Robert Mator v. Wesco Distribution Inc

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

______

No. 22-2552

______

ROBERT MATOR; NANCY MATOR, individually and as

representatives

of a class of participants and beneficiaries in and on behalf of

WESCO Distribution, Inc. Retirement Savings Plan,

Appellants

v.

WESCO DISTRIBUTION, INC.; THE ADMINISTRATIVE

AND INVESTMENT

COMMITTEE FOR WESCO DISTRIBUTION INC

RETIREMENT SAVINGS PLAN;

JOHN AND JANE DOES 1-30

______

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. No. 2-21-cv-00403)

District Judge: Honorable Marilyn J. Horan

______

Argued on April 18, 2023

Before: HARDIMAN, PORTER and FISHER, Circuit

Judges.

(Filed: May 16, 2024)

Timothy L. Foster

Paul R. Wood

Franklin D. Azar & Associates

14426 East Evans Avenue

Aurora, CO 80014

Mariah Heinzerling

Beena M. McDonald

Steven A. Schwartz [ARGUED]

Chimicles Schwartz Kriner & Donaldson-Smith

361 W Lancaster Avenue

One Haverford Centre

Haverford, PA 19041

Counsel for Appellant

Deborah S. Davidson

Morgan Lewis & Bockius

110 N Wacker Drive

Suite 2800

Chicago, IL 60606

Michael E. Kenneally

Matthew J. Sharbaugh [ARGUED]

Morgan Lewis & Bockius

1111 Pennsylvania Avenue NW

Suite 800 North

Washington, DC 20004

Stephanie R. Reiss

Morgan Lewis & Bockius

2

301 Grant Street

One Oxford Centre, Suite 3200

Pittsburgh, PA 15219

Counsel for Appellee

Jordan Bock

Goodwin Procter

100 Northern Avenue

Boston, MA 02210

Jaime A. Santos

Goodwin Procter

1900 N Street NW

Washington, DC 20036

Jordan Von Bokern

United States Chamber Litigation Center

1615 H Street NW

Washington, DC 20062

Counsel for Amicus Appellee

______

OPINION OF THE COURT

______

FISHER, Circuit Judge.

Plaintiffs Nancy Mator and Robert Mator participate in

the Wesco Distribution, Inc. Retirement Savings Plan. On

behalf of themselves and a class of participants and

beneficiaries, the Mators sued the Plan, its fiduciaries, and

Wesco Distribution, Inc. (collectively, “Wesco”). The Mators

allege Wesco violated fiduciary duties imposed by the

Employee Retirement Income Security Act of 1974 (ERISA)

because it paid excessive recordkeeping fees and failed to

3

monitor the Plan. The District Court dismissed the complaint

with prejudice. But under controlling law, the complaint

properly states these claims. We will therefore vacate and

remand.

At the motion-to-dismiss stage, the facts are limited to

the allegations in the complaint. In re Asbestos Prods. Liab.

Litig. (No. VI), 822 F.3d 125, 133 (3d Cir. 2016). Courts accept

the factual allegations as true and view them in the light most

favorable to the plaintiff. Doe v. Princeton Univ., 30 F.4th 335,

340 (3d Cir. 2022). Courts may also “consider documents

integral to or explicitly relied upon in the complaint or any

undisputedly authentic document that a defendant attaches as

an exhibit to a motion to dismiss if the plaintiff’s claims are

based on the document.” In re Asbestos Prods., 822 F.3d at 133

n.7 (internal quotation marks, citations, and emphasis omitted);

see also Steinhardt Grp. Inc. v. Citicorp, 126 F.3d 144, 145 &

n.1 (3d Cir. 1997) (considering contracts underlying the

complaint, which were attached to the motion to dismiss).

To its motion to dismiss, Wesco attached the Plan’s fee

disclosures and excerpts of the Plan’s service agreements. It

also attached several Form 5500s, which are reports that

retirement plans must file annually with the federal

government. The Mators did not take exception to Wesco’s

attachments and, in fact, drew on them in amending their

complaint. No one has disputed the documents’ authenticity

and the Mators’ claims are based on them. The District Court

therefore properly relied on these documents, and we may as

well. See In re Asbestos Prods., 822 F.3d at 133 n.7. According

to the documents, as well as the allegations in the complaint,

the facts are as follows.

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1. The Plan and its recordkeeping fees

Wesco Distribution, Inc., a Pittsburgh company,

maintains the Wesco Distribution, Inc. Retirement Savings

Plan. The Plan is subject to ERISA. Wesco and its

Administrative and Investment Committee are the Plan’s

administrators, which makes them ERISA fiduciaries. See 29

U.S.C. § 1002(21)(A). At the end of 2020, the Plan had about

$837 million in assets and nearly 8,300 participants. Among

those participants are plaintiffs Robert Mator and Nancy

Mator.

The Plan is a defined contribution plan. Thus, it

“promises the participant the value of [his or her] individual

account at retirement.” Boley v. Universal Health Servs., Inc.,

36 F.4th 124, 128 n.2 (3d Cir. 2022) (quoting LaRue v.

DeWolff, Boberg & Assocs., 552 U.S. 248, 250 n.1 (2008)).

That value is determined by how much was put into the account

on the participant’s behalf, whether the chosen investments

gain or lose value, and how much the account pays in fees. Id.

Between 2015 and 2020, Wells Fargo was the Plan’s

recordkeeper. Wells Fargo provided participants with internet

access to their accounts, transaction processing, quarterly

statements, communications including disclosures and

newsletters, retirement education, telephone support, and a

“brokerage window” that allowed participants to invest in

stocks that were not part of the plan’s menu of options. App.

2137.

Wells Fargo was paid for these recordkeeping services

through direct and indirect fees. Direct fees are paid from a

plan’s assets: “the fiduciary contracts with the recordkeeper to

obtain services in exchange for a flat annual fee based upon the

number of participants.” App. 2130. Indirect fees are paid by

participants as a result of revenue-sharing agreements between

recordkeepers and plan investments, such as mutual funds. “In

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a revenue sharing arrangement, the mutual fund pays the plan’s

recordkeeper putatively for providing recordkeeping and

administrative services for the [mutual] fund.” App. 2131.

Indirect fees paid through revenue sharing are based on the

amount of assets in participants’ mutual fund accounts.

The Mators allege the retirement plan services market

is “highly competitive,” App. 2126, and large plans like

Wesco’s “have the bargaining power to obtain the highest level

of service and the lowest fees,” App. 2121. Such plans “possess

tremendous economies of scale,” App. 2127, because “the

marginal cost of adding an additional participant to a

recordkeeping platform is relatively low” and recordkeeping

services for any participant cost about the same regardless of

the participant’s account balance, App. 2126. “Therefore, . . .

[a]s the number of participants in the plan increases, the cost

per[ ]participant to deliver the recordkeeping and

administrative services decreases.” App. 2127.

Given these dynamics, “a flat price per participant . . .

ensures that the compensation [paid to a recordkeeper] is tied

to the actual services provided and does not grow” just because

participants have contributed more to their accounts or the

market has gone up. App. 2130–31. Indirect fees, “if not

closely monitored,” may become unreasonable because they

“bear no relation to the actual cost to provide reasonable

recordkeeping and administrative services.” App. 2133–34.

The Mators allege the fiduciary’s standard of care for

negotiating and monitoring recordkeeping fees is “well

established . . . based on [Department of Labor] guidelines,

case law, and best practices as shared by retirement plan

professionals.” App. 2134. With regard to the substance of the

standard, the Mators cite a consulting firm’s publication to

allege prudent plan fiduciaries pay administrative fees on a per-

participant basis, benchmark and negotiate fees every other

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year, ensure that only contractually required fees are actually

paid, and review services annually. And they allege a survey

of retirement plans determined that plans with 5,000 to 10,000

participants (like the Plan) pay $40 to $60 in fees.

The Mators further allege that “[r]ecordkeeping fees for

large plans have declined significantly in recent years due to

increased technological efficiency, competition, and increased

attention to fees . . . .” App. 2135. Thus, “fees that may have

been reasonable at one time may have become excessive.” Id.

The Mators allege that to avoid overpaying, prudent fiduciaries

regularly ask other recordkeepers to bid on services. Getting

bids is easy, they allege, because plans need only provide a few

basic facts: the number of participants and, possibly, the

amount of assets. The Mators claim the competitive bidding

process should be conducted “at least once every three to five

years.” App. 2136. Yet Wesco failed to do so for over ten years.

From 2015 through 2020, the Plan paid Wells Fargo

direct fees of between $50 and $82 per participant—on

average, $66. As opposed to a typical direct fee (a flat amount

of dollars per participant), this was a “direct asset-based fee”—

a percentage of each participant’s account balance paid directly

from his or her account to Wells Fargo. App. 2138. Wells

Fargo was also paid indirect fees (revenue sharing payments

from Plan investments) of between $80 and $103—on average,

$91. Thus, the total per-participant fees (direct plus indirect)

ranged from $110 to $185—on average, $153–$154. This is

something like two to four times the alleged $40 to $60

industry average as of 2018. Fees were not capped, nor was

Wells Fargo “required to refund any excess amounts

collected.” App. 2138–39. The Mators allege “the Plan should

unquestionably have been able to obtain recordkeeping and

administrative services [at] significantly lower rates” than it

paid. App. 2141. And the Plan’s fees “were excessive relative

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to the type and quality of the services received by the Plan

when benchmarked against other similar-sized plans for the

same or similar recordkeeping and administrative services.”

App. 2137–38. “These excessive fees led to lower net returns”

for Plan participants. App. 2138.

The Mators provide a table in their complaint showing

five other plans for which Wells Fargo provided recordkeeping

services. In 2018, these plans had between 6,500 and 12,700

participants (compared to the Plan’s 8,600 participants) and

$219 million to $1.1 billion in plan assets (compared to the

Plan’s $671 million). The other plans allegedly paid $37 to $52

per participant—an average of $44—while the Plan paid $154.

The Mators next provide a table showing eleven plans

that received recordkeeping services from other providers such

as Vanguard and Fidelity. In 2018, these plans had between

4,950 and 13,500 participants and plan assets between $221

million and $2.1 billion. The other plans allegedly paid from

$31 to $53 per participant—an average of $42—compared to

the Plan’s $154.

But there is a caveat to these comparisons: the Mators

do not have complete information. They calculated direct fees

based on publicly available information, including the plans’

Form 5500s. The Form 5500—a joint creation of the IRS, the

Department of Labor, and the Pension Benefit Guaranty

Corporation—is the “Annual/Return Report of [an] Employee

Benefit Plan.” 2018 Instructions for Form 5500;1 see also 29

U.S.C. §§ 1021, 1024(a) (requiring plans to file annual

1

https://www.dol.gov/sites/dolgov/files/EBSA/employ

ers-and-advisers/plan-administration-and-

compliance/reporting-and-filing/form-5500/2018-

instructions.pdf [https://perma.cc/6RP3-6N5C].

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reports). The Form 5500 requires a plan to list the amount of

direct compensation it paid.

But the Form 5500 asks only whether indirect

compensation was paid—yes or no—rather than asking the

dollar amount. To determine indirect fees, the Mators looked

at the list of investments a plan offered its participants (such as

money market funds and various types of mutual funds) and

then sussed out the revenue sharing rates for those investments

by checking a different part of the Form 5500 or using

“publicly available” rates. App. 2142. While these allegations

provide a somewhat detailed description of how the Mators

calculated indirect fees, they do not allow us to replicate the

calculations. For instance, the complaint does not say where

the revenue-sharing rates were publicly available or what the

rates were.

Much of the dispute about the sufficiency of the

complaint turns on whether it provides apples-to-apples

comparisons between the Plan and other plans. The Mators

beefed up successive versions of their complaint to show their

comparisons are valid. For instance, they allege that either the

Plan’s “direct fees alone” or its “indirect fees alone” were

“unreasonable compared to the total fees . . . that other similar

plans paid.” App. 2138, 2139. The implication is that the Plan

overpaid, even if the comparisons are imperfect.

To support the contention that the comparisons actually

are sound, the Mators repeatedly allege that all defined

contribution plans buy essentially the same bundle of

recordkeeping services with no appreciable difference in

quality. App. 2125 (“For large plans . . . , any minor variations

in the way that these essential services are delivered have no

material impact on the fees charged . . . .”); App. 2137

(recordkeeping services Wells Fargo provided to the Plan were

“typical of the services provided to any large defined

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contribution plan”); App. 2145 (“During the Class Period,

Fidelity, Vanguard, T. Rowe Price, Voya and Transamerica all

provided identical or similar services of the same quality to the

comparator plans as those provided by Wells Fargo to the

Plan.”).

Finally, the Mators allege that in July 2020, the Plan

switched to Fidelity for recordkeeping services and paid a

much lower flat fee of $54 per participant. “Plaintiffs and other

Plan participants received the same services from Fidelity that

they had previously received from Wells Fargo” and “did not

experience a reduction in the level or quality of retirement plan

services . . . .” App. 2147–48. “This further confirms that the

services offered by Fidelity (and other large recordkeepers) are

substantially similar in all material respects to the services

offered by Wells Fargo.” App. 2148.

In sum, the Mators allege that as a result of Wesco’s

imprudence, the Plan paid “four times the reasonable cost of

recordkeeping,” which caused the participants to lose “millions

of dollars in their retirement savings over the last six-plus

years.” App. 2149.

2. Mutual fund share classes offered by the Plan

The Mators allege the Plan imprudently offered

participants expensive classes of mutual fund shares. Mutual

funds offer multiple classes of shares that are identical in every

way except cost. The more expensive retail-class shares “are

targeted at smaller investors with less bargaining power, while

lower-cost shares are targeted at institutional investors with

more assets, generally $1 million or more, and therefore greater

bargaining power.” App. 2151. The Mators allege that “[e]ven

when a plan does not yet meet the investment minimum to

qualify for the cheapest available share class, it is well-known

among institutional investors that mutual fund companies will

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typically waive those investment minimums for a large plan.”

App. 2152. The Mators concede that “plans often select mutual

fund share classes that include revenue sharing to pay for some

or all of the plan administrative expenses.” Id. But, they allege,

“prudent fiduciaries monitor the amount of revenue sharing” to

make sure indirect fees do not become “unreasonably high.”

Id. If they do, the plans switch to cheaper share classes or

obtain rebates.

The Mators say that for nineteen of the mutual funds

Wesco offered participants, it chose expensive share classes

that were subject to revenue sharing and therefore “had higher

operating expenses than other available classes of the same

mutual funds.” Id. The Mators allege the Plan was already

paying too much in direct fees, so if the defendants had been

monitoring properly, “they would have realized that it was not

necessary to allow Wells Fargo to collect additional fees

[indirectly] through revenue sharing.” App. 2153. Offering

expensive share classes allegedly caused participants to pay

“excess costs of between $700,000 and $900,000 per year.”

App. 2155. And the fees allegedly paid for services that were

not needed because Wells Fargo was already providing them.

Finally, the Mators allege the higher-cost share class offerings

show that Wesco did not have “a prudent process to evaluate,

negotiate, and/or monitor . . . fees.” Id.

3. Failure to monitor

The Mators allege Wesco had the duty to monitor those

“responsible for overseeing retirement plan service fees for the

Plan to ensure that they were adequately performing their

fiduciary obligations.” App. 2161. They allege Wesco

breached that duty by, among other things, failing to monitor

the responsible individuals and the processes by which those

individuals administered the Plan.

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The Mators filed their complaint in March 2021. In

Count I, they alleged Wesco breached its duty of prudence by

causing the Plan to pay excessive recordkeeping fees and by

offering mutual fund investment options in higher-cost share

classes. In Count II, they alleged Wesco breached its duty to

monitor the processes and people administering the Plan.

Wesco moved to dismiss for failure to state a claim, and the

District Court granted the motion without prejudice. The Court

held that in order for the excessive fee allegations to “pass from

‘possible to the plausible,’ an apples-to-apples comparison is

necessary.” App. 57. But the Mators “allege[d] no facts about

the level of services provided to the Plan’s participants” and

did “not allege the complete nature and scope of services

provided by the alleged comparator plans.” App. 56. The

share-class allegations were “conclusory.” App. 59. The Court

held the failure-to-monitor claim was insufficient as a matter

of law because it was derived from Count I, the excessive-fee

and share-class claims.

The Mators amended their complaint in October 2021,

but the District Court again dismissed it. Their final amended

complaint, filed in April 2022, met with the same fate—except

this time it was dismissed with prejudice. The Court continued

to view the successive iterations of the complaint as conclusory

and insufficiently specific. The Mators appeal.

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2

Congress enacted ERISA to protect “employees and

their dependents” whose “well-being and security” was

affected by “the lack of . . . adequate safeguards” for employee

benefit plans. 29 U.S.C. § 1001(a). Congress also did not want

“to create a system that is so complex that administrative costs,

or litigation expenses, unduly discourage employers from

offering welfare benefit plans in the first place.” Fifth Third

Bancorp v. Dudenhoeffer, 573 U.S. 409, 425 (2014) (quoting

Varity Corp. v. Howe, 516 U.S. 489, 497 (1996)). ERISA

therefore “represents a careful balancing between ensuring fair

and prompt enforcement of rights under a plan and the

encouragement of the creation of such plans.” Id. at 424

(internal citation and quotation marks omitted); see also Sweda

v. Univ. of Pa., 923 F.3d 320, 327 (3d Cir. 2019) (ERISA

furthers the distinct goals of “safeguarding anticipated

employee benefits” and “assuring a predictable set of

liabilities” for employers) (quoting first Cutaiar v. Marshall,

590 F.2d 523, 529 (3d Cir. 1979), then Renfro v. Unisys Corp.,

671 F.3d 314, 321 (3d Cir. 2011)).

ERISA requires the appointment of “one or more named

fiduciaries who . . . shall have authority to control and manage

the operation and administration” of an employee benefit plan.

29 U.S.C. § 1102(a)(1). A fiduciary must administer the plan

“solely in the interest of the participants and beneficiaries and

2

The District Court had jurisdiction under 28 U.S.C.

§ 1331 (actions arising under the laws of the United States) and

29 U.S.C. § 1132(e)(1) and (f) (ERISA civil enforcement

actions). This Court has jurisdiction under 28 U.S.C. § 1291

(final orders of district courts). We review on a plenary basis

an order granting a motion to dismiss for failure to state a

claim. In re Asbestos Prods., 822 F.3d at 131.

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. . . with the care, skill, prudence, and diligence under the

circumstances then prevailing that a prudent [person] acting in

a like capacity and familiar with such matters would use in the

conduct of an enterprise of a like character and with like aims.”

Id. § 1104(a)(1). “A fiduciary’s process must bear the marks of

loyalty, skill, and diligence expected of an expert in the field.

It is not enough to avoid misconduct, kickback schemes, and

bad-faith dealings. The law expects more than good

intentions.” Sweda, 923 F.3d at 329.

ERISA entitles a participant in a defined contribution

plan to “the value of his account unencumbered by any

fiduciary impropriety.” Graden v. Conexant Sys. Inc., 496 F.3d

291, 297 (3d Cir. 2007). A participant may sue a fiduciary who

breaches his duties, 29 U.S.C. § 1132(a)(2), and the fiduciary

is “personally liable to make good to such plan any losses to

the plan resulting from each such breach,” id. § 1109(a).

The standard for pleading an ERISA claim is, of course,

key to the resolution of this case. As in all civil cases, the

familiar pleading standards of Federal Rules of Civil Procedure

8(a) and 12(b)(6) require an ERISA plaintiff to “allege enough

facts to state a claim to relief that is plausible on its face.”

Renfro, 671 F.3d at 320–21 (quoting Matrixx Initiatives, Inc.

v. Siracusano, 563 U.S. 27, 46 n.12 (2011)). When assessing

the sufficiency of the complaint, we pay attention to “the

context of [the] claim, including the underlying substantive

law.” Id. This means we evaluate the allegations bearing in

mind ERISA’s twin goals of protecting participants and

encouraging plan creation through a predictable set of

liabilities for employers. Sweda, 923 F.3d at 326.

In addition to the legal context, the factual context is

paramount. “[A]pplying the pleading standard discussed in

Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 173 L. Ed. 2d

868 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544,

14

127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007),” to ERISA fiduciary

breach claims “will necessarily be context specific” because

“‘the content of the duty of prudence turns on the

circumstances . . . prevailing at the time the fiduciary acts.’”

Hughes v. Nw. Univ., 595 U.S. 170, 177 (2022) (quoting

Dudenhoeffer, 573 U.S. at 425). The circumstances

confronting a fiduciary sometimes require “difficult tradeoffs,”

so “courts must give due regard to the range of reasonable

judgments a fiduciary may make based on her experience and

expertise.” Id. To plead a breach of the duty of prudence under

ERISA, then, a plaintiff must plausibly allege fiduciary

decisions outside a range of reasonableness. Id.

Consistent with these rules, a plaintiff alleging an

ERISA fiduciary breach need not “rule out every possible

lawful explanation for the conduct he challenges.” Sweda, 923

F.3d at 326 (quoting Braden v. Wal-Mart Stores, Inc., 588 F.3d

585, 597 (8th Cir. 2009)). In addition to the Eighth Circuit, the

Second and Seventh Circuits agree on this point. See Hughes

v. Nw. Univ., 63 F.4th 615, 629 (7th Cir. 2023); Sacerdote v.

New York Univ., 9 F.4th 95, 108 (2d Cir. 2021). However, the

Rules require dismissal when fiduciary defendants offer an

alternative explanation for their conduct that is “obvious,”

“natural,” or simply “more likely” than the plaintiff’s theory of

15

misconduct. See Twombly, 550 U.S. at 567–68 (“obvious,”

“natural”); Iqbal, 556 U.S. at 680 (“more likely”).3

The elements of an ERISA breach of fiduciary duty

claim are: “(1) a plan fiduciary (2) breaches an ERISA-

imposed duty (3) causing a loss to the plan.” Sweda, 923 F.3d

at 328 (quoting Leckey v. Stefano, 501 F.3d 212, 225–26 (3d

Cir. 2007). The parties dispute only the second element. In the

two counts of their complaint, the Mators allege Wesco

(A) breached its duty of prudence by causing or permitting the

Plan to pay excessive fees for recordkeeping services and

offering retail-class shares of mutual funds, and (B) breached

its duty to monitor the fiduciaries and the administration of the

Plan.

1. Excessive recordkeeping fees

To explain why the Mators’ complaint states a claim,

we return to Sweda, where we reversed a dismissal. 923 F.3d

at 320. Sweda alleged the following: the market for

recordkeeping services is competitive; large plans offer

economies of scale for recordkeeping; “paying for

recordkeeping with asset-based revenue sharing,” though “not

per se [a] violation of ERISA, . . . can lead to excessive fees if

not monitored and capped”; and competitive bids should be

3

In Sweda, we held that “Twombly’s discussion of

alleged misconduct that is ‘just as much in line with a wide

swath of rational and competitive business strategy’ is specific

to antitrust cases.” 923 F.3d at 326 (quoting Twombly, 550 U.S.

at 554). The Supreme Court recently abrogated that specific

portion of Sweda by reiterating that in ERISA cases, courts are

to “apply[] the pleading standard discussed in [Iqbal] and

[Twombly].” Hughes, 595 U.S. at 177.

16

obtained for recordkeeping services. Amended Complaint,

Sweda v. Univ. of Pa., No. 16-4329, Dkt. No. 27, pp. 44–48

(E.D. Pa. Nov. 21, 2016). Sweda alleged the University of

Pennsylvania retirement plan paid fees of about $220 to $250

per participant—but based on the plan’s features, the

recordkeeping services provided, the number of participants,

and market conditions, “experts in the recordkeeping industry”

determined the plan should have paid no more than $35 per

participant. Id. at 50–51. Sweda did not support that allegation

with any comparisons to other plans. See id.

Keeping in mind the importance of context and the

regard due to the “range of reasonable judgments” a fiduciary

might make when faced with “difficult tradeoffs,” Hughes, 595

U.S. at 177, we observe that the Mators’ allegations are more

specific than Sweda’s and provide more context. As in Sweda,

the Mators allege the Plan’s fees were several times larger than

what similar plans paid; the Plan’s fiduciary did not negotiate

a fee cap or solicit bids (although revenue sharing rates fell on

a percentage basis); the asset-based fee structure caused the

Plan’s fees to rise when there was no corresponding increase

in services; and similarly situated fiduciaries requested

proposals and negotiated with recordkeepers to keep fees

reasonable. Unlike Sweda, the Mators provide context for

these allegations by making additional allegations about the

amount of the fees paid by comparator plans. These

comparisons nudge their complaint across the line from

conceivable to plausible. See Twombly, 550 U.S. at 570.

Although reasonable fiduciaries need not prioritize cost

minimization above all else, there is enough evidence alleged

here of a failure to act prudently.

The District Court held that the comparisons merely

provided a “side by side list,” not an “apples to apples”

comparison. App. 19 (citation omitted), 22. It reached this

17

conclusion for three main reasons: differences in services

provided by the comparator plans’ recordkeepers, differences

in plan sizes, and problems with how the Mators calculated the

fees paid by the Plan and its comparators. But a close

examination of the complaint and attached documents shows

that the District Court’s criticisms do not scuttle the

comparisons or the complaint.

Services provided by the various recordkeepers. On the

Form 5500, plans are asked to list codes showing what services

were rendered by the provider. The District Court held that the

complaint did not account for the differences in the

recordkeeping services listed on the comparator plans’ Form

5500s. There are indeed variations between the service codes,

but the differences are not fatal.

From 2015 to 2019, the Plan obtained six services from

recordkeeper Wells Fargo: “Recordkeeping and information

management (computing, tabulating, data processing),”

“Trustee (bank, trust company),” “Direct payment from the

plan,” “Float revenue,” “Participant loan processing,” and

“Recordkeeping fees.” App. 2260, 2303, 2346, 2387, 2427; see

also 2018 Form 5500 Instructions p. 27 (providing list of

service codes). In 2020, when Fidelity became the Plan’s

recordkeeper, the Plan’s Form 5500 retained two of these

service codes, “Participant loan processing” and

“Recordkeeping fees,” and listed three new ones: “Sub-transfer

agency fees,” “Account maintenance fees,” and “Securities

brokerage commissions and fees.” App. 2697.

The Form 5500 for one comparator, the Red Lobster

plan, lists six service codes that exactly match the Plan’s six

service codes from 2015 to 2019. But the other comparators’

codes differ from the Plan’s and from one another’s. In

addition to the previously mentioned services, some

comparators listed: “Contract administrator,” “Consulting,”

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“Trustee (directed),” “Investment advisory (participants),”

“Securities brokerage,” “Investment management fees paid

indirectly by plan,” and “Sub-transfer agency fees.” App.

2495, 2535, 2574, 2612, 2649, 2748.

The different service codes do not undermine the

Mators’ comparisons because they apparently overlap. All of

the plans list either “Recordkeeping fees,” “Recordkeeping and

information management (computing, tabulating, data

processing),” or both. These two codes seem similar. Other

codes seem to overlap as well, such as “Securities brokerage”

and “Securities brokerage commissions and fees.”

“Consulting” could cover a wide variety of services and could

intersect with other categories. And it is unclear why the code

“Direct payment from the plan” exists at all, since every dollar

reported on this part of Form 5500 is “direct compensation paid

by the plan.” See, e.g., App. 2260. At this stage, the record does

not reveal the codes’ precise meanings, nor whether all plans

define the codes consistently. But given that all the plans

received some portion of an overlapping constellation of

recordkeeping services, the comparisons help nudge the

Mators’ claims across the line from possible to plausible.

For their part, the Mators argue that “due to the nature

and competitiveness of the market at the top levels [of]

recordkeeping service for large plans, it would be reasonable

to infer that similar services” were provided. Appellants’ Br.

41–42. Their complaint emphasizes this point. It alleges, for

instance, that “[f]or large plans with greater than 5,000

participants, like the Plan, any minor variations in the way that

these essential services are delivered have no material impact

on the fees charged,” which is demonstrated by the fact that

“all service providers quot[e] fees on a per-participant basis

without regard for any individual differences in services

requested.” App. 2125. Assuming the truth of this allegation,

19

the information about comparator plans helps render the

Mators’ claim plausible despite the differences in service

codes.4

Plan sizes. Second, the District Court faulted the Mators

for providing comparators that did “not match the Plan relative

to number of participants or asset sizes, or the average of all

other plans of similar sizes.” App. 21. We know of no authority

on how close comparators must be in size, and the Mators’

choices are sound. The comparator plans ranged from 4,950 to

13,502 participants and had assets of $221 million to $2.1

billion. The Plan—with 8,600 participants and $671 million in

assets—falls roughly in the middle of that range. If we were to

limit comparators to the 7,000 to 10,000 participant range, that

would leave six of the eleven comparators. If we were to limit

comparators to the $350 million to $1 billion asset range, that

would leave four of the eleven comparators. Four does not

seem insufficient. See Johnson v. PNC Fin. Servs. Grp., Inc.,

2022 WL 973581, at *1 (W.D. Pa. Mar. 31, 2022) (denying

motion to dismiss complaint that made allegations about four

comparator plans).

Wesco says that if we consider only those comparator

plans whose participants and assets are 75% to 125% of the

Plan’s 2018 participants and assets, three comparators would

4

Amicus Chamber of Commerce argues that

“[r]ecordkeeping services are highly customizable” and

“myriad services are available at different fee levels,” usually

with “extraordinarily complicated” fee arrangements. Amicus

Br. 17–18. If the Chamber is correct, it would be virtually

impossible for a plaintiff to identify plans that buy precisely

the same bundle of services as a defendant plan. That would

make it more important for courts not to disregard every less-

than-identical comparator.

20

remain. Wesco does not offer any authority supporting a 75%-

to-125% limitation. Regardless, even accepting Wesco’s

argument, the three remaining comparators allegedly paid

2018 per-participant fees of $51, $31, and $44, compared to

the Plan’s $154. That is a stark difference. Drawing bright lines

would run counter to the required contextual analysis, so we do

not adopt any rules limiting comparator size or requiring a

specific number of comparators. Regardless, winnowing the

comparators as Wesco proposes would not leave the complaint

bereft of allegations that help make a fiduciary breach

plausible.

By rejecting the comparator plans on the basis of size,

the District Court erroneously failed to view the allegations in

the light most favorable to the Mators. Construed most

favorably to them, the comparisons show the Plan paid well

above what others did. Moreover, assuming the truth of the

allegations that large plans have superior bargaining power and

the cost per participant falls as participant numbers increase,

the smaller comparators actually strengthen the complaint. If

smaller plans can obtain lower fees than the Plan despite less

bargaining power and higher per-participant costs, it is more

likely the Plan’s fiduciaries breached their duty of prudence.

Fee calculations. Third, the District Court faulted the

Mators’ comparisons based on their fee calculations. To

understand the complications in calculating recordkeeping

fees, we begin with Form 5500, which asks for the amount of

“direct compensation paid by the plan to service providers.”

See, e.g., App. 2260. With this data, ascertaining direct

compensation seems straightforward enough. But for indirect

compensation, the form asks only whether such fees were paid,

not their amount.

The District Court observed that for some

comparators—two, to be precise—the Mators allege that the

21

total fee amounts are the same as the direct fee amounts shown

on the Form 5500s, even though the plans also reported they

paid indirect fees. We can infer that by leaving out indirect

fees, the Mators underreported the total fees paid by these two

plans. But even if we disregard the two plans, we are left with

fourteen comparators that paid significantly lower fees than the

Plan.

Like the District Court, Wesco finds fault with the

Mators’ calculations of comparators’ fees, saying: “Plaintiffs

. . . claim to be adding indirect fee amounts ‘using publicly

available revenue sharing rates’,” but “[t]hey do not explain

where or how those rates for other plans are ‘publicly

available.’” Appellees’ Br. 40–41 (quoting App. 2142–43). In

other words, Wesco argues the Mators need to explain

precisely how they calculated the fees alleged in the complaint.

Although plaintiffs may be well advised to do so, we have not

required this in the past. The Sweda plaintiff did not say how

she calculated Penn’s indirect fees—only that her allegations

were based on Penn’s Form 5500s and “information from

sources including industry experts.” Sweda, No. 16-4329 (E.D.

Pa.), Amended Complaint, ECF No. 27, p. 49. Yet her

allegations, in context, stated a claim. Sweda, 923 F.3d at 332.

The same is true here.

In sum, the Mators’ comparisons between the Plan and

other plans, while not perfect, are sufficient to plausibly state a

claim for breach of fiduciary duty.

Wesco cites several cases in support of its argument for

affirmance. We agree with our sister Circuits’ articulation of

the relevant law in those cases. See Matousek v. MidAmerican

Energy Co., 51 F.4th 274, 278–79 (8th Cir. 2022); Smith v.

CommonSpirit Health, 37 F.4th 1160, 1164–65 (6th Cir. 2022).

Contrary to Wesco’s arguments, however, the fact that

Matousek and Smith affirmed dismissal of the respective

22

complaints has little bearing on our decision. The complaints

in both cases fell short in ways the Mators’ does not. The Smith

opinion mostly analyzes a fiduciary breach claim based on

excessive investment fees—which is a type of claim the Mators

do not allege. 37 F.4th at 1165–69.5 The portion of Smith

dealing with what we are looking at here—excessive

recordkeeping fees—held the complaint was properly

dismissed because the plaintiff’s only comparators were

averages from an industry publication. Id. at 1169. That

“fail[ed] to give the kind of context that could move [the] claim

from possibility to plausibility,” because the plaintiff did “not

plead[] that the services that CommonSpirit’s fee covers are

equivalent to those provided by the plans comprising the

average in the industry publication that she cites.” Id. Matousek

is similar. See 51 F.4th at 279–80 (“[T]he way to plausibly

plead a claim of this type is to identify similar plans offering

the same services for less,” but “[r]ather than point to the fees

paid by other specific, comparably sized plans, the plaintiffs

rel[ied] on industry-wide averages” without accounting for

differences in the services purchased.). Here, as we have

explained, the Mators give the context the Smith and Matousek

plaintiffs omitted: they provide specific plan comparators, not

just industry averages, and plausibly allege that the services

purchased were sufficiently similar to render the comparisons

valid.

5

Another of Wesco’s cases, Forman v. TriHealth, Inc.,

is distinguishable insofar as it discussed excessive investment

fees and breaches of the duty of loyalty. 40 F.4th 443, 449–50

(6th Cir. 2022). When it came to the share class claim, which

is similar to the Mators’ claim we discuss below, the Sixth

Circuit concluded—as we do here—that the complaint was

sufficient. Id. at 450–51; see also Part II.A.2., below.

23

Wesco contends the statute of limitations does not allow

us to consider the Mators’ allegation that Wesco failed to

engage in a bidding process every three to five years. Wesco’s

argument goes as follows: the six-year ERISA statute of

limitations permits us to look back only as far as 2015, and

because less than five years elapsed between that point and the

Plan’s 2020 change in recordkeepers, the Mators are unable to

allege that Wesco failed to get bids for more than five years.

The Mators reply that allegations in the complaint are

not bounded by the statute of limitations. They agree they

cannot collect damages for breaches before 2015, but argue it

is proper for their allegations to encompass a longer time

period to allow for the necessary context-specific analysis.

Reply Br. 16. They are correct. Discovery may be permitted

for “events that occurred before an applicable limitations

period” if “the information sought is . . . relevant to issues in

the case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340,

352 (1978). Therefore, Wesco’s statute-of-limitations based

argument is unpersuasive. We agree with the Seventh Circuit

that “a failure to regularly solicit quotes or competitive bids

from service providers” does not necessarily give rise to an

imprudence claim. Albert v. Oshkosh Corp., 47 F.4th 570, 579

(7th Cir. 2022). Still, “fiduciaries who fail to monitor the

reasonableness of plan fees and fail to take action to mitigate

excessive fees . . . may violate their duty of prudence.” Hughes,

63 F.4th at 625–26 (emphasis added).

Wesco argues the complaint was correctly dismissed

because the Plan’s recordkeeping fees fell between 2015 and

2020, from fourteen to six basis points (that is, from 0.14% to

0.06%), and the Plan rebated some fees to participants. As the

Supreme Court instructs, we must give “due regard to the range

of reasonable judgments a fiduciary may make.” Hughes, 595

U.S. at 177. We agree that “[s]ometimes an alternative

24

explanation for an ERISA fiduciary’s conduct may be patently

more reasonable and better supported by the [alleged] facts

than any theory of fiduciary duty violation pleaded by a

plaintiff,” and in those circumstances “courts should not

hesitate to dismiss.” Hughes, 63 F.4th at 630. But Wesco’s

alternative explanation is not more reasonable or better

supported than the Mators’ theory of misconduct, given the

magnitude of the differences in fees—about two to four times

what comparable plans paid.

Wesco also attacks the Mators’ calculations of the

Plan’s fees. Wesco says that by adding direct and indirect fees

to come up with the total fees, the Mators “essentially double-

count” because “Wells Fargo did not receive any ‘direct’ fees

from the Plan, as confirmed by the absence of any such fees in

the participant disclosures.” Appellees’ Br. 42 n.6 (citing App.

2200–30). But the Plan’s Form 5500s seem to say otherwise:

each year, the Plan reported paying hundreds of thousands of

dollars to Wells Fargo as “direct compensation.” App. 2260,

2303, 2346, 2387, 2427. Wesco’s explanation is therefore not

obvious, natural, or more likely than the allegations of

misconduct. See Twombly, 550 U.S. at 567–68; Iqbal, 556 U.S.

at 680.

Wesco also contends that “[f]or price comparisons to

raise an inference of an imprudent fiduciary process, there

must also be nonconclusory, fact-based allegations that the

cheaper services were as good as or better.” Appellees’ Br. 33–

34. There are. The Mators allege that when the Plan switched

to Fidelity for recordkeeping services, lowering fees from

about $154 to $54 per participant, there was no change in the

kind or quality of recordkeeping services provided to

participants. In other words, Fidelity’s services allegedly were

as good as Wells Fargo’s, but at a fraction of the price.

25

Although the Mators are correct that their complaint

states a claim, it is worth noting that two of their arguments are

off base. First, they assert the District Court applied an

incorrect dismissal standard. They point out that the Court,

when dismissing the original complaint, quoted another district

judge’s opinion that erroneously said “allegations must cross

‘the threshold from possible to probable.’” App. 55 (quoting

Johnson v. PNC Fin. Servs. Grp., Inc., 2021 WL 3417843, at

*4 (W.D. Pa. Aug. 3, 2021)) (emphasis added). The correct

standard is less demanding: the allegations must move the

claim “from conceivable to plausible.” Twombly, 550 U.S. at

570 (emphasis added). When dismissing the amended and

second amended complaints, the District Court retained the

flawed citation, thus replicating the mistake. But despite this

error, the Court stated the correct “plausibility” standard

numerous times and clearly applied it. App. 23; see also App.

17, 19, 20, 38, 39, 42, 48, 55.

Second, the Mators go too far when they contend the

District Court improperly weighed credibility and decided

facts by pointing out problems with their calculations. Judges

draw on “common sense” when “[d]etermining whether a

complaint states a plausible claim for relief.” Iqbal, 556 U.S.

at 679. And if allegations are based on incorrect arithmetic,

common sense says they are not well-pled. The calculation

problems are not fatal here because even taking those problems

into account, there are enough comparators, and the

comparators are sufficiently similar to the Plan, to state a claim.

But in a different case, calculation errors could conceivably

lead to dismissal of a complaint.

When considering whether a plaintiff has stated a claim

for breach of fiduciary duty under ERISA, “we employ a

holistic approach” that takes into account all of the well-pled

facts. Sweda, 923 F.3d at 331. “The complaint should not be

26

‘parsed piece by piece to determine whether each allegation, in

isolation, is plausible.’” Id. (quoting Braden, 588 F.3d at 594).

Here, the District Court parsed the allegations, found some of

them not well-pled, and dismissed. But the Court’s criticisms,

although partly valid, only nibble around the edges of the

complaint. Even allowing for these criticisms, what remains

plausibly states a claim.

2. Retail-class mutual fund shares

The District Court concluded the Mators did not state a

claim for breach of fiduciary duty based on their allegation that

the Plan offered retail-class shares of some mutual funds,

rather than identical but cheaper institutional-class shares.

Wesco argues we should affirm. It points to the allegation that

more expensive share classes that include revenue sharing can

help pay for a plan’s administrative expenses. It argues that the

more expensive share classes the Plan chose—which did

indeed pay revenue sharing to the recordkeeper—represented

a choice to pay some fees indirectly rather than directly.

Therefore, Wesco says, the share-class claim is “interrelated[]”

with the excessive-fee claim: if the fees were not too high

overall, then paying them partly through revenue sharing was

not imprudent. Appellees’ Br. 45.

Wesco is correct that, as the Mators have pled their

fiduciary breach claim, the excessiveness of the recordkeeping

fees and the impropriety of offering retail-class shares are

intertwined. But, as explained above, the excessive-fee claim

is adequately pled. Because the Mators plausibly allege the

fees were too high overall, it is therefore also plausible that it

was a fiduciary breach to cause participants to pay indirect fees

by offering mutual fund shares subject to revenue sharing.

The District Court dismissed partly based on its

conclusion that the Mators did not “address[] whether the retail

27

share class may have offered other benefits.” App. 42. To the

contrary, the Mators do so. They allege plans might choose

share classes subject to revenue-sharing agreements in order

“to pay for some or all of the plan administrative expenses.”

App. 2152. But the Mators allege this benefit was not realized

here: first, the direct fees alone were too high, so paying

additional fees through revenue sharing was imprudent; and

second, the direct fees were already paying for the needed

administrative services, so there was no reason to pay for more

services indirectly.

Although the Mators have alleged a fiduciary breach

based on the Plan’s offerings of retail-class mutual fund shares,

they overstate the holdings of Tibble v. Edison International,

575 U.S. 523 (2015), and Hughes, 595 U.S. 170. In both cases,

the Supreme Court reversed the dismissal of share-class

claims. Tibble, 575 U.S. at 525–26, 530; Hughes, 595 U.S. at

176–77. But in neither case did the Court decide whether

offering retail-class shares breaches a fiduciary’s duty. In

Tibble, the Ninth Circuit had erroneously held some claims

were time-barred. 575 U.S. at 530. In Hughes, the Seventh

Circuit had erroneously held that offering an array of cheap and

expensive investment options insulates a fiduciary from

liability. 595 U.S. at 176. The Supreme Court rejected those

bases for dismissal and remanded for further proceedings

without expressing a “view on the scope of [defendants’]

fiduciary duty.” Tibble, 575 U.S. at 531; Hughes, 595 U.S. at

177. We therefore decline to articulate a bright-line rule that a

plan administrator breaches its fiduciary duty merely by

offering retail-class investment shares.

Count II of the complaint alleges Wesco breached its

fiduciary duty by failing to monitor those responsible for the

28

Plan and the processes by which it was administered. “[F]ailure

to ‘monitor . . . investments and remove imprudent ones’ may

constitute a [fiduciary] breach.” Sweda, 923 F.3d at 328

(quoting Tibble, 575 U.S. at 530). Whether a “monitoring

claim survives depends on whether [the] underlying breach of

fiduciary duty . . . claims survive.” In re Allergan ERISA Litig.,

975 F.3d 348, 354 n.11 (3d Cir. 2020) (citation omitted).

The District Court held the failure to monitor claim

should be dismissed because the underlying fiduciary breach

claim failed. Id. The parties agree the failure to monitor claim

derives from the primary claim of breach of the duty of

prudence. Having vacated the Court’s dismissal of the

fiduciary breach claim, we will vacate its dismissal of the

derivative monitoring claim as well.

For all these reasons, we will vacate and remand for

further proceedings.

29