National Rural Electric Cooperative Association, Arlington, Va., has agreed to pay $10 million to settle an ERISA complaint by participants in a 401(k) plan that alleged excessive fees charged by the association as the plan's sponsor.
The settlement, which requires court approval, contains several non-monetary agreements by the association, including the hiring of an independent fiduciary who must approve any administrative services agreements between the association and the plan, according to a document filed July 31 in a U.S. District Court in Alexandria, Va.
The association, while admitting no wrongdoing, also agreed to submit expense methodologies to the independent fiduciary for approval, according to the class-action settlement in the case of Intravaia et al. vs. The National Rural Electric Cooperative Association, et al.
The independent fiduciary also will hire an independent consultant to conduct periodic studies of the plan to assess whether administrative services remain "prudent and reasonable," the document said.
The consultant "shall utilize requests for proposals, requests for information, or third-party fee benchmarking that, in its professional opinion, are sufficient for evaluating the costs charged to the plan and the quality of the services provided by NRECA to the plan," the document added.
The plan's insurance and financial services committee "shall determine whether to continue to retain NRECA to provide plan administrative services, provided that NRECA shall be afforded a reasonable opportunity to modify or correct any material plan administration deficiencies identified in the final study and/or the recommendation of the independent fiduciary," the document said.
Plan participants sued the association and its fiduciaries in July 2019. The association's petition to dismiss the case was rejected by a U.S. District Court judge in Alexandria in January.
Aside from criticizing plan fees, the participants alleged that plan fiduciaries used this money to subsidize other association benefits programs — a defined benefit pension and a health and welfare plan.
The National Rural Electric Cooperative Association is a national cooperative service organization that represents more than 1,000 member electric cooperatives throughout the U.S.
The association's 401(k) Pension Plan, Arlington, Va., had $9.97 billion in assets as of Dec. 31, 2018, according to the latest Form 5500.
