Mator v. Wesco: Fiduciary Breach Claims Over 401(k) Fees Move Forward

The case of Mator v. Wesco Distribution, Inc. involved allegations that Wesco and its fiduciaries violated their obligations under the Employee Retirement Income Security Act (ERISA) by charging excessive recordkeeping fees in the company's retirement savings plan. Plaintiffs Robert and Nancy Mator, on behalf of themselves and other plan participants, argued that Wesco failed to properly monitor plan expenses, leading to excessive costs that reduced participants' retirement savings. The United States Court of Appeals for the Third Circuit vacated the district court’s dismissal of the case and remanded it for further proceedings.

Background and Legal Issues

The plaintiffs participated in the Wesco Distribution, Inc. Retirement Savings Plan, a defined contribution plan subject to ERISA. They alleged that the plan's fiduciaries breached their duty of prudence by allowing the plan to pay excessive recordkeeping fees and failing to secure competitive bids to lower costs.

Between 2015 and 2020, Wells Fargo served as the plan’s recordkeeper, providing administrative services such as account access, transaction processing, and retirement education. Recordkeeping fees were charged through direct payments from plan assets and indirect revenue-sharing agreements with investment providers. The plaintiffs contended that:

• The plan's recordkeeping fees were significantly higher than those of comparable plans.
• The plan fiduciaries failed to negotiate fee caps or solicit competitive bids for recordkeeping services over a ten-year period.
• The use of an asset-based fee structure led to rising costs without an increase in services.
• Other fiduciaries in similar circumstances regularly negotiated with recordkeepers to reduce fees.

Court’s Analysis and Findings

The Third Circuit determined that the plaintiffs sufficiently stated a claim under ERISA by providing meaningful comparisons to other retirement plans that paid lower fees for similar services. The court found that:

• The district court had improperly dismissed the complaint for lack of an "apples-to-apples" comparison, as ERISA does not require exact matching comparators.
• The plaintiffs alleged specific, concrete financial harm resulting from excessive fees, making their claims plausible.
• The plan’s long-standing failure to seek competitive bids supported the claim that Wesco breached its duty of prudence.
• The plaintiffs’ claims regarding excessive mutual fund share classes were intertwined with the recordkeeping fees, as selecting higher-cost investments exacerbated the financial impact on participants.

The court rejected Wesco’s arguments that the allegations were too speculative and emphasized that fiduciary responsibilities under ERISA require ongoing monitoring of plan fees and investment selections.

Conclusion and Ruling

The Third Circuit vacated the district court’s dismissal and remanded the case for further proceedings. The ruling reinforces the fiduciary duty under ERISA to actively manage plan expenses and ensure that fees remain reasonable. The court’s decision highlights the importance of securing competitive bids and monitoring administrative costs to protect plan participants.

Legal Guidance for Businesses

For businesses managing retirement plans, ensuring compliance with fiduciary duties is crucial. Our team at Whitcomb, Selinsky, PC provides legal guidance on ERISA compliance, fiduciary responsibilities, and retirement plan litigation.