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$4 Billion 401(k) Strikes $4 Million Settlement


A $4 billion plan has struck a $4 million settlement—and “meaningful prospective relief”—in a suit that challenged the fees it paid itself as recordkeeper for its own plan.

Plaintiffs Chris Carrigan, Michael Venti, and Sylvain Yelle (represented by Nichols Kaster PLLP[i] and Garrison, Levin-Epstein, Fitzgerald & Pirrotti PC) brought suit against Xerox Corporation, the Xerox Corporation Plan Administrator Committee and John Does 1-30 for breaching their fiduciary duties “with respect to the Xerox Corporation Savings Plan in violation of ERISA, to the detriment of the Plan, its participants, and their beneficiaries.” 

The (mere) 22-page suit claimed that shortly after Xerox entered the retirement plan recordkeeping business in the early 2010s, the defendants hired Xerox as the Plan’s recordkeeper, and passed Xerox’s fees, “which were well above reasonable market rates,” according to the suit, “onto the Plan’s participants.” 

Said another way “by retaining the services of an affiliated recordkeeper and failing to engage in a prudent investigation of other service providers in the marketplace, Defendants allowed the Plan to pay as much as four times more than what the Plan would have paid in the open market for recordkeeping services of comparable or superior quality,” the plaintiffs argued. “As a result, participants paid millions of dollars per year in excessive fees from 2015 through 2021.”

The Settlement

Under the terms of the proposed Settlement (Carrigan v. Xerox Corp., D. Conn., No. 3:21-cv-01085, motion for preliminary settlement approval 12/16/22), Xerox will pay a Gross Settlement Amount of $4.1 million into a common fund for the Settlement Class’s benefit. “This is a significant recovery for the Class compared to the claims that were alleged, and it falls well within the range of negotiated settlements in similar ERISA cases,” the plaintiffs note. Moreover, they note that “the Settlement also provides for meaningful prospective relief, as Defendants have agreed to retain an independent consultant to assist them in ensuring that the Plan’s recordkeeping fees remain competitive in the future by means of a request for proposal, fee benchmarking study, or other comparative analysis.”

The monetary settlement will be spread among “all participants and beneficiaries[ii] of the Xerox Corporation Savings Plan at any time from August 11, 2015, until January 1, 2021 (the date that the Plan’s current recordkeeper took over the recordkeeping function), excluding any persons with responsibility for the Plan’s administrative functions or expenses.” 

As for the adequacy of the settlement, the plaintiffs explain that their damages models estimated that the total losses were approximately $14 million, and that “based on this estimate, the $4.1 million recovery represents approximately 29% of the total estimated losses”—a result they claim was “on par with numerous other ERISA class action settlements that have been approved across the country.”

However, “in addition to the foregoing monetary compensation, the Settlement also provides that, within five years of the Settlement Agreement, Defendants will retain an independent consultant to assist with a request for proposal, fee benchmarking study, or other comparative analysis to ensure that the Plan’s recordkeeping fees remain competitive.” The settlement notes that “this relief addresses the core issue that Plaintiffs raised in the lawsuit and is designed to ensure that the Plan’s expenses are reasonable going forward.”

Attorneys’ Fees

While the part of that cash settlement that will go to plaintiffs’ attorneys isn’t yet spelled out, the agreement (a Motion for Attorneys’ Fees and Costs will be submitted at least 30 days before the deadline for objections to the proposed Settlement), it’s noted that the requested fees “may not exceed one-third of the Gross Settlement Amount,” and that it also “provides for recovery of Administrative Expenses related to the Settlement.” As for the named plaintiffs in the suit, the settlement agreement proposes that those “service awards” be up to $5,000 per Class Representative.

Now we’ll see if the court approves the terms.


[i] The settlement notes that Nichols Kaster has (1) won favorable rulings on dispositive motions and/or class certification in over a dozen ERISA cases; (2) recently tried three ERISA class actions; (3) successfully litigated an appeal before the First Circuit in Brotherston v. Putnam Invs., LLC, 907 F.3d 17 (1st Cir. 2018); and (4) negotiated numerous ERISA class action settlements in addition to the present settlement.


[ii] the Net Settlement Amount will be divided pro rata among Settlement Class Members (and eligible Beneficiaries and Alternate Payees) based on their Average Settlement Allocation Score in relation to other Class Members. To calculate the Average Settlement Allocation Score, the Settlement Administrator will review Class Members’ account balances in the Plan for each quarter during the Class Period, and will award one point for each dollar invested in the Plan at the end of each quarter. A Settlement Class Member’s Average Settlement Allocation Score shall be the average of the quarterly scores during the Class Period, weighted to account for partial quarters.