Packaging Co. Hit with Excessive Fee Suit on $1.2B 401(k)

A South Carolina-based product packaging company’s board and benefits committee is the latest to be hit with a lawsuit alleging excessive participant fees in its 401(k) plan.

The complaint brought last Friday in the United State District Court for the District of South Carolina Florence Division by Daniel Steen individually, which is seeking class status on behalf of other participants, alleges breach of fiduciary duty under the Employee Retirement Income Security Act for allowing for excessive fees in the $1.2 billion 401(k) plan, which was record kept by Empower.

“Defendants, during the Class Period, were responsible for selecting, monitoring, and removing the Sonoco Plan’s recordkeeper, and approving and/or contracting for Plan administrative services,” the suit reads. “Instead of acting for the exclusive benefit of the Sonoco Plan and its participants and beneficiaries when performing these duties, Defendants allowed the Sonoco Plan’s recordkeeper to receive excessive compensation for the services it provided.”

The plaintiff is seeking damages for monetary loss for participants from Sonoco Products Company, its board and the members of its plan committee serving at the time. The plan had 12,882 participants in 2022, according to the plan’s most recent Form 5500 filed with the Department of Labor.

The lawsuit, Steen v. Sonoco Prods. Co., was filed by law firm Johnson, Smith, Hibbard & Wildman Law Firm LLP, a firm that did not appear in a list of firms filing similar cases in the past couple of years as tracked by Encore Fiduciary.

Johnson, Smith, Hibbard & Wildman did not respond to a request for comment.

Plaintiffs allege in the suit that the committee did not leverage the size of the plan to negotiate lower fees for participants via a request for proposal from other recordkeepers. The plan’s recordkeeper, Empower, had been overseeing the plan throughout the class action period from 2018 to 2022, and as far back as 2014, according to the filing.

“Defendants failed to solicit bids for recordkeeping services at reasonable intervals, which, in turn, has caused the Sonoco Plan to overpay for recordkeeping during the entire Class Period,” the complaint alleges.

The suit goes on to cite what the plaintiff alleges are comparable 401(k) plans and estimated fees with organizations including the Children’s Medical Center of Dallas, Ralph Lauren Corp. and the Southern California Permanente Medical Group, among others.

The suit states the estimated per-participant fees for those plans, provided by Empower, Fidelity Investments, T. Rowe Price and Vanguard in the range of $28 to $36 per participant—comparing them to a $121-per-participant fee for Sonoco’s plan.

“In sum, the disparity between the fees paid by the Sonoco Plan and the fees paid by the comparable plans identified above cannot be plausibly explained by immaterial service disparities since there are no material differences in the RKA [recordkeeping and administration] services provided to plans as large as the Sonoco Plan and the comparable plans,” the complaint stated.

Sonoco did not respond to a request for comment on the allegations.

Encore Fiduciary counted 48 excessive fee and performance lawsuits in 2023, a reduction from the year prior in part due to cases making their way through the courts, according to a January article in PLANADVISER. The majority of the cases filed were for plans with more than $1 billion in assets, and often used “the same playbook of suing large plans for purported excessive recordkeeping fees based on the Form 5500 filing,” Encore President Daniel Aronowitz wrote in the article. Some of those fees, Aronowitz noted, can be “inflated” because they include transaction fees.

Plaintiffs in the Sonoco suit will be seeking repayment for what the lawsuit cites as losses of “millions of dollars” for the alleged excessive fees.