Employers and plan sponsors recently received some good news relating to 401k-plan litigation:
Matney v. Barrick Gold, No. 22-4045, 2023 (10th Cir. Sept. 6, 2023), Microsoft Word – 22-4045.docx
Briefly, the court upheld the employer’s defeat of a proposed class action. Importantly, the court found that plan participants claiming excessive investment management or recordkeeping fees must assert a “meaningful benchmark” in order to survive a motion to dismiss.
With this holding, the 10th Circuit joins the 3rd, 6th, 7th and 8th Circuits in adopting a pleading standard requiring plaintiffs to provide a “meaningful benchmark” by which a court can compare an allegedly mismanaged plan to a sound one.
The court found that the plaintiffs did not offer evidence of reasonable alternative investment options with similar investment strategies, investment objectives, or risk profiles to the plan.
Similarly, with respect to the recordkeeping fees, the plaintiffs did not offer evidence that the services received by comparative plans were akin to the services received by the plan.
Citing to other circuits’ precedents, the 10th Circuit concluded that, without a meaningful benchmark, participants couldn’t infer the fiduciaries’ decision-making process was flawed in managing the plan – and affirmed the motion to dismiss.
With this holding, five circuit courts now back the “meaningful benchmark” standard, increasingly taking shape as a test that can be used by a court to evaluate a motion to dismiss.
Employers and plan sponsors should continue to monitor developments in this area with their ERISA counsel.