LHC Group 401(k) Plan Breach of Fiduciary Duties Class Action

This class action, against LHC Group, Inc., the LHC Group 401(k) Committee, and a group of individuals, alleges that these defendants mismanaged the company’s LHC Group 401(k) Plan. The complaint claims they paid excessive fees for services, chose more expensive share classes than they needed to, and maintained underperforming investment options in the plan when better ones were available.

The class for this action is all participants in or beneficiaries of the LHC Group 401(k) Plan from January 20, 2017 through the date of judgment in this case.

The LHC Group 401(k) Plan is a defined-contribution plan, in which the company does not offer a guaranteed payout after retirement but only certain contributions during the employee’s working years. The final amount available to retirees is to a large extent dependent on how the plan is managed, what the costs to the participants are, and how well the investment options perform.

Those managing such plans, like the defendants in this case, have fiduciary duties to the participants and beneficiaries of the plan, under the Employee Retirement Income Security Act of 1974 (ERISA). However, the complaint alleges that the defendants in this case “have not followed ERISA’s standard of care” in managing the plan. It makes a number of allegations as to how the defendants failed to do their duty to the plan.

First, the complaint alleges the defendants paid excessive fees for services such as recordkeeping, to Transamerica Retirement Solutions and later to Voya Institutional Plan Services, through both fees and revenue sharing. The complaint claims, “The U.S. Department of Labor has noted that a 1% higher level of fees over a 35-year period makes a 28% difference in retirement assets at the end of a participant’s career.”

Second, the complaint claims the defendants chose higher-cost share classes for plan investments when lower-cost share classes were available. Different share classes charge investors different expense ratios, and lower expense ratios are often available to entities that will make larger investments, such as retirement plans.

Third, the complaint claims that they chose and kept as investment options poorly-performing, actively-managed funds that did not meet or exceed their own primary benchmarks or other appropriate benchmarks.

Fourth, it alleges they also chose and kept poorly-performing, actively-managed funds when index funds with the same investment goals, similar investments, and lower fees were available.

Fifth, it claims the defendants chose a guaranteed-income annuity product, the Wilmington/MetLife Group Annuity Contract Stable Value Option that the complaint says “had unnecessarily high risk and low returns” and also offered an expensive share class of that product.

All these things, the complaint alleges, chipped away at the returns offered by the investment options and resulted in losses for the participants and beneficiaries. It asserts that the defendants breached their fiduciary duties of prudence and loyalty to the plan.

Article Type: Lawsuit
Topic: Employment
Tags: 401(k) Plans, Breach of Fiduciary Duty, ERISA, Employment Violations, Excessive Fees, Retirement Plan Mismanagement