Case 6:23-cv-00301-ADA Document 1 Filed 04/24/23 Page 1 of 31
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`UNITED STATES DISTRICT COURT
`WESTERN DISTRICT OF TEXAS
`WACO DIVISION
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`v.
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`Case No.: 6:23-00301
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`
`ASHLEY BARNER and SHAWN
`ROEBUCK, on behalf of
`MCLANE COMPANY, INC.
`PROFIT SHARING PLAN,
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`Plaintiffs,
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`
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`MCLANE COMPANY, INC.,
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`Defendant.
`___________________________________/
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`CLASS ACTION COMPLAINT
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`INTRODUCTION
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`
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`Ashley Barner and Shawn Roebuck (collectively, “Plaintiffs”) have invested their
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`retirement savings in the McLane Company, Inc. Profit Sharing Plan (the “Plan.”). McLane
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`Company, Inc. (“McLane”) is a fiduciary to the Plan. Its fiduciary obligations to the Plan are the
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`highest known to law. McLane has a duty to protect the retirement savings of Plan participants.
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`Unfortunately, McLane has been asleep at the wheel. McLane allows third parties to charge the
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`Plan millions of dollars in excessive fees and compensation. The excessive fees are paid by Plan
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`participants and reduce the value of Plan participant retirement savings. By analogy, if two
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`adjacent gas stations offered the same gasoline for different prices, McLane has chosen the more
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`expensive gasoline for no rational reason. McLane has acted imprudently, causing millions of
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`dollars to be drained from retirement accounts by excessive fees and compensation paid to third
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`parties. McLane should never have allowed this to happen. A prudent fiduciary would never have
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`allowed this to happen.
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`Case 6:23-cv-00301-ADA Document 1 Filed 04/24/23 Page 2 of 31
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`SUMMARY OF ALLEGATIONS
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`1.
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`This action seeks to protect the retirement savings of more than 27,000 employees
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`of McLane who are participants in the Plan.
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`2.
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`McLane has a fiduciary duty to ensure that the compensation paid by the Plan to
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`third parties who provide services to the Plan is reasonable. McLane failed to do so. McLane also
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`has a duty to prudently select and monitor investments offered through the Plan. The Plan is
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`eligible – given its massive size – for favorable pricing on investments. Instead of taking advantage
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`of favorable pricing, McLane caused Plan participants to pay more for investments than what they
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`were eligible for and more than what they should have paid.
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`4.
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` Plaintiffs bring this action on behalf of the Plan under 29 U.S.C. §1132(a)(2) and
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`(3) to enforce liability under 29 U.S.C. §1109(a) and to restore to the Plan all losses resulting from
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`McLane’s breaches of fiduciary duty.
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`JURISDICTION AND VENUE
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`5.
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`This Court has exclusive jurisdiction over the subject matter of this action under 29
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`U.S.C. §1132(e)(1) and 28 U.S.C. §1331 because it is an action under 29 U.S.C. §1132(a)(2) and
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`(3).
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`6.
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`This judicial District is the proper venue for this action under 29 U.S.C. §1132(e)(2)
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`and 28 U.S.C. §1391(b) because it is the district in which the Plan is administered, and where at
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`least one of the alleged breaches took place.
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`ERISA
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`7.
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`The ERISA fiduciary duty of prudence is among “the highest known to the law”
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`and requires fiduciaries to have “an eye single to the interests of the participants and beneficiaries.”
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`Donovan v. Bierwirth, 680 F.2d 263, 271, 272 n.8 (2d Cir. 1982). As a fiduciary to the Plan,
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`McLane is obligated to act for the exclusive benefit of the Plan and to ensure that the Plan’s
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`expenses are reasonable. Sweda v. Univ. of Pennsylvania, 923 F.3d 320, 333 (3d Cir. 2019).
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`Fiduciaries must act “solely in the interest of the participants and beneficiaries,” 29 U.S.C. §
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`1104(a)(1)(A), with the “care, skill, prudence, and diligence” that would be expected in managing
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`a plan of similar scope. 29 U.S.C. § 1104(a)(1)(B).
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`8.
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`“ERISA is a remedial statute designed to protect the interests of plan participants
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`and beneficiaries . . . Courts should not hasten to employ technical rules of pleading and practice
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`to defeat that goal.” Degnan v. Publicker Industries, Inc., 83 F.3d 27, 30 (1st Cir. 1996). This
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`mandate favors liberal construction of pleadings. Fitzgerald v. Codex Corp., 882 F.2d 586, 589
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`(1st Cir. 1989); see also Jackson v. Truck Drivers’ Union Local 42 Health & Welfare Fund, 933
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`F. Supp. 1124, 1134 (D. Mass. 1996).
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`9.
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`There are fees associated with administering a 401(k) plan. To help the public
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`obtain a better grasp on fees they pay in retirement plans, the Department of Labor passed
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`regulations in 2012 that require plan administrators to disclose fee and expense information to plan
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`participants. However, most plan participants are still in the dark concerning the actual amount of
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`fees they pay. The lack of understanding is not surprising. Often fees are hidden from plain view.
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`10. McLane’s fiduciary obligations with respect to the Plan are especially important
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`because Plan participants cannot negotiate fees and expenses charged to Plan participants. Plan
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`participants must trust that McLane will prudently do so.
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`11. McLane is also responsible for selecting investments and hiring service providers
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`for the plan. These fiduciary decisions dramatically alter the amount of money participants can
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`save for retirement. According to the U.S. Department of Labor, a 1% difference in fees over the
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`course of a 35-year career makes a difference of 28% in savings at retirement. U.S. Dep’t of Labor,
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`Case 6:23-cv-00301-ADA Document 1 Filed 04/24/23 Page 4 of 31
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`A Look at 401(k) Plan Fees, at 1-2 (Aug. 2013). Stated differently, $28.00 out of every $100.00
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`the employee believed they were saving for retirement was diverted to a service provider.
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`12.
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`Accordingly, McLane must engage in a rigorous process to control Plan expenses
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`and ensure that Plan participants pay no more than reasonable fees and expenses. McLane does
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`not play from a position of weakness. Like most industries, more spending power equates to better
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`pricing. In the retirement services industry, a billion-dollar plan has the spending power to obtain
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`the best services at the lowest cost.
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`13.
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`Retirement services providers and plan participants engage in a zero-sum game
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`with very real consequences. Each dollar in fees and expenses paid from a participants’ retirement
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`account diminishes the amount available for retirement not only by an equal amount, but also by
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`the opportunity cost of the lost future returns on that same money.
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`14.
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`And that is why plan sponsors such as McLane play such an important role – their
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`actions (or inactions) directly influence the outcome of the zero-sum game. Simply put,
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`participants’ retirement security is directly correlated to the plan fiduciaries effectiveness in
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`minimizing a Plan’s fees and expenses.
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`15.
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`Plan fiduciaries should understand third party retirement service providers are
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`motivated to maximize fees from plans. Plan fiduciaries must prioritize and act exclusively in the
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`best interests of a plan and its participants. When negotiating on behalf of a plan, fiduciaries must
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`negotiate as if their own money was at stake. No differently, when making investment alternatives
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`available to plan participants, fiduciaries must choose as if they are investing for their own
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`retirement. Fiduciaries must act “solely in the interest of the participants and beneficiaries,” 29
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`U.S.C. § 1104(a)(1)(A), with the “care, skill, prudence, and diligence” that would be expected in
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`managing a plan of similar scope. 29 U.S.C. § 1104(a)(1)(B).
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`16.
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`The Plan is a qualified retirement plan commonly referred to as a 401(k) plan. It is
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`THE PLAN
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`a defined contribution plan, to which employees contribute to the individual Plan accounts from
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`their paychecks.
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`17.
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`The Plan is established and maintained under written documents in accordance with
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`29 U.S.C. §1102(a)(1).
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`18. McLane is a statutory fiduciary to the Plan.
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`19.
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`Current and former employees of McLane are eligible to participate in the Plan.
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`The Plan provides the primary source of retirement income for many McLane current and former
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`employees.
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`20.
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`Defined contribution retirement plans are generally classified as follows: “Micro”
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`plans (<$5 million in assets); “Small” plans ($5 million-<$50 million); “Mid” plans ($50 million-
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`<$200 million); “Large” plans ($200 million-<$1 billion); and “Mega” plans (>$1 billion).
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`21.
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`As of December 31, 2021, the Plan had $1,538,244,207 in assets and 27,416
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`participants with account balances. The Plan qualifies as a “Mega” plan in the 401(k) marketplace.
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`22.
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`Instead of leveraging the Plan’s tremendous bargaining power to benefit Plan
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`participants, McLane caused the Plan to pay unreasonable and excessive fees to the detriment of
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`the Plan and its participants.
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`THE PARTIES
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`23.
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` Plaintiff Ashley Barner is presently a McLane employee. She is a Plan participant,
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`and is currently invested in, inter alia, the following funds: John Hancock Disciplined Value Mid
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`Cap Fund Class A (JVMAX), Emerald Growth Fund Investor Class (FFGRX), MFS mid Cap
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`Growth Fund Class A (OTCAX), American Funds EuroPacific Growth Fund Class A (AEPGX),
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`MFS New Discovery Value Fund Class R6 (NDVVX), State Street S&P Index NL Series Fund
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`Class N (SVSPX), Metropolitan West Total Return Bond Fund I (MWTIX), and Invesco Stable
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`Value Trust.
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`24.
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` Plaintiff Shawn Roebuck is an employee of McLane. He is a Plan participant and
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`is currently invested in John Hancock Disciplined Value Mid Cap Fund Class A (JVMAX),
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`Emerald Growth Fund Investor Class (FFGRX), MFS Mid Cap Growth Fund Class A (OTCAX),
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`American Funds EuroPacific Growth Fund Class A (AEPGX), MFS New Discovery Value Fund
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`Class R6(NDVVX), MFS Value Fund Class A (MEIAX), State Street S&P Index NL Series Fund
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`Class N (SVSPX), Metropolitan West Total Return Bond Fund I (MWTIX), and Invesco Stable
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`Value Trust.
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`25.
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`Plaintiffs have statutory standing to bring this action because 29 U.S. §1132(a)(1)
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`allows a plan participant to file a civil action which seeks relief on behalf of a plan. Here, the Plan
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`suffered millions of dollars in losses caused by McLane’s fiduciary breaches. Plaintiffs allege that
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`they and Plan participants suffered the same losses resulting from McLane’s ERISA violations.
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`All relief in this action sought by Plaintiffs is on behalf of the Plan.
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`26.
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`To establish Constitutional standing (or Article III standing), Plaintiffs need only
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`show a concrete and particularized injury flowing from McLane’s ERISA fiduciary breaches.
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`Plaintiffs allege their individual accounts in the Plan suffered economic losses because McLane
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`breached its fiduciary duty to the Plan. Thus, Plaintiffs allege concrete and particularized economic
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`injuries. Plaintiffs also have standing because they are seeking injunctive and equitable relief on
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`behalf of the Plan.
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`27.
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`CLASS ACTION ALLEGATIONS
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`28.
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`Plaintiffs bring this action as a class action pursuant to Fed. R. Civ. P. 23 on behalf
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`of themselves and the following proposed class (“Class”):
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`All persons who were participants in or beneficiaries of the Plan, at
`any time between April 24, 2017, and the present (the “Class
`Period”).
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`The members of the Class are so numerous that joinder is impractical. According
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`29.
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`to the Plan’s Annual Form 5500 for the year ending 2021, filed with the U.S. Department of Labor,
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`there were 27,416 Plan participants with account balances as of December 31, 2021.
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`30.
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`Plaintiffs’ claims are typical of Class members’ claims. Like other Class members,
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`Plaintiffs participated in the Plan and suffered injuries because of McLane’s ERISA fiduciary
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`breaches. McLane treated Plaintiffs consistently with other Class members and managed the Plan
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`as a single entity. Plaintiffs’ claims and Class members’ claims arise out of the same conduct,
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`policies, and practices of McLane as alleged herein, and all members of the Class have been
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`similarly affected by McLane’s ERISA violations.
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`31.
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`There are questions of law and fact common to the Class, and these questions
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`predominate over questions affecting only individual Class members. Common legal and factual
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`questions include, but are not limited to:
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`A. Whether McLane is a fiduciary of the Plan;
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`B. Whether McLane breached its fiduciary duty of prudence by
`engaging in the conduct described herein;
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`C. Whether McLane failed to prudently monitor other fiduciaries to
`ensure the Plan was being managed in compliance with ERISA;
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`D. Whether McLane caused the Plan to pay excessive fees for
`investments;
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`E.
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`F.
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`The proper form of equitable and injunctive relief; and
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`The proper measure of relief.
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`Plaintiffs will fairly and adequately represent the Class and retained counsel
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`32.
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`experienced and competent in the prosecution of ERISA class action litigation. Plaintiffs have no
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`interests antagonistic to those of other Class members. Plaintiffs are committed to the vigorous
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`prosecution of this action and anticipates no difficulty in the management of this action as a class
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`action.
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`33.
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`This action may be properly certified under Fed. R. Civ. P. 23(b)(1). Class action
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`status in this action is warranted under Fed. R. Civ. P. 23(b)(1)(A) because prosecution of separate
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`actions by the members of the Class would create a risk of establishing incompatible standards of
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`conduct for McLane. Class action status is also warranted under Fed. R. Civ. P. 23(b)(1)(B)
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`because prosecution of separate actions by the members of the Class would create a risk of
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`adjudications with respect to individual members of the Class that, as a practical matter, would be
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`dispositive of the interests of other members not parties to this action, or that would substantially
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`impair or impede their ability to protect their interests.
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`34.
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`In the alternative, certification under Fed. R. Civ. P. 23(b)(2) is warranted because
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`McLane has acted or refused to act on grounds generally applicable to the Class, thereby making
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`appropriate final injunctive, declaratory, or other appropriate equitable relief with respect to the
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`Class as a whole.
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`EXCESSIVE RECORDKEEPING FEES
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`35.
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`The Plan’s recordkeeper is Merrill Lynch, Pierce, Fenner and Smith, Inc. (“Merrill
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`Lynch”). Merrill Lynch receives direct and indirect compensation from the Plan.
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`36.
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`Plan administrative services are sometimes called recordkeeping services. The
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`recordkeeper keeps track of the amount of each participant’s investments in the various options in
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`the plan, and typically provides each participant with a quarterly account statement. The
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`recordkeeper often maintains a plan website or call center that participants can access to obtain
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`information about the plan and to review their accounts. The recordkeeper may also provide access
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`to investment education materials or investment advice. These administrative services are largely
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`commodities and the market for them is highly competitive.
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`37.
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`Nearly all recordkeepers in the marketplace offer the same range of services. Many
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`of the recordkeeping services are provided by recordkeepers at very little cost.
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`38.
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`The market for recordkeeping is highly competitive, with many vendors equally
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`capable of providing a high-level service. As a result of such competition, recordkeepers
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`vigorously compete for business by offering the best price.
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`39.
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`The cost of providing recordkeeping services depends mainly on the number of
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`participants in a plan. Plans with large numbers of participants can take advantage of economies
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`of scale by negotiating a lower per-participant recordkeeping fee. Because recordkeeping expenses
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`are driven by the number of participants in a plan, most plans are charged on a per-participant
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`basis.
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`40.
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`Prudent fiduciaries implement three related processes to prudently manage and
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`control a plan’s recordkeeping costs. First, they must closely monitor the recordkeeping fees being
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`paid by the plan. A prudent fiduciary tracks the recordkeeper’s expenses by demanding documents
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`that summarize and contextualize the recordkeeper’s compensation, such as fee transparencies, fee
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`analyses, fee summaries, relationship pricing analyses, cost-competitiveness analyses, and multi-
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`practice and stand-alone pricing reports.
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`41.
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`Second, make an informed evaluation as to whether a recordkeeper or other service
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`provider is receiving no more than a reasonable fee for the services provided to a plan, a prudent
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`fiduciary must identify all fees, including direct compensation and so-called “indirect”
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`compensation through revenue sharing being paid to the plan’s recordkeeper. To the extent that a
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`plan’s investments pay asset-based revenue sharing to the recordkeeper, prudent fiduciaries closely
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`monitor the amount of the payments to ensure that the recordkeeper’s total compensation from all
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`sources does not exceed reasonable levels and require that any revenue sharing payments that
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`exceed a reasonable level be returned to the plan and its participants. Additionally, to the extent
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`prudent fiduciaries agree that recordkeepers receive interest or float income from funds transferred
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`into or out of a plan, fiduciaries track and control these amounts as well.
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`42.
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`Third, a plan’s fiduciaries must remain informed about overall trends in the
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`marketplace regarding the fees being paid by similar plans, as well as the recordkeeping rates that
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`are available in the marketplace. This will generally include conducting a request for proposal
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`(“RFP”) process at reasonable intervals, and immediately if the plan’s recordkeeping expenses
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`have grown significantly or appear high in relation to the general marketplace. More specifically,
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`an RFP should happen at least every three to five years as a matter of course, and more frequently
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`if a plan experiences an increase in recordkeeping costs or fee benchmarking reveals the
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`recordkeeper's compensation to exceed levels found in other, similar plans. George v. Kraft Foods
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`Global, Inc., 641 F.3d 786, 800 (7th Cir. 2011); Kruger v. Novant Health, Inc., 131 F. Supp. 3d
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`470, 479 (M.D.N.C. 2015).
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`43.
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`As of December 31, 2021, according to the information available in the Defendant’s
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`Form 5500, Merrill Lynch receives direct compensation of at least $1,345,534 annually from the
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`Plan, meaning Plan participants pay annually approximately $53 per participant on average in
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`direct fees to Merrill Lynch. This money is taken directly from Plan participants’ retirement
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`accounts.
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`44. Merrill Lynch also receives indirect compensation. Merrill Lynch receives indirect
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`compensation in two material ways. First, Merrill Lynch receives compensation via “float” on Plan
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`participant money. Second, Merrill Lynch receives compensation via a practice known as revenue
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`sharing.
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`45.
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`“Float” is money in transit in or out of the Plan. McLane agreed that anytime Plan
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`participants deposit or withdraw money from their individual accounts in the Plan, that money will
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`first pass through a Merrill Lynch clearing account. Plan participant money typically sits in Merrill
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`Lynch’s clearing account for at least 2-3 days (often much longer). McLane has agreed any
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`investment returns and/or interest earned on Plan participant money while it is in Merrill Lynch’s
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`clearing account shall belong to Merrill Lynch. It is an additional form of compensation – indirect
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`compensation – Merrill Lynch receives from the Plan.
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`46.
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`The Plan’s Annual Form 5500 for the year ending 2021 shows that in 2021 alone
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`nearly $263,000,000 was transferred into and out of the Plan. Thus, in 2021 alone, Merrill Lynch
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`earned interest and investment related revenue on more than $263,000,0000 while the money was
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`in Merrill Lynch’s account.
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`47. McLane entered into an agreement where Merrill Lynch obtained the benefit of the
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`of this money without considering the value of benefits Merrill Lynch was providing to the Plan.
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`McLane’s imprudence caused the Plan losses. For instance, in 2021, a 1% return on $263,000,000
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`would have generated $2,630,000 in indirect float compensation for the Plan. McLane imprudently
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`permitted Merrill Lynch to siphon millions of dollars from the Plan, just from this one source of
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`indirect compensation.
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`48.
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`The Department of Labor has issued guidance concerning fiduciary duties for
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`payment of compensation via float. The Department of Labor instructs that an ERISA fiduciary
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`acts imprudently when it allows service providers to receive float compensation, unless plan
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`fiduciaries, substantively understand the arrangement, monitor the compensation received from
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`float, negotiate the amount, and include the compensation in the total mix of compensation service
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`providers receive from plans for providing services to plans. This is a common-sense approach.
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`49.
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`In 2002, the Department of Labor issued Field Assistance Bulletin 2002-3 (Nov. 5,
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`2002), available at http://www.dol.gov/ebsa/regs/fab2002-3.html. Specifically, the bulletin
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`describes what a fiduciary needs “to consider in evaluating the reasonableness of an arrangement
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`under which the service provider will be retaining ‘float’ and what information [] a service provider
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`[is] required to disclose to plan fiduciaries with respect to such arrangements…” Id. at *1. The
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`document then sets out steps that plan fiduciaries and service providers should take to ensure that
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`float practices are adequately disclosed, reviewed, and compensation is reasonable – as required
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`by ERISA.
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`50.
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`The document lists three primary duties with respect to float compensation for plan
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`fiduciaries, related to their responsibility for conducting a prudent and competent review of float
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`compensation, and three primary duties for a service provider to a plan, primarily related to fully
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`disclosing to plan fiduciaries how float compensation is to be earned. Specifically, a fiduciary is
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`required to: (1) review comparable providers to determine for whom float is credited, (2) review
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`the circumstances under which float is earned (such as the inclusion of time limits for earning float
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`income), and (3) review sufficient information to evaluate float as part of the total compensation
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`to be paid for the services rendered under the agreement. Id. Similarly, a service provider is
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`required to: (1) disclose the specific circumstances under which float compensation is taken and
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`maintained, (2) establish and adhere to time frames with respect to depository and redemptive
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`float, and (3) disclose the rate and manner by which float is earned.
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`51.
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`McLane has not tracked, monitored, or negotiated the amount of compensation
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`Merrill Lynch receives from float compensation. McLane never disclosed this compensation to
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`Plan participants either.
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`52.
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`There is no disclosure in Defendant’s annual Department of Labor Form 5500
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`documents about compensation Merrill Lynch receives from float. As noted above, Defendant’s
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`2021 5500 disclosure (Defendant has not yet filed its 2022 5500 disclosure), states that Merrill
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`Lynch received direct compensation of $1,345,534 annually from the Plan, meaning Plan
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`participants paid approximately $53 per participant in 2022 to Merrill Lynch. The direct fee is
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`excessive. Defendant’s 2022 5500 also makes inconsistent and troubling statements about the fees
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`paid to Merrill Lynch. In the notes to the financial statement for the 2022 5500, Defendant states
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`that Merrill Lynch receives an annual amount for recordkeeping annually from each Plan
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`participant. The 5500 also states that the $40 fee is offset and will be reduced by compensation
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`Merrill Lynch receives from indirect sources from the Plan. But there is no disclosure of any
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`compensation Merrill Lynch received from float. Worse yet, the 5500 states that as of December
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`31, 2021, Merrill Lynch was supposed to rebate $4.6 million in excessive fees to the Plan and its
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`participants, but the money had not been allocated to Plan participants accounts. There is no
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`legitimate reason why Defendant is allowing Merrill Lynch to collect excessive fees and
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`compensation from Plan participants and retain millions of dollars that ought to be in Plan
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`participants’ individual accounts. The Plan’s 2022 5500 disclosure evidences ERISA imprudence
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`by Defendant.
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`53.
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`The undisclosed, undocumented, and simply ignored indirect compensation that
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`Merrill Lynch receives from float is more than the amount of the disclosed direct compensation
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`that Merrill Lynch pockets from the Plan. To make matters even worse, the Plan’s assets have
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`increased by nearly $500,000,000 during the relevant time period while the number of Plan
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`participants decreased. That means Merrill Lynch’s compensation has skyrocketed solely due to
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`an increase in Plan assets while the services its provides to the Plan has decreased.
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`54.
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`McLane breached its fiduciary duty of prudence by permitting Merrill Lynch to
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`receive excessive compensation via float.
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`55.
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`Merrill Lynch also receives indirect compensation via revenue sharing. In a revenue
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`sharing arrangement, the amount of compensation for recordkeeping services to a plan is not based
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`on the actual value of such services, instead compensation is based on the amount of assets in the
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`plan, or amount of assets in certain investments in the plan.
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`56.
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`Revenue sharing, while not a per se violation of ERISA, can lead to excessive fees
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`charged to participants if not properly understood, monitored, and capped. If a fiduciary enters into
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`a revenue sharing arrangement, it is to (1) determine and monitor the amount of the revenue sharing
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`and any other sources of compensation that the provider has received, (2) compare that amount to
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`the price that would be available on a flat per-participant basis, or other fee models that are being
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`used in the marketplace, and (3) ensure the plan pays a reasonable amount of fees.
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`57.
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`Self-interested recordkeepers prefer fee agreements that allow them to receive
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`“direct” and “indirect” payments for recordkeeping. Recordkeepers often tout the direct fees they
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`collect as being “reasonable” while they surreptitiously collect more from Plan participants via
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`indirect fees.
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`58.
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`Recordkeepers such as Merrill Lynch often construct their services agreement so
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`fees collected are not solely tied to services performed but to the amount of assets in a plan (i.e.,
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`float and revenue sharing). As Plan assets increase, fees increase proportionately without the
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`recordkeeper providing any additional services.
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`Case 6:23-cv-00301-ADA Document 1 Filed 04/24/23 Page 15 of 31
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`59.
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`Plaintiffs are not making a claim against McLane because it allowed the Plan’s
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`recordkeeper to pocket revenue sharing. However, when the revenue sharing compensation is left
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`unchecked, it is the participants who pay the price from their 401(k) accounts. As one commentator
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`noted, “[A]t worst, revenue sharing (one source of indirect fees) is a way to hide fees. Nobody sees
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`the money change hands, and very few understand what the total investment expense pays for. It
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`is a way to milk large sums of money out of large plans by charging a percentage-based fee that
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`never goes down (when plans are ignored or taken advantage of). In some cases, employers and
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`employees believe the plan is ‘free’ when it is in fact expensive.” See Justin Pritchard, “Revenue
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`Sharing and Invisible Fees.”1
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`60.
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`Plan fiduciaries have an obligation to monitor and control recordkeeping fees to
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`ensure that such fees remain reasonable. See, e.g., Tussey v. ABB, Inc., 746 F.3d 327, 336 (8th Cir.
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`2014) (“Tussey II”) (holding that fiduciaries of a 401(k) plan “breach[] their fiduciary duties” when
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`they “fail[] to monitor and control recordkeeping fees” incurred by the plan). Excessive expenses
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`“decrease [an account’s] immediate value” and “depriv[es] the participant of the prospective value
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`of funds that would have continued to grow if not taken out in fees.” Sweda, 923 F.3d at 328. No
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`matter the method of payment or fee collection, the fiduciary must understand the total amount
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`paid the recordkeeper and per-participant fees and determine whether pricing is competitive. See
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`Tussey II, 746 F.3d at 336. Thus, defined contribution plan fiduciaries have an ongoing duty to
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`ensure that the recordkeeper’s fees are reasonable.
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`61.
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`Prudent fiduciaries implement processes to prudently manage and control a plan’s
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`recordkeeping costs. They must closely monitor the fees being paid by the plan. A prudent
`
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`1 Available at: http://www.cccandc.com/p/revenue-sharing-and-invisible-fees (last visited April
`21, 2023).
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`Case 6:23-cv-00301-ADA Document 1 Filed 04/24/23 Page 16 of 31
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`fiduciary tracks the demands documents that summarize and contextualize the recordkeeper’s
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`compensation, such as fee transparencies, fee analyses, fee summaries, relationship pricing
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`analyses, cost-competitiveness analyses, and multi-practice and stand-alone pricing reports.
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`62.
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`Additionally, to make an informed evaluation whether a recordkeeper or other
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`service provider is receiving no more than a reasonable fee for the services provided to a plan, a
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`prudent fiduciary must identify all fees, including direct compensation and so-called “indirect”
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`compensation through revenue sharing being paid to the plan’s recordkeeper. To the extent that a
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`plan’s investments pay asset-based revenue sharing to the recordkeeper, prudent fiduciaries closely
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`monitor the amount of the payments to ensure that the recordkeeper’s total compensation does not
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`exceed reasonable levels and require that any revenue sharing payments that exceed a reasonable
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`level be returned to the plan and its participants.
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`63.
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`In addition to the millions in annual direct fees Plan participants pay Merrill Lynch,
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`and the millions in float compensation Merrill Lynch pockets, Merrill Lynch also collects fees
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`indirectly via revenue sharing. It appears, (based on the bald statements in the 2022 5500) Merrill
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`Lynch rebates some portion of the revenue sharing it collects, but apparently years after holding
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`on to the money (which is an imprudent arrangement), and the amount of money Merrill Lynch
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`collects from revenue sharing exceeds the amount of direct fees Plan participants pay – thus,
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`illustrating the imprudence of direct fees and revenue sharing in the first instance.
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`64.
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`Defendant is causing the Plan to provide Merrill Lynch with excessive
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`compensation. When Merrill Lynch’s direct and undisclosed indirect compensation is added to the
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`compensation, Merrill Lynch receives at least $5,600,000 annually from Plan participants, or over
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`$207 per plan participant. And Merrill Lynch’s compensation continues to increase as Plan assets
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`Case 6:23-cv-00301-ADA Document 1 Filed 04/24/23 Page 17 of 31
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`increase. But by any genuine measurement, Merrill Lynch’s compensation is excessive and
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`unreasonable.
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`65. McLane failed to obtain competitive bids (“RFP”) during the Class Period which,
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`in turn, has caused the Plan to overpay for recordkeeping during the entire Class Period.
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`66.
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`By going through an RFP process annually, or at least every three years—rather
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`than not at all—a prudent plan fiduciary can review the level of service provided by the
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`recordkeeper and compare fees in the marketplace to those being offered by the current
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`recordkeeper. This also allows the plan fiduc