In recent cases, Loomis v. Exelon Corp., 2011 U.S. App. LEXIS 18480 (7th Cir. 2011) (“Loomis”) and Renfro v. Unisys, 2011 U.S. App. LEXIS 17208 (3rd Cir. 2011) (“Renfro”), the Seventh and Third Circuit appellate courts, respectively, dismissed plaintiffs’ claims that the administrators for 401(k) defined contribution plans had breached their fiduciary duties, finding that the respective district courts had correctly dismissed each case based on the pleadings. In both cases, participants in 401(k) defined contribution plans alleged a breach of fiduciary duty because plan administrators selected and retained only retail funds in the mutual fund investment options available to plan participants. Plaintiffs alleged that plan administrators should not have included retail funds available on the same terms to investors on the open market in the portfolio of possible investment choices, but rather should have opted for institutional funds or institutional classes of retail funds that were not available to the public and that offered lower fees. The Loomis and Renfro cases are part of a wave of lawsuits filed beginning in 2006 against retirement plan sponsors over 401(k) fees.

In Loomis, plaintiffs argued that the plan administrator should have selected institutional funds with lower expense ratios and should have covered the expenses of the retail funds, rather than requiring participants to bear that cost. The Seventh Circuit held that the mere possibility that “some other funds might have had even lower ratios is beside the point; nothing in ERISA requires every fiduciary to scour the market to find and offer the cheapest possible fund . . ..” The court further stated that “…whether to cover these expenses is a question of plan design, not of administration.” The court concluded that ERISA does not create a fiduciary duty for employers to make pension plans more valuable to participants, finding that “[w]hen deciding how much to contribute to a plan, employers may act in their own interests.”

In Renfro, plaintiffs contended that the fees associated with each retail mutual fund in the plan, as well as the administrative fees governed by the plan administrator’s agreement with a directed trustee for the plan, were excessive as compared to other, less expensive, investment options not included in the plan. The Unisys plan offered various options, including company stock, commingled funds (including retail funds with “a variety of risk and fee profiles”), and mutual funds comprising seventy-three different investment options. The Third Circuit held that, “[i]n light of the reasonable mix and range of investment options in the Unisys plan, plaintiffs’ factual allegations about Unisys’s conduct do not plausibly support their claims.”