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December 06, 2022

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December 05, 2022

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United States District Court Dismisses 401(k) Plan Recordkeeper Fee Complaint

Recently,  the United States District Court for the Western District of Pennsylvania granted a Motion to Dismiss, dismissing ERISA breach of fiduciary duty claims based on excessive recordkeeping fee allegations. The district court addressed the level of detail plaintiffs must provide to move an ERISA breach of fiduciary duty recordkeeping fee allegation from possible to plausible under Federal Rule of Civil Procedure 12(b)(6).

In Henrena Johnson and Barbara Demps v. The PNC Financial Services Group, Inc., The PNC Financial Services Group, Inc. Incentive Savings Plan Administrative Committee, Plaintiffs were former PNC employees and 401(k) plan (“the Plan”) participants. On behalf of a putative class, Plaintiffs alleged that Defendant’s Administrative Committee fiduciaries improperly allowed the Plan to pay excessive administrative fees to Co-Defendant, The PNC Financial Services Group, Inc., from 2014-2018, for recordkeeping services. Plaintiffs claimed Defendants breached their fiduciary duties of prudence and loyalty.

Plaintiffs argued the increase in administrative fees from $85 to $90 per participant over four years reflected a lack of prudence and poor management of the Plan. Plaintiffs specifically compared the Plan’s $51-$57 annual recordkeeping fee (which was the majority of the administrative fee) with the average recordkeeping fee of $35 for smaller plans reported in The 401k Averages Book. Despite the downward trend of recordkeeping fees, Plaintiffs argued the Plan should have leveraged its size to obtain recordkeeping fees of $14-$21 per participant, per year. Plaintiffs also claimed the Administrative Committee failed to engage in a comparison or benchmarking of these fees.

The court reasoned that a “high fee may reflect imprudence even if the fee falls year-over-year, [but] the fact that the Plan’s recordkeeping fees trend downward for the period at issue points in the direction of prudence rather than imprudence.” Moreover, Plaintiffs compared the direct administrative fees and did not account for revenue sharing or indirect administrative fees paid by smaller plans. Indeed, when revenue sharing was considered, smaller plans typically paid significantly higher administrative fees per-participant. Thus, the court concluded that without additional detailed factual averments as to the Plan’s fee structure and services received in exchange for the fees charged, Plaintiffs’ allegations only raised a possibility of imprudence, insufficient to state a plausible claim for breach of fiduciary duty.

As to the claim of a breach of the duty of loyalty, the district court held that Plaintiffs had to offer more facts than their purported breach of prudence claims, recast as a loyalty claim. Plaintiffs merely pointed to the excessive administrative fees paid to The PNC Financial Services Group, Inc., arguing that because of the intertwined corporate relationships, this constituted a conflict of interest. Again, the court was unpersuaded and held the allegations stopped short of articulating a plausible claim, explaining that a valid claim must allege “something more” than a purported potential conflict of interest. Plaintiffs’ allegations permitted a reasonable inference that PNC received an incidental benefit, but that alone did not establish a plausible claim for breach of loyalty.

Count II (Failure to Monitor The Plan) and Count III (Participation in the Breach of Fiduciary Duty) were summarily dismissed as derivative and dependent upon Plaintiffs’ breach of fiduciary duty claim. The district court held these derivative Counts were untenable because the underlying breach of fiduciary duty claim was dismissed. The court granted leave to amend the Complaint in response to the Order, noting that the court’s order would convert to a dismissal with prejudice if no amendment was filed on or before August 17, 2021.

The case is Johnson v. The PNC Financial Services Group, Inc., The PNC Financial Services Group, Inc. Incentive Savings Plan Administrative Committee, No. 2:20-01493-CCW (W.D. Pa. Aug. 3, 2021).

Jackson Lewis P.C. © 2022National Law Review, Volume XI, Number 228

About this Author

Lauren Goerbig Austin Associate Attorney Employment Workplace Law Jackson Lewis PC

Lauren H. Goerbig is an associate in the Austin, Texas, office of Jackson Lewis P.C. Her practice focuses on representing employers in workplace law matters, including policy and procedures audits, and preventive advice and counseling.

Lauren graduated with Honors from the University of Texas at Austin and moved to New York City, where she worked in corporate telecom sales in the Higher Education Industry. After a few years in corporate sales, Lauren attended New York Law School and clerked in the Bronx Family Court and...

Lesley Pietras ERISA Knowledge Management Attorney Jackson Lewis New Orleans
Knowledge Management Attorney

Lesley Pietras is a knowledge management (KM) attorney for Jackson Lewis P.C.’s ERISA Complex Litigation group, and based in the New Orleans, Louisiana, office of Jackson Lewis P.C.

Prior to joining Jackson Lewis, Lesley practiced environmental law at firms in New Orleans and Washington, D.C. She also spent four years serving as a staff attorney with the legal division at the U.S. Court of Appeals for the D.C. Circuit.


Howard Shapiro is a Principal in the New Orleans, Louisiana, office of Jackson Lewis P.C., and is Co-Leader of the firm’s ERISA Complex Litigation Group. Mr. Shapiro focuses his practice on the defense of large, sophisticated ERISA class actions.

Mr. Shapiro defends “bet-the-company” litigation where damages are potentially material. His cases involve the defense of Defined Benefit plans, 401(k) Plans, and 403(b) Plans. Mr. Shapiro also defends litigation involving health and welfare plan issues. His practice is nationwide, and throughout his career, Mr....