A Minnesota health-care system maintained two separate record-keepers, preventing it from the economies-of-scale and cheaper fees it could have reaped had it combined the two, a new lawsuit claims.
Bloomberg BNA reports that the proposed class action, filed Dec. 29 by seven participants in Essentia Health’s two retirement plans, “claims that the nonprofit corporation overpaid for 403(b) administrative services by using two record keepers—BMO Harris and Lincoln National Corp.—when one would have sufficed. The plans continued to pay excessive fees after being streamlined in 2012, the lawsuit claims, with annual record-keeping fees rising even as industry averages trended lower.”
The news service notes that unlike many lawsuits over 401k and similar retirement plan fees, the Essentia plan participants don’t challenge the fees associated with any specific plan investment options.
Essentia’s two retirement plans cover about 20,000 participants and hold about $1 billion in assets. The lawsuit claims that Essentia should have used this large plan size as leverage for obtaining lower fees from its service providers, Bloomberg notes.
The lawsuit comes on the heels of a spate of legal action beginning in August that targeted some of the biggest names in higher education, including Duke University, John Hopkins, The University of Pennsylvania, Vanderbilt, Massachusetts Institute of Technology, New York University, and Yale, among others.
“The complaints allege breaches of the duties of loyalty and prudence under ERISA, which caused plan participants to pay millions of dollars in excessive fees for recordkeeping, administrative, and investment services,” according to Schlichter, Bogard & Denton. “The complaints also allege that the universities breached their fiduciary duties by selecting and retaining high-cost and poor performing investment options compared to available alternatives.”
The latest suit was filed in the U.S. District Court for the District of Minnesota by Madia Law LLC and Nichols Kaster PLLP.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
