Deloitte 401(k) Fee Suit Arguments Suggest Division Among Judges

Arguments over Deloitte LLP’s handling of its retirement plan fees prompted different reactions from a panel of Second Circuit judges, whose questions to counsel Friday suggested disagreement over how to view the case before them.

Judge William J. Nardini pointed out an apparent contradiction in the Deloitte workers’ case, saying they claimed to lack information about the administrative services received by various retirement plans while simultaneously maintaining that these services are essentially the same across the board and can be easily compared among plans.

The workers’ attorney, Mark K. Gyandoh of Capozzi Adler PC, responded that major national retirement plan recordkeepers provide services that can be considered fungible.

Nardini, who appeared unimpressed with this answer, said retirement recordkeepers provide a host of different services that can’t be considered fungible, including maintaining participant call centers and tax form services.

“How can you tell us they’re basically the same if you don’t know what they are?” he asked Gyandoh.

The case asks the Second Circuit to decide whether the Deloitte workers have a valid claim under the Employee Retirement Income Security act based on allegations that their retirement plan charged excessive fees. The workers said they presented ample circumstantial evidence showing how Deloitte mismanaged the plan, but a Manhattan federal judge rejected the case as a “bare ‘price tag to price tag’ comparison.”

Judge Debra Ann Livingston suggested it would be hard to maintain a viable challenge to a retirement plan’s administrative fees without offering “something specific” about the relevant administrative services being provided.

But Judge Beth Robinson appeared more amenable to the Deloitte employees’ arguments, saying that a close look at the specific services provided to various plans might be best considered after discovery, and not at the motion-to-dismiss stage at which the court is considering the Deloitte case.

Mixed Results

Hundreds of lawsuits challenging retirement plan fees have been filed over the past few years, and federal appeals court rulings have been mixed.

The Third, Fifth, and Ninth circuits revived lawsuits against Wesco Distribution Inc., United Surgical Partners, Trader Joe’s Co. and Salesforce.com Inc., while the Sixth, Eighth, Tenth, and D.C. circuits have issued employer-friendly decisions largely favoring CommonSpirit Health Inc., TriHealth Inc., MidAmerican Energy Co., Barrick Gold, and Georgetown University.

The Seventh Circuit rejected a plan fee challenge against Oshkosh Corp. in 2022, but last year it allowed key claims to proceed against Northwestern University.

Back and Forth

Deloitte attorney Michael E. Kenneally of Morgan, Lewis & Bockius LLP criticized the way the company’s workers challenged their 401(k) plan fees by making comparisons to the government filings of other retirement plans.

These forms include different codes suggesting the plans received different types of services, and the participants used the forms to draw faulty comparisons that overstated Deloitte’s fees while understating the fees of other companies, he said.

Robinson engaged in an active back-and-forth with Kenneally, asking him how retirement plan investors could ever make out a case using publicly available documents when the information they need is controlled by defendants.

Livingston seemed interested in the other retirement plan fee challenges that have survived a motion to dismiss, asking Kenneally what made this case different from those that have been allowed to move forward.

The case is Singh v. Deloitte LLP, 2d Cir., No. 23-1108, argued 5/24/24.