Those responsible for retirement plans have a duty to exercise the “care, skill, prudence, and diligence” of a prudent person in their plan management. The complaint for this class action brings suit against Baystate Health, Inc. and the its Board of Directors, alleging they did not fulfill their fiduciary duty to the Baystate Health, Inc. Retirement Plan because they hired and maintained a company to perform recordkeeping that charged excessive fees.
The class for this action is all participants and beneficiaries of the Baystate Health, Inc. Retirement Plan, between November 17, 2016 and the date of judgment in this case.
The Employee Retirement Income Security Act (ERISA) requires that those responsible for retirement plans exercise prudence on behalf of the plan. The complaint alleges this includes ensuring that those who perform services for the plan charge reasonably rates for their services. The party performing recordkeeping and administration services (RKA) for the plan was Great West Life & Annuity Insurance, which does business as Empower Retirement and Massachusetts Mutual Life Insurance Company (Empower), up until the fall of 2022.
The complaint shows a graph comparing the 2017-2021 average total RKA fees paid by Baystate with amounts paid by other plans with a similar number of participants and a similar amount of plan assets. The Baystate Plan Average Fee calculated by the complaint is $70; the table claims that the “Reasonable Fee” is $31. The complaint alleges that this choice of recordkeeper cost “millions of dollars of harm in the form of lower retirement account balances than they otherwise should have had in the absence of these nearly double as much RKA fees.”
According to the complaint, the plan had more than 14,000 participants and more than $910 million in assets in 2020, or more than 99% of the numbers for other US defined contribution plans: “The Plan thus had substantial bargaining power regarding Plan fees and expenses. Defendants, however, did not regularly monitor Empower to ensure that it remained the prudent and objectively reasonable choice.”
The US Department of Labor requires that employers do certain things, the complaint alleges: They must (1) have a prudent process for choosing investment options and providers of services, (2) make sure that the fees they pay for expenses and services are reasonable, and (3) monitor the investment options and providers thereafter to be sure they remain appropriate choices for the plan.
The complaint contends, “Industry experts know that recordkeeping services have become a commodity for retirement plan fiduciaries; virtually every major recordkeeper provide[s] the same core services.”
According to the complaint, “Recordkeepers often collect a portion of the total expense ratio fee of the mutual fund in exchange for providing services that would otherwise have to be provided by the mutual fund.” The complaint alleges that the Baystate plan paid Empower both direct compensation as well as indirect compensation through this kind of revenue-sharing.
Article Type: LawsuitTopic: Employment
Most Recent Case Event
Baystate Health Retirement Plan Recordkeeping Fees Complaint
November 17, 2022
Those responsible for retirement plans have a duty to exercise the “care, skill, prudence, and diligence” of a prudent person in their plan management. The complaint for this class action brings suit against Baystate Health, Inc. and the its Board of Directors, alleging they did not fulfill their fiduciary duty to the Baystate Health, Inc. Retirement Plan because they hired and maintained a company to perform recordkeeping that charged excessive fees.
Baystate Health Retirement Plan Recordkeeping Fees ComplaintCase Event History
Baystate Health Retirement Plan Recordkeeping Fees Complaint
November 17, 2022
Those responsible for retirement plans have a duty to exercise the “care, skill, prudence, and diligence” of a prudent person in their plan management. The complaint for this class action brings suit against Baystate Health, Inc. and the its Board of Directors, alleging they did not fulfill their fiduciary duty to the Baystate Health, Inc. Retirement Plan because they hired and maintained a company to perform recordkeeping that charged excessive fees.
Baystate Health Retirement Plan Recordkeeping Fees Complaint