023 in the federal district court in Minnesota captioned Dionicio v. U.S. Bancorp, Case No. 0:23-cv-00026-PJS-JFD.  As we show below, the U.S. Bancorp plan has a low $29 per participant annual recordkeeping fee and a menu of low-cost Vanguard index funds, with Vanguard index target-date funds as the QDIA at the rock bottom 4.5 bps investment fee – the lowest non-proprietary TDF fee that we have seen available for any plan.  But that did not stop the Walcheske firm from alleging that the U.S. Bancorp plan fiduciaries are guilty of malpractice for failing to leverage their plan size to negotiate lower fees.  The initial complaint asserted a false recordkeeping fee that was easily rebutted by plan fee disclosures.  The amended complaint then asserted the correct fee, but with lower purported benchmarks to allege fiduciary imprudence.  None of this passes a laugh test, but credibility is not a hallmark of excess fee lawsuits.

On May 2, 2023, Morgan, Lewis & Bockius LLP filed a motion to dismiss the Plaintiffs’ Amended Complaint.  The masterful motion to dismiss is worth studying, as it exposes the con game of the plaintiffs’ excess fee bar, particularly when they sue low-fee plans like the U.S. Bancorp plan.  The following summarizes the key ways that Morgan Lewis debunked the false excess recordkeeping fees claims in the U.S. Bancorp case.  These defenses apply in nearly every purported excess recordkeeping fee case.  The key defense is how to rebut the now ubiquitous assertion that large plan recordkeeping is a commodity with no difference in type or quality of services.

The U.S. Bancorp Plan Fees and Investments

Most purported excess fee lawsuits try to hide the participant fee disclosures, because those disclosures often demonstrate that plaintiffs’ fee claims are false.  This case is different because the complaint referenced the fee disclosures [even though the initial complaint asserted a higher recordkeeping fee than the fee disclosure], and Morgan Lewis attached the participant fee disclosure to the motion to dismiss.  We thus know the exact fees charged to participants.  Here is what the April 2022 fee disclosure proves about U.S. Bancorp plan investments and fees:

  • Alight is the recordkeeper and charges a $2.40 monthly fee. At 12 times $2.40, that is $28.80 per participant.
  • We see no revenue sharing investments in the plan, so the fee is capped at $28.80.
  • The plan offers five low-cost Vanguard index funds, including the Vanguard Target Retirement Date index funds as the QDIA.
  • The fee for the Vanguard TDFs is .045% – only 4.5 bps.
  • The performance of the Vanguard TDFs appears to be within 5% of the Vanguard Target Retirement custom index for nearly every vintage on a one-, five-, and ten-year basis.
  • The plan offers four other Vanguard index funds at low fees: S. Large-Cap Index Fund (.012%); U.S. Small-Mid Equity Index Fund (.04%); International Equity Index Fund (.04%); and a Bond Index Fund (.04%).  All of these funds appear to be in the lowest available institutional share class.
  • The plan offers a Galliard Stable Value Fund (.29%).
  • The plan offers U.S. Bancorp stock and a Piper Sandler Company Stock Fund with zero fees (.00%).
  • For participants that want active management, the plan offers a managed account offered by Alight Financial Advisors (which is related to the plan recordkeeper), with a fee of .60% for the first $100,000; .45% for the next $150,000; and .30% for assets over $250,000.


We do not have the rule 408b2 plan fee disclosure, so we do not know the all-in fee of the plan.  But based on Euclid benchmarks, we calculate that this plan has an all-in fee of .10-12% (and maybe even lower), making it in the top-5% of all jumbo plans over $1b in terms of low fees.  To put this into context, consider a participant with $100,000 in plan assets.  That participant would have a 2.8 bps recordkeeping fee, and could choose the 4.5 bps target date funds, for all-in plan fee of just 7.3 bps.  Anyone with any plan experience knows that this is historically low.  Compared to all large plans over $500m in assets, this plan is among the top-1% of all plans in terms of low fees.

The premise of excess fee lawsuits is that a large plan failed to leverage its size.  The ultra-low fees of the U.S. Bancorp plan demonstrate that the fiduciaries of this plan leveraged its size to maximum advantage.  There is absolutely no legitimate argument that the plan fiduciaries of U.S. Bancorp acted imprudently in managing expenses.  The 4.5 bps QDIA is exhibit A to rebut any claim of excess fees, as it is a lower investment fee than just about every single defined contribution plan available in America today.  Stated differently, this is one of the lowest fee defined contribution plans in history.  99.9% of all workers in America do not have access to a plan with recordkeeping fees under $30 and target date funds under 5 bps.

The U.S. Bancorp Excess Fee Complaint

The Walcheske & Luzi, LLC law firm first sued the Board of Directors of U.S. Bancorp and its Benefits Administration and Investment Committees on January 5, 2023.  The sponsored 401k defined contribution plan had over $9.8B in assets and 86,195 participants in 2021, which is a jumbo-sized plan.  As is now common in excess fee cases, the complaint alleged that prudent fiduciaries treat bundled recordkeeping services “as a commodity with little variation in price.”  Plaintiffs continue that the U.S. Bancorp Plan had a “standard level” of recordkeeping services, and that the rule 404(a)(5) plan disclosure documents have nothing to suggest that the annual administrative fee charged to participants included any services that were “unusual or above and beyond the standard recordkeeping and administrative services provided by all national recordkeepers to mega plan with more than $500,000 in assets.”   The first claim was that it was imprudent for U.S. Bancorp to pay an average of $41 per participant [$37 in 2021], compared to a chart of eight other (random) plans, with a range from the $7.4B Apple 401k plan that had a recordkeeping fee of $18 per participant, to the $2.3B Raytheon plan that paid $28 per participant.  Plaintiffs asserted that “[a]ny differences in the quality or scope of the services delivered are immaterial to the differences between what the Plan paid for RKA services and what [the] reasonable fair market fee was for identical services.”  [Euclid note:  We have already shown you from the fee disclosure that the claim of a $41 recordkeeping fee was false].  The second claim was that the plan fiduciaries did not effectively monitor and thus paid unreasonable managed account service fees.  Plaintiffs argued that other large plans paid lower managed account fees.  In addition, plaintiffs further asserted that managed accounts are an expensive way to diversify assets.  And given that that managed accounts provide limited value, plaintiff also allege that “the reasonable fee for the Managed Advice service was zero or very close to zero.”

The defense filed a motion to dismiss the original complaint, which asserted that the fee disclosures referenced in the complaint showed a $29 per participant recordkeeping fee, and not the $41 purported average fee asserted in the complaint.  The motion to dismiss argued that the true $29 fee was only $1 different than two of the eight purported comparator plans in the case.

Showing no shame, the Walcheske law firm filed an amended complaint as if the original, false claims had never happened.  Besides a change in font size, the complaint asserted the same two excess recordkeeping and managed account fees claims, except this time Walcheske alleged that the truthful $29 recordkeeping fee was unreasonable compared to four different corporate plans with $19-25 per participant recordkeeping fees, as well as three years of Fidelity’s own plans for Fidelity employee with recordkeeping fees from $14-21.  The only comparator plan that was the same from the original complaint was the Lowes 401(k) Plan [$5.6B/154,402 – $19 per participant].  The plan’s recordkeeping fees were lower, so Walcheske changed the goal posts and lowered the comparator benchmarks accordingly.

Defense #1:  Courts should not allow plaintiff law firms to assert excess recordkeeping fee claims based on Form 5500 data, because it includes individual elective fees for plan transactionsThe U.S. Bancorp case is yet another example as to how plaintiff firms file false recordkeeping imprudence claims based on plan fees recorded on the Form 5500, which contains transaction fees that distort the fees paid to recordkeepers for recordkeeping services.  Instead, the Department of Labor mandated fee disclosures or the plan recordkeeping contract are the only proper sources of recordkeeping fees from which to base an imprudence lawsuit.  Each named plaintiff already has the participant fee disclosures, and plaintiffs can request the recordkeeping contract with an ERISA rule 104 request.  There is thus no excuse to use misleading information in a lawsuit alleging the serious claim of fiduciary malpractice in an attempt to convince a court to allow a case to discovery.

The best example of the prejudicial impact of allowing plaintiff law firms to misrepresent recordkeeping fees from the Form 5500 is Matousek v. Mid-Am. Energy Co., 51 F.4th 274 (8th Cir. 2022).  In that case, plaintiffs alleged that the plan recordkeeper for the MidAmerican Energy plan charged an “unreasonable” fee ranging “between $326 and $526 per plan participant.”  The court took judicial notice of the plan fee disclosures, however, and observed that Merrill Lynch performed both recordkeeping and non-recordkeeping services, the latter of which included compensation for loan origination, individual trades, and check services.  The fees paid to Merrill Lynch also included elective-services fees charged against the account of individual participants for participant-initiated transactions.  For these reasons, the Form 5500 recordkeeping fee number was not an accurate representation of the recordkeeping fee charged to participants.  The actual recordkeeping fees paid by participants was only $32 – not the false representation by plaintiffs that the fee was $300-500 higher.

The prejudice to U.S. Bancorp is the same.  The initial complaint used Form 5500 numbers to allege a $41 recordkeeping fee, when the actual fee was $29 per participant.  Plaintiff law firms are officers of the court, and we believe should be sanctioned and responsible for defense fees when they file false claims that are easily rebutted by plan fee disclosures provided to the named plaintiffs in the case (the clients of the plaintiff law firms bringing these cases).  The complaint even referenced the participant fee disclosure, but still alleged a false fee amount.  This law firm’s misrepresentations are intentional, as they specialize in filing many of these cases.  As Morgan Lewis stated more diplomatically, Walcheske’s “shifting” claims and benchmark comparators “give away their game.”

But the prejudice is broader than just false fees alleged in the complaints.  The purported comparators used in the excess fee complaints are also misleading, because of the same variable that the Form 5500 includes inconsistent information relating to optional transaction fees.  The Walcheske chart of purported comparison plans – a moving target that changed when they filed the second complaint – is not a meaningful benchmark or “like-for-like comparison” because of the variable of transaction fees that inflates the Form 5500 recordkeeping fee disclosure.  The fees of some of the comparison plans in the U.S. Bancorp case cover only basic recordkeeping services that do not include non-recordkeeping services.  Form 5500 filings for other comparator plans omit fees for individualized services like loans and distributions paid by individual plan participants.  And still other Form 5500 filings include fees paid to other service providers to the plan beside the plan recordkeeper.

The Form 5500 is not a reliable measure of recordkeeping fees because it includes all three types of non-recordkeeping fees.  The simple fact remains that courts must stop the plaintiff’s bar from filing misleading “excess” fee claims based on Form 5500 recordkeeping data.  The con game to mislead courts as evidenced in the MidAmerican and U.S. Bancorp cases must be shut down.

Defense #2:  Can Plaintiffs Survive a Motion to Dismiss By Simply Arguing that Recordkeeping is a Commodity with the Same Bundled Services for All Large Plans?  The current battlefield in the pleading standard for excess recordkeeping fee claims is the rigor courts will require for “meaningful benchmarks” to prove that the disputed fees are actually excessive.  The Eighth Circuit in the MidAmerican case held that plaintiffs must plausibly allege a “meaningful benchmark” that “similar sized plans spend less on the same services.”  The U.S. Bancorp complaint is like most cases in asserting what the Eighth Circuit described as an inadequate “naked fee-to-fee comparison” based on data from undisclosed sources.  Several recent courts have held that this fails to provide any sort of context regarding the fees and services being compared.  For example, the Wisconsin court in Guyes v. Nestle USA, No. 20-CV-1560-WCG-SCD, 2022 WL 18106384, at *4 (W.D. Wis. Nov. 21, 2022), dismissed recordkeeping claims based on “only a naked fee-to-fee comparison” that failed to identify the “specific services performed by the comparator plans’ recordkeepers.”  Similarly, in Krutchen v. Ricoh USA, Inc., No. CV 22-678, 2023 WL 3026705, at *5 (E.D. Pa. Apr. 20, 2023), the Pennsylvania federal court held that “without information as to the type and quality of the services provided, this is insufficient to suggest imprudence . . . because fiduciaries may ‘reasonably choos[e] to pay more for higher quality services.”

The U.S. Bancorp complaint offers the same conclusory allegations that the “comparator Plans . . . received materially the same level of quality of services,” as the plan and recordkeeping services are “fungible among all recordkeepers who provide services to mega plans.”  AC ¶¶ 58, 100.  The question is whether these bald conclusions will be sufficient to meet the plausibility pleading standard to survive a motion to dismiss.  Plaintiffs will likely cite to the Seventh Circuit recent opinion in Hughes v. Northwestern Univ., 63 F.4th 61 (7th Cir. Mar. 23, 2023) (“Hughes II”) in which the Seventh Circuit found the excess recordkeeping claim plausible because the Northwestern plaintiffs had alleged that recordkeeping services are highly “commoditized”:  “[i]n short, plaintiffs allege that recordkeeping services are fungible and that the market for them is highly competitive.”  The Court further distinguished the appellate court decisions in CommonSpirit and Oshkosh by holding that plaintiffs in those cases had not pled that the fees were excessive relative to the recordkeeping services rendered.  We find this reasoning unconvincing based on our review of the complaints in both cases, but as we discuss further below, the Northwestern case is easily distinguishable because the plan at issue contained an obsolete recordkeeping arrangement with multiple recordkeepers and uncapped revenue sharing.  The recordkeeping fees were alleged to be between $150-250 per participant.  It is a different case with different facts from most low-cost modern plans like the U.S. Bancorp plan.  Morgan Lewis made this same argument.

The Morgan Lewis dismissal memorandum provides a helpful list of precedents in which certain recent courts have dismissed similar recordkeeping claims premised on unsupported and categorical allegations that recordkeeping services are “the same,” including the Sixth Circuit in CommonSpirit [plaintiff “has not pleaded that the services that CommonSpirit’s fee covers are equivalent to those provided by the plans” identified by the plaintiff]; and Forman v. TriHealth, Inc., 40 F.4th at 443, 449 (6th Cir. 2022) (affirming dismissal of claims that the “plan expenses were almost twice as high as other comparator plans” because the plaintiffs “never alleged that these fees were high in relation to the services that the plan provided.”).  Similarly, the Seventh Circuit in Albert v. Oshkosh rejected the plaintiffs’ recordkeeping fee comparisons because the complaint was “devoid of allegations as to the quality or type of recordkeeping services the comparator plans provided.”  47 F.4th at 579-80.  We note that these citations prove that the Seventh Circuit in Hughes II incorrectly cited to both appellate court decisions.

Several district courts have followed the same reasoning.  See Krutchen II, 2023 WL 3026705, at *2 (finding “conclusory statement” that “all recordkeepers provided the same quality of services” is “insufficient to render a comparison meaningful”; such allegations “defy common sense” given that “operational complexity and service levels drive meaningful differentiation in price” between recordkeepers); Eli Lilly, 2023 WL 1782611, at *10 (allegations that “all mega plans receive nearly identical recordkeeping services and that any difference in services was immaterial to the price of those services” where “wholly conclusory and do nothing to identify what specific types of services comparator plans received relative to the Plan”); Singh v. Deloitte LLP, No. 21-cv-8458 (JGK), 2023 WL 186679, at *5 (S.D.N.Y. Jan 13, 2023) (allegation that “[n]early all recordkeepers in the marketplace offer the same range of services “ did not provide requisite specificity to support breach of duty of prudence claim); Laabs v. Faith Techs., Inc., No. 20-CV-1534-WCG-SCD, 2022 WL 17418358, at *3 (E.D. Wis. Nov. 9, 2022) (conclusory allegations that recordkeeping fees were excessive relative to services rendered and that defendants’ plan “received a standard package of [recordkeeping] services” did not state a claim for breach of duty of prudence), report and recommendation adopted, No. 20-1534, 2022 WL 17417583 (E.D. Wis. Dec. 5, 2022); Mator v. Wesco Distrib., Inc., No. 21-CV-00403-MJH, 2022 WL 3566108 at *4-5(W.D. Pa. Aug. 18, 2022) (allegations that other recordkeepers “provided identical or similar services of the same quality . . . as those provided by [defendant’s provider]” were insufficient to state a fiduciary breach claim).  The Wesco case has been argued before the Third Circuit and awaits a decision by the appellate court.

Although confined to footnote 9 in the brief, Morgan Lewis articulates a key point as to how recordkeeping fees differ for large plans.  The premise of Plaintiffs’ fee comparison is that recordkeeping fees are appropriately calculated and compared on a per-participant basis, assuming the number of participants determines the recordkeeping fee.  But Morgan Lewis quotes from the Morningstar Center for Retirement & Policy Studies, which was cited in the complaint:  “Plan assets drive plan costs lower, not increased number of participants.  In fact, . . . plans with greater number of participants are actually associated with higher costs rather than lower costs, holding assets in the plan constant.  Morgan Lewis argues that it is more accurate to analyze recordkeeping fees as a percentage of total plan assets.  When that is calculated for the U.S. Bancorp plan, the Plan’s alleged recordkeeping fees constitute only .025% of its assets – which is lower than the amount paid by the Lowe’s plan at .052%.  Morgan Lewis thus argues that plaintiff’s own comparator shows that the U.S. Bancorp plan’s fees are not excessive.  The reason is that the plan has a high number of participants.

The “recordkeeping is a commodity” argument is a key issue.  If all plaintiffs have to allege is that recordkeeping services are a commodity, then more excess fee complaints will be filed.  It is crucial for plan sponsors to distinguish the Northwestern case for what it represents:  high fees in an obsolete recordkeeping arrangement that is no longer common for large plans.  Plan sponsors also need to work with trade organizations like SPARK to advance more arguments like Morgan Lewis did in this case to demonstrate how plan recordkeeping is not a commodity.  We need better sources to distinguish recordkeeping service features and levels.  This research is largely missing to defend plan sponsors from these common excess fee claims.

Defense #3:  Even Fee Disclosure Numbers Cannot be Compared From Plan to Plan, Because Some Plans include Fees Paid to Other Services ProvidersWe have already shown how Form 5500 recordkeeping fee numbers cannot be used to prove what plan participants pay in recordkeeping fees.  But Morgan Lewis takes it a step further by arguing that even recordkeeping fees disclosed on the rule 404a5 participant disclosure cannot be compared without further apples-to-apples analysis, because the U.S. Bancorp $29 per participant fee includes services and fees paid to other providers other than Alight as the plan recordkeeper.

Specifically, the Alight fee disclosure states that the annual fee covers “the Plan’s administrative expenses,” which are defined as:

Fees paid to the recordkeeper to cover expenses for things like keeping data on participants, communication materials, internet services, and assisting participants with transactions; fees paid to a trustee to manage some operations of the Plan including trading and holding assets; plus fees paid for legal and accounting services.

The motion to dismiss memorandum argues that different entities provided the trustee and legal and accounting services, and thus received a portion of the $29 annual fee.  Ernst & Young provided Plan accounting services and U.S. Bank, N.A. provided Plan trustee services.  Therefore, not all of the $29 annual fee is paid to Alight for recordkeeping services.  Despite this, plaintiffs compare this $29 fee to the fees paid by other plans allegedly just for recordkeeping.

This is a new defense argument that should be applied to other excess fee cases.  Fidelity serves as the recordkeeper for the majority of large plans, and this analysis needs to be applied to the Fidelity fee disclosure to evaluate if they include fees paid to other third-parties beyond Fidelity.

Defense #4:  The Continued Comparison to Fidelity’s Own Internal Plans is Disingenuous, at BestThe amended complaint switched to a new comparator chart to provide lower fee benchmarks.  As Morgan Lewis explained, plaintiffs moved the goal posts.  But it is useful to analyze the plans Walcheske chose:

Comparable Plans’ Bundled RKA Fees Based on Publicly Available Information from Participant Fee Disclosures or Financial Statements

 Plan  Participants  Assets  Bundled RKA Fee ($) Bundled RKA Fee
 Record- keeper
Leidos, Inc. Retirement


46,995 $10,028,148,473 $939,900 $20 Vanguard
General Dynamics Corporation 401(K) Plan












Fidelity Retirement Savings Plan 51,049 $13,250,740,623 $1,072,029 $21 Fidelity
Fidelity Retirement Savings Plan 57,658 $14,730,835,962 $980,186 $17 Fidelity
Fidelity Retirement Savings Plan 64,113 $24,332,734,660 $897,582 $14 Fidelity
Deloitte 401K Plan 98,051 $9,949,148,795 $2,157,122 $22 Vanguard
Lowes 401(K) Plan 154,402 $5,619,838,861 $2,856,437 $19 Wells Fargo


The comparators are four company plans for unknown years; and then three years of the Fidelity plan for its own employees (and again, the years are not identified).  This means that plaintiffs are claiming fiduciary malpractice by comparing the U.S. Bancorp plan to just four plans out of all $1B+ plans in America.  This is hardly a meaningful benchmark, even if it is four out of approximately 250 mega plans.  But buried in footnote 10 of the motion to dismiss memorandum is an interesting point:  despite holding out these comparator plans as paying “reasonable” and “prudent” recordkeeping fees, four out of five of the comparator plans have been sued for failing to prudently monitor their fees and investment options.  The General Dynamics plan was one of the first plans to be sued in 2006; Deloitte was sued in 2021 for allegedly paying $65 per participant in recordkeeping fees; and Lowes was sued in 2020.  What plaintiffs fail to mention is that they are comparing U.S. Bancorp to plans that have reduced their fees under pressure of a lawsuit.  These are artificial comparators.

The comparison to three years of the Fidelity employee plan is also misleading.  The Fidelity plan was sued for excess fees in Moitoso v. FMR LLC., No. 1:18-cv-12122 (D. Mass. 2018).  In the lawsuit, Fidelity stipulated to certain facts “for purposes of [that] litigation only” to satisfy its discovery obligations to plaintiffs.  But the stipulation does not state that the Fidelity plan actually paid an annual $14 to $21 per-participant recordkeeping fee; it states only that these amounts reflected “the value of the recordkeeping services that Fidelity provided to its own plan at the time.”  Fidelity has since made clear that the stipulation was entered into “for the limited purpose of resolving a discovery dispute” and “certainly does not reflect the value of the recordkeeping services that Fidelity provides to different plans pursuant to different recordkeeping contracts for different sets of services.”  Accordingly, at least two courts rejected fee comparisons based on this same Fidelity stipulation.  See Wehner v. Genentech, Inc., No. 20-cv-06894-WHO, 2021 WL 507599, at 6 (N.D. Cal. Feb. 9, 2021) (refusing to draw any inference from the Moitoso discovery stipulation); Johnson v. PNC Fin. Servs. Grp., Inc., No. 2:22-CV-01493-CCW, 2021 WL 3417843, at *4 (W.D. Pa. Aug. 3, 2021) (same).  But that has not stopped the Walcheske and Capozzi law firms from using the Fidelity discovery stipulation as a purported benchmark in dozens of the cases.

The excess fee plaintiffs’ bar knows that the Fidelity argument is disingenuous.  But again, their business model is not about credibility or truth.  It is about misleading a federal judge into allowing discovery into the case, and then leveraging the huge defense costs into a lucrative settlement.  The Walcheske law firm has bragged in settlement motions that this has worked to the tune of $75m+ in settlements.  They keep using the disingenuous Fidelity stipulation argument because it works often enough to score settlements.

Defense #5:  Hughes II is not a different pleading standard because it has distinctive facts, including multiple recordkeepers and uncapped revenue sharing, that are distinguishable from nearly every modern plan: The Seventh Circuit in Albert v. Oshkosh, 47 F.4th 570, 579 (7th Cir. 2022), affirmed dismissal of recordkeeping claims brought by the same plaintiffs’ attorneys, holding that the plaintiff “cannot proceed to discovery solely on the basis that the Plan paid higher recordkeeping fees than a potentially random assortment of nine other plans from around the country.”  Several defense firm blogs have taken the position that this sets a new pleading standard for excess fee cases, and plaintiffs in the U.S. Bancorp case will likely rely on the Seventh Circuit’s decision.  But Morgan Lewis makes the critical distinction that we made in our analysis of the case that the Northwestern plan had a decisively different fee structure that must be distinguished.  See

Hughes II applied the “context specific” analysis from Albert v. Oshkosh to the factual allegations before it, which included the claim that the defendant imprudently retained multiple recordkeepers and thereby paid duplicative recordkeeping fees “four to five” times above reasonable ones due to uncapped revenue sharing, which other university plans avoided through consolidation to a single recordkeeper.  Here, plaintiffs’ allegations differ significantly:  they do not allege that defendants had multiple recordkeepers, failed to consolidate, or paid fees that were “four to five times” more than their comparator plans’ fees.  Plaintiffs’ allegations instead closely resemble the “naked fee comparison” dismissed in Albert.  Consequently, even though the Seventh Circuit appears to allow the “recordkeeping is a commodity” argument, the facts of the Northwestern case are drastically different from the low-fee U.S. Bancorp plan.

The Euclid Perspective

The U.S. Bancorp defined contribution plan is one of the lowest fee plans in the entire country.  Participants have the ability to select investment options of 4.5 basis points for identical Vanguard investments that cost smaller plans 100%+ higher [the normal range in 2022 was 9 to 13 bps].  And they have a 2-3 basis point recordkeeping fee that is capped at $29 [and even lower on a percentage basis when your individual account grows over time].  Participants have the ability to invest in leading target-date funds with an all-in fee of 7 bps.  By contrast, the national average for large plans is 30-40 bps, and 70-80+ bps for small plans.

The excess fee case filed against U.S. Bancorp should be thrown out of court, and attorney fees assessed against the plaintiffs for bringing a meritless case.  There needs to be ramifications for filing bogus fiduciary malpractice claims.  As we often say, there may be a few legitimate excess fee cases.  But the essential element of an excess fee claim is excess fees, and that is missing from the U.S. Bancorp case.

Disclaimer:  The Fid Guru Blog is intended to provide fiduciary thought leadership and advocacy for the plan sponsor community in areas of complex fiduciary litigation.   The views expressed on The Fid Guru Blog are exclusively those of the author, and all of the content has been created solely in the author’s individual capacity.  It is not affiliated with any other company, and is not intended to represent the views or positions of any policyholder of Encore Fiduciary, or any insurance company to which Encore Fiduciary is affiliated.  Quotations from this site should credit The Fid Guru Blog.  However, this site may not be quoted in any legal brief or any other document to be filed with any Court unless the author has given his written consent in advance.  This blog does not intend to provide legal advice.  You should consult your own attorney in connection with matters affecting your legal interests.

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