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A federal judge in Santa Ana, California, has ruled that a lawsuit against Universal Services of America regarding its 401(k) plan can proceed. The lawsuit, filed by plan participants in June 2022, alleges that the company and its affiliates violated ERISA (Employee Retirement Income Security Act) by failing to properly manage record-keeping fees and administrative costs.
Allegations Against Universal Services of America
The plaintiffs claim that 401(k) plan fiduciaries neglected their duty to ensure that record-keeping fees were reasonable, particularly as the number of plan participants increased. They argue that the company should have reduced fees over time but failed to do so.
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Court Ruling on the Case
On February 1, 2025, U.S. District Court Judge John W. Holcomb denied a motion to dismiss the case, stating that the plaintiffs had successfully presented a claim for breach of fiduciary duty of prudence at this stage of the proceedings.
The ruling emphasized that:
- Plaintiffs provided enough details to support their claims that plan fiduciaries did not act in the best interest of participants.
- The lawsuit sufficiently alleges that plan executives failed to monitor and manage fees responsibly.
- Defendants could potentially be held accountable for not removing executives who did not comply with ERISA’s fiduciary standards.
Next Steps in the Lawsuit
The plaintiffs are seeking class action status, which would allow a broader group of employees to join the case. The Allied Universal 401(k) Plan, associated with Universal Services of America, held $498 million in assets as of December 31, 2022, according to the latest Form 5500 filing.
As the lawsuit moves forward, it could set a precedent for how security companies manage retirement plans and ensure compliance with ERISA regulations.
