In Santomenno ex rel. John Hancock Trust v. John Hancock Life Ins. Co. (U.S.A), — F.3d –, 2014 WL 4783665 (3d Cir. Sept. 26, 2014), the plaintiffs, who were participants in employer-sponsored 401(k) benefit plans, claimed that John Hancock, an administrator that provided investment services to plans, breached its fiduciary duty by allegedly charging the retirement plans excessive fees.
The plans in question each had a trustee, who contracted with John Hancock to provide a “Big Menu” of potential investments, from which the trustees could select a “small menu” available to participants. The court noted that the plaintiffs incorrectly framed their argument as “whether John Hancock acted as a fiduciary to the Plans at some point and in some manner and then charged an excessive fee for that fiduciary service[.]” The court held that the correct “question is whether John Hancock acted as a fiduciary to the Plans with respect to the fees that it set.”
In a lengthy opinion with detailed discussion, the court identified a number of actions that did not render John Hancock a fiduciary, including: (i) selection of investment options and accompanying fee structure; (ii) monitoring of performance of investment options and relaying that information to plan trustees; (iii) retention of authority to change options offered to plan trustees and alter the fees that it charged; and (iv) failure to unilaterally substitute less expensive share classes in funds made available to plan participants.
The court also held that the allegation that John Hancock rendered investment advice to the plans for a fee bore no nexus to the wrongdoing alleged in the complaint (i.e., allegedly charging an excessive fee).