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Compliance October 24, 2024
Pfizer Gets 401(k) Plan Fee Lawsuit Tossed
A federal judge dismissed allegations made by a former Pfizer employee that the pharmaceutical company charged unreasonable recordkeeping and administrative fees.
Reported by Remy Samuels
The U.S. District Court for the Western District of Michigan granted Pfizer Inc.’s motion to dismiss a lawsuit that alleged “unreasonable” recordkeeping and administrative fees. In dismissing the complaint, U.S. District Judge Paul Maloney ruled that the plaintiff, former Pfizer employee Matthew Miller, failed to state a claim and presented his case with a “flawed methodology.”
In a joint agreement between the parties, Miller waived his right to appeal the dismissal and Pfizer waived its right to hold Miller responsible for the company’s attorneys’ fees and costs.
In June 2023, Miller, represented by Walcheske & Luzi LLC and the Haney Law Office PC, filed a complaint alleging that Pfizer’s retirement plan committee violated its fiduciary duty of prudence by engaging a vendor that charged plan participants excessive recordkeeping and administrative fees. The complaint also accused Pfizer and its board of directors of failing to monitor the committee’s oversight of the plan’s total recordkeeping fees. Miller alleged that Pfizer’s fiduciary decisions were unreasonable under the Employee Retirement Income Security Act.
Pfizer works with Fidelity Investments as its recordkeeper. The complaint argued that plan participants should have received better rates for recordkeeping because of the plan’s large size. The Pfizer Savings Plan has more than $19 billion in assets and serves 56,648 participants, according to its latest Form 5500 filing.
The complaint alleged that plan participants paid, on average, $24 more in recordkeeping fees than they should have each year between 2017 and 2021.
Pfizer argued in its motion for dismissal that Miller did not use a proper methodology to establish his claims—specifically, the complaint compared average fees paid over several years to just one year of a plan’s fees. Maloney wrote in his order that the plaintiff’s apples-to-oranges comparison warranted dismissal of the case, as it was used by the plaintiff to “cherry-pick” data and prevent the court from finding a plausible claim.
Pfizer’s motion to dismiss also argued that the plaintiff failed to allege that the plan fees were excessive relative to the service provided.
However, Maloney agreed with the plaintiff’s argument that recordkeeping services are fungible, that the market is highly competitive and that many recordkeeping services are standardized and bundled. Miller had argued that only the cost associated with each plan matters and that the services are identical across the board.
In addition, Pfizer argued that Miller failed to identify a single comparable 401(k) plan that paid lower recordkeeping fees and that the six comparator funds Miller offered were too unlike those in which Pfizer’s plan invested. The court agreed that the inconsistency of the plaintiff’s data, as well as a lack of proper comparator plans, made the recordkeeping claim less plausible.
While Miller argued that larger plans, like Pfizer’s, should pay less in recordkeeping fees, Maloney found that some of the data presented in the plaintiff’s case contradicted his argument, as some of the larger comparator funds paid more than the smaller ones.
The court also found that the plaintiff’s “blanket assertions” that Pfizer acted imprudently because the company failed to successfully solicit bids from recordkeepers failed to state a claim.
Pfizer was represented by law firms Sidley Austin LLP and McShane & Bowie PLC in the case. The law firms representing Miller did not immediately respond to a question of whether they plan to appeal the dismissal.
