Estimated reading time: 5 minutes
On July 31, the parties in a six-year-old lawsuit over a company retirement plan asked a federal court to approve a $48 million settlement.
The plan in question held roughly $4.4 billion in assets and covered more than 114,000 participants. The company is ADP, the payroll and human resources provider. The case is Berkelhammer et al. v. ADP TotalSource Group Inc. et al., filed in 2020 in the U.S. District Court for the District of New Jersey, and it took until February 2025 just to reach class certification.
The settlement was first reported by PLANADVISER, with additional coverage from PLANSPONSOR, Bloomberg Law, Pensions & Investments, and 401(k) Specialist.
It’s tempting for a sponsor with a five, ten, or twenty million dollar plan to read a headline like that and conclude it has nothing to do with them. It has more to do with them than the size of the number suggests.
Key Takeaways
- ADP agreed to pay $48 million to settle a fee and oversight lawsuit on a plan holding $4.4 billion in assets.
- The plan’s scale should have produced better pricing leverage. The lawsuit alleges it didn’t, because nobody was actively benchmarking it.
- The settlement’s non-monetary terms, independent fund review, an independent consultant, and fiduciary training, are what a well-run plan builds voluntarily. Plan size doesn’t eliminate fiduciary risk. The mechanism that created this exposure exists at any plan size.
What the Plan Was Accused Of
The complaint centered on excessive recordkeeping fees paid over more than a decade to a single recordkeeper, along with allegations of imprudent investment options and inadequate monitoring of the plan’s service providers.
The theory at the core of the case is worth sitting with. A plan of that size should have had the leverage to negotiate meaningfully better pricing than it did. The fact that it apparently didn’t raised the obvious question: was anyone actively benchmarking the arrangement, or had the fee structure simply been left in place because nothing forced a look at it.
Scale is supposed to be an advantage in fee negotiation but it’s only an advantage if someone uses it.
What the Settlement Actually Requires
Beyond the monetary figure, the proposed settlement includes several non-monetary terms, and they’re the more interesting part of the story for anyone advising a much smaller plan.
The plan’s fiduciary committee will review at least three target date fund options, with the assistance of investment consultants, and select the most appropriate one. If ADP seeks reimbursement for administrative services to the plan going forward, the settlement calls for the appointment of an independent retirement plan consultant. And fiduciary training for all new committee members, delivered by outside legal counsel, is built into the agreement for 2027 and 2028.
Read that list again. A documented investment review process. Independent third-party oversight. Committee training as an ongoing requirement rather than a one-time event.
A federal court, as a remedy for what went wrong, has now ordered ADP to build the exact practices that a well-run plan of any size builds voluntarily. The five documents we have written about before, an Investment Policy Statement, minutes with recorded reasoning, dated benchmarking, evidenced monitoring, and a record of decisions on underperformance, aren’t an abstract compliance ideal. They’re what a court considers the standard once a case actually gets tested.
A Word on How This Plan Was Structured
It’s worth being precise here, because the structure matters. The ADP plan at issue is a multiple employer plan connected to a professional employer organization arrangement, not a pooled employer plan under the structure created by the SECURE Act, which layers a dedicated pooled plan provider and a named fiduciary framework on top of the pooling itself.
The distinction matters because the lesson of this case isn’t that pooling arrangements are inherently risky. It’s that pooling and scale reduce cost per participant. They don’t, on their own, replace an active, documented, monitored fiduciary process. A properly governed pooled structure adds that oversight on top of the scale it provides. This settlement is a reminder of what tends to happen when that oversight layer is thin or absent.
For any sponsor evaluating a payroll-provider-bundled retirement offering specifically, that’s the question worth asking directly: who’s independently benchmarking this plan, and how often.
Why the Size Gap Doesn’t Protect You
ADP’s plan held $4.4 billion for roughly 114,000 participants and still went eighteen years without generating the pricing pressure its scale should have produced. A plan holding five million dollars for forty participants has no scale to leverage in the first place, and correspondingly less institutional infrastructure watching for the problem.
The mechanism is identical at both ends. An unreviewed fee structure compounds quietly for as long as nobody checks it. The dollar amounts differ. The absence of a documented review process doesn’t.
What to Actually Check
Three questions worth asking about your own plan this week.
- When was your plan’s fee structure last independently benchmarked, and by whom?
- Is there a documented process for reviewing your investment lineup, including target date funds, against stated criteria?
- If your recordkeeper or plan provider is affiliated with your payroll or HR vendor, who’s providing independent oversight of that relationship?
This case took six years of litigation and a $48 million settlement to force one company to adopt practices most well-governed plans build voluntarily, long before anyone asks a court to require them.
You don’t need a lawsuit to get there.
This article discusses publicly reported litigation and isn’t a comment on the legal merits of the case or the conduct of any party. The settlement described was pending preliminary court approval as of the date of this article and may change before final approval. This article is educational and does not constitute legal, tax, or investment advice. Marshall+Sterling Wealth Advisors, Inc. is a registered investment adviser and does not provide tax or legal services.
