A recent $2.9 million settlement against Magna International for failing to adequately review 401K plan investments is a reminder to any company that provides retirement options to employees. 

Magna and its investment committee was accused of violating the Employee Retirement Income Security Act (ERISA), according to Law360. It says employees have claimed $9.3 million in damages. 

The suit represented about 20,000 people who had been participants or beneficiaries  of Magna 401K plan since April 2014, the article says. It says, the suit claimed the plan paid an average of $73 per participant for recordkeeping services between 2014 and 2020. It argued a more reasonable fee would have been $30 per participant. 

Magna is not the only auto parts company to be named in an ERISA case recently. The sponsor, of the Advanced Auto Parts Inc. 401K plan settled for $1.7 million in a similar case in December 2023, according to Pensions&Investments 

“This company ran into trouble by not monitoring the costs they were paying for 401k administration and the employees learned that they had been overpaying,” said Scott Broaddus, Irongate Capital Advisors partner and plan account representative and advisor for the SCRS Multiple Employer Plan. 

“You can’t set a 401K plan on autopilot,” Broaddus said. “Costs need to be benchmarked every 2-3 years.” 

Broaddus said a company can be sued even if there’s lack of bad intentions. 

Collision repair business owners are likely distracted with many other duties during a week, Broaddus said. Their retirement plan is not likely something they are thinking about. 

“It is a responsibility to monitor costs with any vendor and as you become a larger customer. As you have more leverage purchasing supplies for your business or your 401k plan, you would expect the costs for those services to decline as you grow,” Broaddus said.

Participants are often paying for a portion of these costs in their plans, Broaddus said. 

Plans provided by groups such as the Society of Collision Repair Specialists remove some of that responsibility from business owners, he said. 

“The SCRS plan has an investment committee that meets four times per year not only to review the investment lineup, but also to monitor plan expenses,” Broaddus said. “We regularly benchmark plan costs and have plan expenses structured so that as more shops participate in the retirement plan, plan costs reduce for all participating SCRS members.”

This is a great value for the members who utilize it, he said. 

“SCRS already has such a great reputation of being an advocate for the owners of these businesses,” Broaddus said. “This is another area where they have negotiated a plan structure that costs 30%-40% less than what a member business would pay on their own.”

The average SCRS member in the plan has fewer than 50 employees, Broaddus said. 

“They don’t have HR or finance teams,” Broaddus said. “It might be them or their spouse or a third party they are hiring part time. It is not a big focus in their world.” 

Members or prospective members still have access to cost details in the SCRS plan, Broaddus said. 

Broaddus said he provides reports that detail what members are paying along with a comparison. 

“If any SCRS member wants to know what they are currently spending on their retirement plan, we can provide them an expense breakdown as well as what the SCRS costs would be,” Broaddus said.

Broaddus is one of the retirement plan account representatives who can help companies wanting to make changes to plans offered through the Society of Collision Repair Specialists (SCRS). He can be emailed at Scott.Broaddus@irongate-capital.com. More information can be found at scrs.com/401k/. 

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