Cognizant Technology Solutions will pay $2.8 million to settle a lawsuit alleging mismanagement of its 401(k) plan, Bloomberg Law News reported.

The settlement resolves claims that the plan's fiduciaries failed to monitor investment fees and retain cheaper investment options for participants. The case is part of a broader wave of excessive-fee litigation that has swept retirement plan sponsors over the past decade.

For HR leaders, the settlement is a reminder that retirement plan governance remains a live legal risk. Employers sponsoring 401(k) plans face ongoing obligations to benchmark plan costs, document fiduciary decisions, and periodically review investment lineups against available alternatives.

The claims in the Cognizant case followed a familiar pattern seen in hundreds of similar suits: participants alleged the company selected and retained higher-cost share classes of mutual funds when identical or similar lower-cost options existed, and that recordkeeping fees were excessive relative to the plan's size and negotiating leverage.

Cognizant's 401(k) plan covers tens of thousands of employees, giving it the scale that courts and plaintiffs' attorneys often view as heightening the duty to negotiate favorable terms. The $2.8 million settlement figure is modest compared with some headline verdicts in the genre, but it still represents a meaningful payout for a case resolved before trial.

The settlement requires court approval before it becomes final. Class members — plan participants — will receive distributions from the settlement fund, with the exact allocation method to be detailed in settlement documents filed with the court.

Excessive-fee litigation has reshaped how employers manage retirement plans since a series of high-profile cases beginning in the mid-2000s. Sponsors now routinely conduct formal requests for proposals for recordkeeping services, negotiate fee rebates, and shift toward lower-cost share classes and passive investment strategies.

The litigation wave has also accelerated the movement of plan assets toward collective investment trusts and separately managed accounts, which typically carry lower expense ratios than retail mutual funds.

For employers, the practical takeaways are straightforward. Fiduciary committees should document their fee benchmarking processes, retain independent consultants where appropriate, and maintain minutes showing that investment options were evaluated against alternatives. Failure to do so leaves plans exposed to precisely the type of claims Cognizant faced.

The settlement also underscores the value of periodic plan reviews. Plaintiffs' attorneys frequently build cases around periods when sponsors allowed above-market fees to persist despite obvious alternatives. Regular benchmarking — at least annually — creates a record that fees were actively monitored.

As excessive-fee suits continue to be filed against employers of all sizes, plan sponsors that maintain disciplined governance processes will be best positioned to defend their decisions.