A class-action lawsuit alleges the National Rural Electric Cooperative Association failed to control the cost for participating in its 401(k) pension program and has used the extra money to subsidize other association programs.

NRECA administers the defined contribution plan on behalf of participating electric cooperatives. Two participants—Thaddius Intravaia and Steven Marvik—sued the association in U.S. District Court earlier this year, alleging it has failed to control administrative costs. In an amended complaint filed in October, the plaintiffs state that NRECA's plan is one of the 75 largest defined contribution plans in the U.S. However, while similarly sized plans typically incur administration costs of less than $100 per participant, the association plan's costs are more than $400 per participant.

The lawsuit also alleges the high costs were "to subsidize other expenses of NRECA and its member employers." NRECA has increasingly used the plan to bolster its own revenues and used money from fees to shore up two other plans it administers, the plaintiffs allege.

"As a result of Defendants' mismanagement of the plan and failure to control plan costs, the plan has suffered millions of dollars in losses through excessive and inappropriate fees," the lawsuit states. The plaintiffs are represented by the Silver Spring, Md.-based law firm Zipin, Amster & Greenberg.

NRECA shot back in a Nov. 1 motion to dismiss, arguing the plaintiffs' case rests entirely on the fact that some other plans have lower fees. The association argues this is an apples-to-oranges comparison given NRECA's plan is a multi-employer plan (MEP) compared to the single-large employer plans that it is being contrasted against. MEPs have their advantages, but they still don't have the scale efficiencies that single-large employer plans enjoy, according to the group's attorneys.

"Apparently they recognize the problem with doing so, however, because they tack on a new allegation that the plan is more expensive than a single other MEP," the association's attorneys said. Even if that particular case were comparable, "all that plaintiffs would have succeeded in alleging is that the plan is not the absolute cheapest plan of all 4,630 MEPs in the country."

NRECA is being represented by Groom Law Group in Washington, D.C.

MORE CEO DATELINE

• Report: National Association of Realtors membership hits record high
• Report: Business Roundtable leading crackdown on investor activism
• Beverage association to coordinate recycling push
• Twitter to ban political ads, effect on associations unclear
• RILA, PhRMA among top contributors to ‘dark money' group