On December 10, 2024, the United States Court of Appeals for the Second Circuit upheld a lower court’s dismissal and denial of leave to file an amended complaint in a case against Deloitte LLP alleging that its retirement plan (Plan) fiduciaries breached their duty of prudence by allowing the Plan to pay excessive fees to its recordkeeper. The case is Singh v. Deloitte LLP. The appeals court ruled when plan participants alleging their plan has been charged too much for administration costs, the complaint must demonstrate clear “apples-to-apples” comparisons to other plans, which the plaintiffs in this case did not do. Rather, the plaintiffs alleged that from 2015-2019 they paid direct and indirect (revenue sharing) expenses of $59.58 to $70.31 per participant compared to the 2019 direct costs of six other similar sized retirement plans that ranged from $21.00 to $34.00 per participant.

Apples to Oranges. The court found that the complaint only alleged conclusorily that the Plan’s recordkeeping fees exceeded those of the other plans and did not allege the specificity needed to state a claim. The complaint alleged next to nothing about the recordkeeping services provided to the Plan or the six comparable plans. Further, it failed to make apple-to-apple comparisons with other plans.

First, the original complaint compared the Plan’s direct and indirect recordkeeping costs to the direct recordkeeping costs of the comparable plans, alone. In their amended complaint the Plaintiffs only compared direct expenses among the plans, ignoring the indirect expenses. The court found that this meant the complaint failed to compare total recordkeeping costs and the direct expenses alone could not provide the complete picture.

Second, the complaint compared the Plan’s direct recordkeeping expenses from 2015-2019 to the fees the similar plans paid in 2019 alone, without any explanation. Further, the complaint did not specify the type of recordkeeping services that were provided for the fees to any of the plans. Therefore, the allegations lacked sufficient context for the court to infer that the services provided were comparable to those provided to the Plan or that the 2019 fees were a meaningful benchmark.

The court agreed with the lower court that absent greater specificity as to the type and quality of services provided to both the Plan and the comparable plans, Plaintiffs failed to state a claim for breach of the duty of prudence.

Conclusion. This case importantly lays out what plaintiffs must plead in an excessive fees case to survive a motion to dismiss. That is, an apples to apples comparison of fees spent for similar services in similar plans demonstrating the fees for the Plan in question are excessive.