Here\u2019s a story straight from the trenches of the 401(k) world: the parties in a long-running excessive-fee lawsuit over the $2.6 billion Ferguson Enterprises LLC 401(k) plan have reached a settlement for $1.8 million.<\/p>\n
What Happened<\/p>\n
Back in 2022, plan participants Tera Bozzini and Adrian Gonzales alleged that their employer\u2019s plan:<\/p>\n
\u00b7 Didn\u2019t use its size to negotiate lower investment and recordkeeping fees.<\/p>\n
\u00b7 Allowed higher-priced investment options when cheaper institutional shares were available.<\/p>\n
\u00b7 Permitted conflicted providers to collect unreasonable compensation for plan services.<\/p>\n
The court eventually dismissed many of the claims for lack of specific factual detail and rejected an attempt to expand the case to include forfeiture-related allegations. But before the next round of motions, both sides agreed to settle.<\/p>\n
The Settlement<\/p>\n
\u00b7 Settlement amount: $1,800,000<\/p>\n
\u00b7 Estimated maximum damages: ~$7.37 million<\/p>\n
\u00b7 Recovery rate: about 24 percent of potential losses<\/p>\n
\u00b7 Named-plaintiff awards: $7,500 each<\/p>\n
\u00b7 Attorneys\u2019 fees requested: about $600,000 (one-third of the settlement)<\/p>\n
Why It Matters for Plan Providers and TPAs<\/p>\n
1. Fee vigilance matters. Even billion-dollar plans can get hit with \u201cyou should have paid less\u201d lawsuits. Size doesn\u2019t grant immunity. 2. Document reasonableness. Benchmark, negotiate, and document every step. The court noted the plaintiffs\u2019 failure to include specific facts \u2014 a reminder that your records are your defense. 3. Settlements are business decisions. The plaintiffs chose a sure $1.8 million over the risk of chasing a larger but uncertain verdict. For providers, it shows that even if you believe you\u2019re right, litigation costs can outweigh pride. 4. Distraction costs real money. Even when you \u201cwin,\u201d discovery, expert witnesses, and reputational damage can drain far more than the check you write to close the case.<\/p>\n
My Take<\/p>\n
In the 401(k) world, we don\u2019t just manage plans \u2014 we manage risk perception. If a plan is big enough to demand institutional pricing but doesn\u2019t, that silence can look like negligence in court. Whether you\u2019re an advisor, TPA, recordkeeper, or ERISA counsel, the question to ask is simple: Can you prove you acted prudently if someone looks under the hood?<\/p>\n
This $1.8 million settlement isn\u2019t about scandal \u2014 it\u2019s about process. It\u2019s a reminder that documentation beats memory, prudence beats guesswork, and, as always, time is undefeated.<\/p>\n
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