Cintas Corp. will pay $4 million to settle an ERISA lawsuit by former employees who said the company's 401(k) plan charged excessive record-keeping fees and favored actively managed mutual funds instead of cheaper index mutual funds, according to a settlement document filed Feb. 9 in a U.S. District Court in Cincinnati.
"Nothing in this settlement agreement, including the furnishing of consideration for this settlement agreement, shall be deemed to constitute any finding, admission or suggestion of any wrongdoing or liability by any defendants," said the document in Hawkins et al. vs. Cintas Corp. et al. The class-action settlement requires court approval.
"Defendants specifically deny any such liability or wrongdoing and state that they are entering into this settlement agreement to eliminate the burden and expense of further litigation," the document said.
The parties reached an agreement in principle in November, but they didn't disclose terms at that time.
Plaintiffs sued in December 2019. The company and its fiduciaries asked that the lawsuit be dismissed, contending that the dispute should be handled through arbitration. That argument was rejected by the circuit court in January 2021 and the 6th U.S. Circuit Court of Appeals in Cincinnati in September 2022.
Both courts said arbitration for an ERISA dispute was allowable if an arbitration provision was part of a retirement plan document, but Cintas' arbitration provisions in individual employee contracts didn't extend to ERISA. The U.S. Supreme Court in January 2023 declined to review the case.
In addition to paying $4 million, Cintas agreed to conduct a record-keeping RFP within five years of the court's final approval of the settlement.
Cintas Partners Plan, Mason, Ohio, had $2.85 billion in assets as of Dec. 31, 2022, according to the latest Form 5500.
