Class Action Claims DISH Network Failed to Prudently Manage Employee Retirement Plan

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A proposed class action claims DISH Network Corporation and its board of directors and retirement plan committee have run afoul of federal law by failing to maintain reasonable plan expenses and select better performing investment options.

The 44-page lawsuit alleges that the defendants’ failure to properly monitor the plan’s recordkeeping and administrative fees and choose the best available investment options have had “stark financial consequences” for participants and their beneficiaries, whose retirement savings, the case says, have been vastly depleted as a result. The suit says DISH and its directors and retirement plan committee have breached their fiduciary duties under the federal Employee Retirement Income Security Act (ERISA).

The lawsuit explains that a defined contribution plan with substantial assets such as DISH Network’s 401(k) plan, which had nearly 19,000 participants and roughly $841 million in assets by the end of 2020, have “significant bargaining power” when it comes to negotiating for low-cost recordkeeping and administrative fees. Given the size of the DISH Network plan, the defendants should have been able to obtain much lower fees by consistently seeking out quotes from other recordkeeping and administrative service providers and obtaining competitive rates, the complaint alleges. According to the suit, the defendants have imprudently allowed the DISH plan to be charged fees that “far exceeded the reasonable market rate.”

As the case tells it, even small differences in fee costs can have a substantial effect on the amount of retirement funds available to plan participants given the extra expenses compound over time.

“Had Defendants appropriately monitored the compensation paid to Fidelity and ensured that participants were only charged reasonable [recordkeeping and administrative] fees, Plan participants would not have lost millions of dollars in their retirement savings over the last six-plus years,” the lawsuit contests.

The case goes on to claim that the defendants failed to prudently choose the best available investment options for their retirement plan, and instead offered a suite of risky and more costly target date funds. According to the suit, there were “substantially less costly and less risky” target date funds available from Fidelity Management & Research Company that would have performed better and been a more appropriate offering for the plan. The lawsuit claims “[a] simple weighing of the benefits” of the available target date funds would have tipped off any prudent fiduciary that the funds chosen by DISH were not the best options for the plan.

“Had Defendants carried out their responsibilities in a single-minded manner with an eye focused solely on the interests of the participants, they would have come to this conclusion and acted upon it,” the complaint claims. “Instead, Defendants failed to act in the sole interest of Plan participants, and breached their fiduciary duty by imprudently selecting and retaining the Active suite.”

According to the case, the defendants’ choice of Fidelity’s Active suite and other “objectively imprudent investment options” has caused plan participants to lose out on millions in investment returns for their retirement savings.

The lawsuit looks to represent those who participated in or were beneficiaries of the DISH Network Corporation 401(k) plan at any time after January 20, 2016 and until the date of judgment in the case (or an earlier date deemed appropriate by the court), including any beneficiary of a deceased person who participated in the plan during that time.

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