‘Objectively Unreasonable’: Mercedes-Benz Hit With Class Action Over Retirement Plan Service Fees

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A proposed class action alleges Mercedes-Benz and the directors of its employee 401(k) retirement savings plan have unlawfully caused participants to pay “unreasonable and excessive” annual service fees.

Instead of leveraging the Mercedes-Benz retirement plan’s “substantial bargaining power” to the benefit of participants and beneficiaries, the defendants have allowed proposed class members to pay “objectively unreasonable” and unjustifiable service fees far in excess of what would be considered appropriate for a plan of its size, the 59-page lawsuit claims.

“During the class period, the Plan paid between $239 and $567 per participant annually for retirement plan services,” the complaint, filed in Alabama federal court, says. “During the Class Period, reasonable retirement plan service fees for a plan of this size would have averaged $53 per participant annually.” 

The defendants’ failure to properly monitor retirement plan service fees and ensure their reasonableness amounts to a breach of fiduciary duties owed to plan participants and beneficiaries under the Employee Retirement Income Security Act (ERSIA), the suit alleges. Whereas prudent fiduciaries would continuously monitor the market for retirement plan services, Mercedes-Benz and its co-defendants “did not engage in [a] prudent decision-making process,” the complaint asserts. 

According to the lawsuit, “there is no other explanation for why the Plan paid these objectively unreasonable fees for retirement plan services.” The case states that the Mercedes-Benz 401(k) plan had nearly 4,500 participants and more than $984 million in net assets as of December 31, 2019. 

More specifically, the lawsuit alleges the defendants breached their fiduciary duties to Mercedes-Benz retirement plan participants by:

• Failing to monitor the retirement plan service fees to ensure they were reasonable and, as a result, authorizing the plan to pay the allegedly “unreasonable and excessive” costs;
• Failing to understand the methodology by which fee payments, such as revenue sharing, are paid to retirement service providers;
• Failing to take “standard and customary” actions to understand the market for retirement plan services in order to monitor for reasonableness the plan service fees paid by proposed class members in relation to the services actually received; and
• Failing to monitor the fees charged by plan investment advisory service providers to ensure they were reasonable and, as a result, allowing the plan to pay unreasonable and excessive plan investment advisory fees. 

The lawsuit looks to cover all participants and beneficiaries to the Mercedes-Benz U.S. International, Inc. Retirement and Savings Plan from January 1, 2015 through the date of judgment. 

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