Sixth Circuit Tightens Pleading for ERISA Recordkeeping-Fee Claims: Price Disparities and “Fungibility” Allegations Are Not Enough

Case: Martha D. England v. DENSO International America Inc., No. 24-1360 (6th Cir. May 6, 2025) (Recommended for Publication)
Panel: McKeague, Griffin, and Larsen, JJ. (opinion by Griffin, J.)
Origin: E.D. Mich. (Hon. Mark A. Goldsmith), dismissal under Rule 12(b)(6) affirmed

Introduction

This published Sixth Circuit opinion addresses a wave of ERISA “excessive fee” litigation targeting 401(k) plan recordkeeping and administrative services (RKA). Plaintiffs—current and former employees participating in DENSO’s 401(k) plan—alleged the plan imprudently overpaid its recordkeeper, Empower, by charging approximately $71 per participant between 2016 and 2020, compared to purportedly comparable plans paying $25 to $39. They argued that mega 401(k) plans (those with more than $500 million in assets) purchase highly commoditized, standard “bundled” RKA services and therefore should be able to negotiate much lower fees.

The district court dismissed the complaint for failing to plead context-specific facts, such as the types and quality of services actually provided to the DENSO plan and to the comparator plans, that would make the alleged fee disparity a plausible indicator of imprudence. The Sixth Circuit affirmed, clarifying and reinforcing its pleading standard from Smith v. CommonSpirit Health: plaintiffs must plausibly allege that fees were excessive relative to the services rendered, which requires a meaningful, context-specific benchmark—not merely industry generalizations or a chart of lower fees at other plans.

Summary of the Opinion

• The Sixth Circuit affirmed dismissal because the complaint did not include context-specific allegations about the scope and quality of RKA services provided to DENSO’s plan and to the purported comparators. Without such specificity, plaintiffs could not show that the plan’s fees were excessive “relative to the services rendered.”
• Generic assertions that mega plans buy standardized, fungible services and can negotiate better rates do not suffice. Price disparities alone—even supported by a list of other plans with lower per-participant fees—are not enough to plausibly allege imprudence under ERISA.
• The court emphasized the need for a “meaningful benchmark,” noting that plaintiffs’ comparators varied widely in fees and in plan size, with several not even meeting plaintiffs’ own “mega plan” threshold.
• The court aligned with several sister circuits (Second, Eighth, Tenth, and Seventh in Albert) that have rejected similarly sparse excessive-recordkeeping complaints, and expressly declined to follow the Seventh Circuit’s more permissive approach in Hughes v. Northwestern University on fungibility-based pleading.
• Derivative monitoring claims fell with the prudence claim.

Detailed Analysis

Procedural Posture and Applicable Standards

The case came up on appeal from a Rule 12(b)(6) dismissal. Applying Twombly and Iqbal, the court required the complaint’s factual content to render liability plausible, not merely possible. ERISA fiduciaries must act “with the care, skill, prudence, and diligence under the circumstances then prevailing” (29 U.S.C. § 1104(a)(1)(B)). The Supreme Court in Fifth Third Bancorp v. Dudenhoeffer and Hughes v. Northwestern University stresses that the prudence inquiry is context-specific and that courts must respect the “range of reasonable judgments” available to fiduciaries.

Precedents and Authorities Cited

• Twombly (550 U.S. 544) & Iqbal (556 U.S. 662): Establish the plausibility pleading standard—legal conclusions do not suffice; factual allegations must push the claim from conceivable to plausible.
• Fifth Third Bancorp v. Dudenhoeffer (573 U.S. 409): ERISA prudence is “context specific”; courts should “separate the plausible sheep from the meritless goats.”
• Hughes v. Northwestern University (595 U.S. 170) (2022) (Supreme Court): Emphasizes “due regard to the range of reasonable judgments” ERISA fiduciaries may make; does not create a per se rule about recordkeeping fees; requires case-by-case analysis.
• Smith v. CommonSpirit Health, 37 F.4th 1160 (6th Cir. 2022): Cornerstone Sixth Circuit authority requiring plaintiffs to allege fees were “excessive relative to the services rendered” and to use a “meaningful benchmark.” Mere averages or general price differences do not suffice without service comparability.
• Forman v. TriHealth, Inc., 40 F.4th 443 (6th Cir. 2022); Johnson v. Parker-Hannifin Corp., 122 F.4th 205 (6th Cir. 2024): Reinforce the need for meaningful benchmarks in ERISA fee and performance claims.
• Alignment with other circuits in rejecting sparse complaints:
  • Singh v. Deloitte LLP, 123 F.4th 88 (2d Cir. 2024), and Boyette v. Montefiore Med. Ctr., 2025 WL 48108 (2d Cir. Jan. 8, 2025): Complaints that “allege next to nothing” about services are implausible; fungibility and economies-of-scale allegations are insufficient.
  • Matney v. Barrick Gold of N.A., 80 F.4th 1136 (10th Cir. 2023): Required service comparability; rejected generic assertions.
  • Matousek v. MidAmerican Energy Co., 51 F.4th 274 (8th Cir. 2022): Price-only allegations without service detail fail.
  • Albert v. Oshkosh Corp., 47 F.4th 570 (7th Cir. 2022): Similar skepticism toward bare price disparity allegations in recordkeeping claims.
• Distinguishing contrary or more permissive cases:
  • Hughes v. Northwestern University, 63 F.4th 615 (7th Cir. 2023) (on remand): The Sixth Circuit expressly declines to follow the Seventh Circuit’s acceptance of fungibility allegations as sufficient. The Seventh Circuit found adequate pleading where plaintiffs alleged market-wide fungibility, a reasonable $35 target fee, and specific steps peer institutions took (e.g., consolidating recordkeepers, seeking bids) to lower fees. The Sixth Circuit requires more plan- and service-specific detail under Smith.
  • Mator v. Wesco Distribution, Inc., 102 F.4th 172 (3d Cir. 2024): Distinguished because plaintiffs there alleged both direct and indirect (revenue sharing) compensation, a later switch to a cheaper provider without service decline, and specific services provided—concrete facts absent here.
  • Sweda v. Univ. of Pa., 923 F.3d 320 (3d Cir. 2019), and Perkins v. United Surgical Partners Int’l, Inc., 2024 WL 1574342 (5th Cir. Apr. 11, 2024): Reflect more permissive pleading in certain contexts, but either predate the recent tightening or rest on richer factual detail not present in this case.

Legal Reasoning

The court applied its own precedent in Smith to require allegations showing that the DENSO plan’s $71 per-participant fee was excessive in light of the actual services rendered. Plaintiffs’ theory hinged on three assertions: (1) RKA services to large plans are standardized/commoditized; (2) mega plans can and do negotiate materially lower fees; and (3) a comparator set of 15 plans paid $25–$39 per participant. The court held these were not enough, for several reasons:

• No service comparability: The complaint did not describe the specific types, scope, or quality of Empower’s services to the DENSO plan, nor did it describe those provided to the comparators. Plaintiffs’ own acknowledgement that “variations in the level and quality of RKA services” exist, coupled with their conclusory claim that differences were “immaterial,” could not substitute for factual allegations establishing equivalence or explaining why any differences did not matter.
• No meaningful benchmark: A price chart or “trendline” is insufficient without an apples-to-apples comparison. The comparator set undercut itself:
  • There was a wide fee range among the comparators (a 56% spread from $25 to $39), undermining the inference that price alone signals imprudence.
  • Several comparator plans did not even meet plaintiffs’ own “mega plan” threshold (over $500 million), and only three had assets over $1 billion like DENSO’s plan.
• Fungibility is not enough: Allegations that recordkeepers offer similar services and bid aggressively for mega plans cannot, standing alone, make a price disparity plausibly imprudent. Under Smith, plaintiffs must still allege that this plan could have obtained the same services for less—e.g., by identifying specific competitor offerings, bids, or service-level equivalence.
• Rejecting a narrow reading of Smith: Plaintiffs argued Smith merely disapproved reliance on industry averages. The Sixth Circuit clarified that Smith imposes a broader requirement: plead facts showing fees are excessive relative to the services rendered; how plaintiffs do that is less important than that they do it with context-specific detail.
• Distinguishing Hughes (7th Cir.) and Mator (3d Cir.): The court explained that those complaints alleged additional concrete facts—like consolidation opportunities, competitor bids, and a proven price drop with unchanged services after switching providers—absent in this case.

Impact and Implications

England cements a demanding, detail-oriented pleading standard in the Sixth Circuit for ERISA recordkeeping-fee cases. Its practical effects include:

• For plaintiffs:
  • Complaints must go beyond fee charts and market generalizations. Plaintiffs should plead the specific RKA services the plan received (and their quality), the parallel services comparators received, and facts showing a meaningful equivalence in scope and quality.
  • Plausible allegations might include competitor bids, RFP histories, consolidation opportunities, revenue-sharing structures and amounts, service-level agreements (e.g., call-center metrics), cybersecurity offerings, employer stock fund support, and evidence that the same services could have been secured for a lower fee without service degradation.
• For fiduciaries and plan sponsors:
  • England reduces exposure to bare “trendline” lawsuits and underscores the value of keeping contemporaneous records of RFPs, benchmarking analyses, negotiation efforts, and documented tradeoffs among cost, service levels, and plan features.
  • Paying above some plans’ per-participant rates is not per se imprudent; what matters is the prudence of the process and the reasonableness of fees relative to services under the circumstances.
• For district courts in the Sixth Circuit:
  • England encourages early screening of RKA excessive-fee claims. Courts should examine whether the complaint offers a meaningful, apples-to-apples benchmark with service comparability rather than mere price disparities.
• Intercircuit dynamics:
  • England explicitly parts ways with the Seventh Circuit’s approach in Hughes (2023) that accepted fungibility allegations coupled with limited market facts. The decision aligns with the Second, Eighth, and Tenth Circuits’ more exacting approach and narrows the pathways for price-only pleading within the Sixth Circuit.

Complex Concepts Simplified

• Recordkeeping and Administrative (RKA) Services: The behind-the-scenes operations of a 401(k) plan: keeping participant accounts, processing contributions and withdrawals, issuing statements, maintaining websites and call centers, handling compliance testing, audits, and plan document support, and sometimes extra services like employer stock fund administration and participant advice tools.
• Bundled vs. unbundled pricing: A “bundled” fee is a single per-participant amount covering a package of services. “Unbundled” or component pricing lists discrete services and prices. Some arrangements also include “revenue sharing,” where investment funds rebate a portion of their fees to offset recordkeeping compensation.
• Mega plans: Industry shorthand for very large 401(k) plans (here, defined by plaintiffs as >$500 million in assets). Large plans often have leverage to negotiate lower fees, but the law does not presume that services are identical or that any higher-than-peer fee is automatically imprudent.
• Meaningful benchmark: A legitimate comparator showing that the same or sufficiently similar services (type and quality) are available at a materially lower price. Price-only comparisons without service equivalence are generally not meaningful benchmarks.
• Duty of prudence (ERISA § 404): A process-oriented duty requiring fiduciaries to act with care and diligence under the circumstances then prevailing. It allows a range of reasonable judgments and tradeoffs. The focus is on prudent decision-making, not perfect outcomes or lowest possible cost in hindsight.
• Pleading plausibility: Under Twombly/Iqbal, complaints must articulate specific facts making liability plausible. Legal labels (e.g., “excessive,” “imprudent”) or industry generalities are not enough without factual detail.

Practical Takeaways and Checklists

What England requires in the Sixth Circuit to state an RKA excessive-fee claim

• Identify the challenged fees (e.g., per-participant amounts, revenue-sharing flows, any asset-based components) for the relevant period.
• Describe in detail the RKA services the plan actually received and their quality (e.g., service-level agreements, call-center stats, web tools, advice/managed account programs, payroll interface complexity, employer stock fund services, cybersecurity coverage, data/privacy features).
• Offer comparators that are meaningfully similar in size and complexity, and specify the type and quality of services they received to demonstrate equivalence.
• Allege specific facts showing the plan could have obtained the same services for less (e.g., prior or contemporaneous competitor bids; RFPs; industry quotes; consolidation opportunities; examples from similar plans that achieved lower fees through defined steps).
• Where applicable, explain how revenue-sharing or other indirect compensation inflated total recordkeeping pay without corresponding increases in services.
• Avoid relying solely on generalized statements that recordkeeping is commoditized or that “mega plans” can negotiate better rates; such assertions must be tied to plan-specific and comparator-specific facts.

Risk management for fiduciaries

• Conduct regular RFPs or market checks, document the process, and retain records showing the services evaluated and the reasons for selecting or retaining a provider.
• Track and benchmark service levels and fees annually; document cost-service tradeoffs (e.g., tailored communications, specialized plan design, employer stock fund administration, cybersecurity commitments).
• Periodically evaluate consolidation or rebidding opportunities and keep written records reflecting the prudence of staying with the incumbent or switching providers.

Unresolved Questions and Future Developments

• Intercircuit tension: England underscores divergence with the Seventh Circuit’s post-remand Hughes approach to fungibility-based pleading. Whether the Supreme Court will address these differences remains to be seen.
• What qualifies as “enough” service detail? The Sixth Circuit signals that concrete, plan- and comparator-specific allegations are needed, but the precise quantum will develop case-by-case.
• Role of indirect compensation: Claims involving revenue sharing and subsequent fee reductions after provider switches (as in Mator) may fare better if the complaint connects dollars to concrete service levels.

Conclusion

England v. DENSO is a significant, published clarification of the Sixth Circuit’s pleading standard for ERISA recordkeeping-fee claims. It reaffirms that plaintiffs must do more than identify price disparities and invoke industry “fungibility.” To cross the plausibility threshold, complaints must allege concrete, context-specific facts showing that the plan’s fees were excessive relative to the services provided, supported by meaningful benchmarks demonstrating service equivalence and lower available pricing. The decision aligns the Sixth Circuit with other circuits that have insisted on service comparability and raises the bar for bare-bones excessive-fee pleadings. For fiduciaries, it validates prudent, well-documented processes and the reality that reasonable tradeoffs between cost and service quality do not equate to imprudence.