Judge Dismisses 401(k) Excessive-Fee Lawsuit Against PNC Financial

PNC Financial Services Group Inc. has had a lawsuit dropped from workers accusing the company of paying excessive recordkeeping fees for their incentive savings plan.   

Judge Christy Criswell Wiegand said in the June 21 decision that the expert witness, named Ty Minnich, used by the workers to discuss 401(k) recordkeeping fees did not use “reliable methodology” in concluding that the plan fees were unreasonable. The case, John McCauley v. PNC Financial Services Group, Inc. et al, was filed in the U.S. District Court for the Western District of Pennsylvania. 

In August 2021, John McCauley, a participant of the PNC Incentive Savings Plan, filed an amended complaint against PNC, accusing the financial services company of breaching its fiduciary duty of prudence under the Employee Retirement Income Security Act by failing to properly monitor recordkeeping fees from October 2, 2014, to the present. 

PNC hired Alight Solutions to serve as its recordkeeper in September 2007, according to the legal filing. Alight charged the plan a flat dollar amount per participant for its core services, as well as additional fees for other participant-elective services like loan processing and qualification of domestic relations orders. According to the ruling, Alight never received fees from PNC or the plan that were calculated as asset-based fees.  The plan allocated the cost of Alight’s recordkeeping services to participants’ individual accounts on a pro-rata “asset-based” charge. 

In 2014, the plan’s base recordkeeping fee was $46.55 per participant, and it declined to $32 per participant by January 2022, according to the case documents. 

Expert Witness

To support his claims against PNC, McCauley engaged Minnich as an expert witness. On May 17, 2023, Minnich submitted an expert report, which evaluated the plan’s recordkeeping fees, estimated the reasonable market rate for such fees and calculated the plaintiffs’ damages for paying allegedly excessive fees. 

Minnich argued that PNC “failed to act consistent with industry standards and custom applicable to fiduciaries” causing “the plan to pay recordkeeping and administrative fees in excess of the reasonable market rate.” 

Based on his estimated reasonable market rate, Minnich contended that the plan lost more than $25 million by paying excessive fees. 

PNC disputed Minnich’s conclusions and sought to exclude Minnich as an expert witness, which the court granted. PNC argued that Minnich’s testimony was not reliable because his opinion is “based soley on his experience without using any reproduceable or traceable process,” according to the judge’s ruling. 

Minnich asserted that he based his opinion on his industry experience and three pertinent factors: participant count, the services provided and any ancillary revenue. He argued that the participant count is most important because when the number of participants increases, the recordkeeping fees should exponentially decline.  

“It appears that Mr. Minnich’s opinions are based on his subjective belief and experience and, therefore, he has not demonstrated that it is more likely than not that his testimony is the product of reliable principles and methods,” Wiegand wrote. 

Not Comparable

Minnich’s report also pointed to four other retirement plans that he believes are comparable to the PNC plan and demonstrated that PNC could have negotiated lower fees, but the court found that the four comparable plans “do not salvage the reliability of Minnich’s opinion.” 

In its motion for summary judgment, PNC argued that the plan committee prudently monitored recordkeeping fees through quarterly meetings, benchmarking studies and a request for proposal. 

The PNC Inventive Savings plan contains about $8.1 billion in assets and 80,335 participants, according to the most recent Form 5500 filing. 

PNC did not respond immediately to a request for comment on the decision. 

The law firms representing the plaintiffs are Lynch Carpenter LLP and Miller Shah LLP.  Firms Morgan, Lewis & Bockius LLP and Youman & Caputo LLC are representing PNC.