Nordstrom is the latest corporation to get hit with a breach of fiduciary duty lawsuit for how it manages its 401(k).
Megan McCorvey, a participant in the Nordstrom 401(k) Plan who filed the lawsuit, says in the complaint that the retail giant could have used its bargaining power as one of the largest plans in the country to negotiate reasonable fees for plan participants, but it didn’t.
The suit, which also names the Nordstrom 401(k) Plan Retirement Committee as being in breach of its fiduciary duty, says that while most large retirement plans have been whittling away at plan and administrative fees, Nordstrom’s “administrative fees increased by 30% from 2011 to 2016,” according to the complaint.
Nordstrom “failed to adequately and prudently manage the plan,” the complaint alleges. “It allowed unreasonable fees to be incurred by participants; it did not act prudently to lower costs; it failed to use lower cost investment vehicles; and it made inadequate disclosures on fees.”
As of January 2016, Nordstrom had annual revenues in excess of $14 billion and gross profits close to $6 billion. It employed more than 72,000 people. At the end of 2016, the company’s 401(k) plan had $2.8 billion in assets and 74,304 active participants.
The lawsuit alleges that because Nordstrom didn’t use its bargaining power to get reduced fees, participants in the plan “lost savings of $177,622 per participant, or over $12 billion collectively, as compared to the highest ranking peer plan.”
From 2011 to 2016, Nordstrom 401(k) Plan was charged administrative fees and trustee fees ranging from $3.5 million in 2012 to $4.8 million in 2014.
“These administrative fees are excessive and double the amount of reasonable fees,” the complaint alleges. “A reasonable administrative and recordkeeping fee per person is $30. The extra costs incurred by Nordstrom participants from 2011 to 2016 were $13.7 million.”
The lawsuit claims that participants paid between $55.60 and $68.72 in fees each year.
The complaint also alleges that the Nordstrom retirement plan provided inadequate disclosures concerning revenue sharing; and were charged excessive operating fees on plan investment options.
The complaint was filed Nov. 6, in U.S. District Court for the Central District of California.