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Recreational Equipment Inc. (REI) successfully defeated a proposed class action lawsuit challenging its 401(k) plan’s administrative fee structure. A federal judge in Washington state dismissed claims that REI unlawfully charged administrative costs only to participants with account balances exceeding $5,000, affirming that federal benefits law does not require equal distribution of such expenses.

On Wednesday, U.S. Circuit Judge Tiffany M. Cartwright granted REI’s motion to dismiss the Employee Retirement Income Security Act (ERISA) suit filed in December 2023 by former employees Macy Smith and Sally Johnson. The plaintiffs alleged that REI’s retirement plan, which holds over $1.02 billion in assets and serves 24,455 participants, imposed disproportionately high recordkeeping fees on certain participants.

Judge Cartwright’s ruling emphasized that every method of allocating recordkeeping fees inherently results in some participants subsidizing others. She noted that REI’s hybrid fee allocation method—assessing fees per capita but only for accounts over a specified threshold—is neither unique nor unreasonable. Further, Department of Labor guidance permits such allocation methods under ERISA if a rational basis exists.

The court found insufficient evidence that REI’s retirement committee acted imprudently by not calculating or discussing exact fee amounts for participants with balances above $5,000. The ruling underscores that fluctuating fee estimates alone do not demonstrate a breach of fiduciary duty.

Representatives from both parties have yet to comment on the decision.