Settlement of the Beesley v. International Papers fiduciary lawsuit cracks the foundation of the 401(k) industry’s primary pricing structure. Embedded within the $30 million settlement is an agreement by the plan’s sponsor that it will not pay fees to a recordkeeper based on a percentage of the plan’s assets. What are the implications for plan sponsors?
ERISA does not specify a legally safe approach for computing a service provider’s fees. ERISA does require, however, that a vendor’s fees be prudently negotiated and reasonably priced. The settlement in the International Papers case turns an unflattering spotlight on the asset-based pricing approach, suggesting strongly that plan sponsors should employ a more prudent way to pay their service providers.
