Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—6th Cir.: Complaint that fiduciaries breached fiduciary duty of prudence by paying excessive recordkeeping fees failed, (May 7, 2025)

By Ronald Miller, J.D.

Whether a complaint plausibly alleges an ERISA breach-of-duty-of-prudence claim requires “careful, context-sensitive scrutiny of a complaint’s allegations.”

Nothing in a class action complaint established that fiduciaries of a 401(k) pension plan breached their duty of prudence with respect to the fees paid to a third-party recordkeeping company, ruled the Sixth Circuit. Because the employees’ complaint provided no details about the specific types or quality of services that certain comparator plans received relative to those received by the plan, the appeals court declined to infer a breach of the duty of prudence. The employees’ failure to explain the differences in services or to demonstrate a meaningful benchmark left the appeals court unable to evaluate “whether [the] fee is excessive under the circumstances” (England v. DENSO International America Inc., No. 24-1360 (6th Cir. May 6, 2025)).

The employer makes auto parts. It provides its employees with a 401(k) defined contribution pension plan. The plaintiffs in this action are current and former employees who participate in the plan.

Mega plan. As of 2020, the plan had about 14,000 participants and over $1.7 billion in assets—more participants and assets than 99 percent of other plans in the United States. The plan contracted with third-party recordkeeping companies to provide recordkeeping and related administrative (RKA) services. As a “mega plan,” the plan in this instance possessed significant bargaining power when selecting recordkeeping services.

The employees brought a class action alleging that the plan overpaid for recordkeeping and administrative services. In their view, the plan’s substantial assets and the commoditized nature of the third-party services required the plan’s fiduciaries to use their significant bargaining power to negotiate lower fees, and their failure to do so breached their duty of prudence in violation of ERISA.

“Bundled RKA” services. Empower is the firm that provides the employer’s recordkeeping services. It provides “Bundled RKA” services, charging one rate for a package of recordkeeping services instead of separately billing for each specific service. Between 2016 and 2020, the plan paid Empower “approximately $71 per participant” for its recordkeeping and administrative services. The employees asserted that 15 “comparable plans of similar sizes with similar amounts of money under management, receiving a similar level and quality of services” paid recordkeeping fees ranging from $25 to $39 per participant. According to the employees, the plan’s contract with Empower led to “lower net returns” because of “excessive” and “objectively unreasonable” recordkeeping fees, totaling over $3.4 million over the applicable period.

The employees asserted that a prudent plan fiduciary should be able to negotiate a lower fee for the Bundled RKA services. Therefore, they claimed that the plan fiduciaries breached ERISA’s duty of prudence and the derivative duties to monitor that selection of its recordkeeper.

“Context specific” facts. The district court dismissed the employees’ complaint for failing to set forth the required “context specific” facts—such as the types and quality of services provided—to render plausible an ERISA overpayment-for-recordkeeping-services claim. This appeal followed.

Duty-of-prudence. ERISA requires plan fiduciaries to discharge their duties “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” “Because the content of the duty of prudence turns on ‘the circumstances prevailing’ at the time the fiduciary acts, the appropriate inquiry will necessarily be context specific.”

Whether a complaint plausibly alleges an ERISA breach-of-duty-of-prudence claim requires “careful, context-sensitive scrutiny of a complaint’s allegations.” Doing so usually requires identifying the alleged problematic financial metric and then comparing it to a “meaningful benchmark.” For excessive-recordkeeping claims, a plaintiff must “allege that the fees were excessive relative to the services rendered” or establish “other factors relevant to determining whether a fee is excessive under the circumstances.”

Because the employees’ complaint provided no details about the specific types or quality of services that the comparator plans received relative to those the received by the plan, nothing in their complaint permitted the Sixth Circuit to reasonably infer a breach of the duty of prudence.

Here, the complaint admitted that there were “variations in the level and quality of RKA services” provided to mega plans. The employees’ failure to explain the differences in services or demonstrated a meaningful benchmark left the appeals court unable to evaluate “whether [the] fee is excessive under the circumstances.”

Accordingly, the judgment of the district court was affirmed.

The case is No. 24-1360.

Judge: Griffin, R.

Attorneys: Paul Secunda (Walcheke & Luzi) for Martha D. England. René E. Thorne (Jackson Lewis) for DENSO International America Inc.

Companies: DENSO International America Inc.

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