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Nordstrom Inc. is facing a lawsuit filed in Washington federal court, accusing the company of burdening its employees' 401(k) retirement plan with excessive fees and misusing forfeited plan funds to offset its own contribution obligations. The suit, filed by a group of current and former workers on Monday, claims that Nordstrom and its 401(k) retirement committee violated the Employee Retirement Income Security Act (ERISA) by failing to act in the best interests of the plan's participants.

Allegations of Excessive Fees and Mismanagement

The workers argue that Nordstrom's $3.4 billion retirement plan, which serves over 100,000 participants, failed to leverage its considerable size to negotiate lower fees for recordkeeping and administrative services. As a result, participants allegedly paid significantly higher fees than those associated with similarly sized plans, such as those offered by Lowe's, Costco, and Aldi.

According to the complaint, from 2018 to 2023, Nordstrom's plan charged an average annual recordkeeping fee of $42 per participant. In comparison, other large plans reportedly charged fees ranging from $18.50 to $23 per participant, which the workers argue should have been achievable for Nordstrom’s plan. The lawsuit estimates that the excessive fees resulted in an additional cost of nearly $1.85 million per year to participants.

Furthermore, the suit claims that Nordstrom's recordkeeping provider, Alight, offered an expensive managed account service that further inflated the fees charged to plan participants.

Nordstrom Saddled 401(k) Plan With High Fees : Accusations of Self-Dealing

The workers also allege that Nordstrom misused forfeited plan funds, which are typically used to reduce plan expenses for participants. Instead, Nordstrom allegedly used these funds to cover its own contributions to the plan, effectively reducing its expenditures by almost $26 million. The workers claim this constitutes self-dealing, a practice prohibited under ERISA, which mandates that fiduciaries act solely in the interest of plan participants.

"Defendants acted with a conflict of interest in administering the plan and in managing and disposing of its assets," the workers stated in the lawsuit, emphasizing that Nordstrom's actions violated the fiduciary duties established by ERISA.

Legal Representation and Next Steps

The plaintiffs in the case are represented by Erin M. Riley of Keller Rohrback LLP, Paul M. Secunda of Walcheske & Luzi LLC, and Todd M. Schneider and James A. Bloom of Schneider Wallace Cottrell Konecky LLP. As of now, Nordstrom has not publicly responded to the allegations, and counsel information for the company was not immediately available.

This lawsuit adds to the growing number of cases in recent years where companies have been accused of mismanaging employee retirement plans, highlighting the importance of fiduciary responsibility under ERISA.