Northwell Health 403(b) Plan Breach of Fiduciary Duty Class Action

The complaint for this class action brings suit against Northwell Health, Inc. and the Northwell Health, Inc. 403(b) Plan Committee for breach of fiduciary duties. A 403(b) retirement plan is similar to a 401(k), except that it is for employees of tax-exempt and nonprofit organizations, like certain schools and hospitals. Like 401(k) plans, it is governed by ERISA, or the Employee Retirement Income Security Act.

The class for this action is all participants and beneficiaries in the Northwell Health 403(b) Plan at any time on or after July 21, 2014 to the present, including beneficiaries of deceased participants.

Northwell is the largest healthcare provider in New York.

The Northwell plan is a large one. With over 56,000 participants and account balances and assets that total more than $5.6 billion, it is in the top 0.1% of such defined contribution plans. Because of that, the complaint alleges, it has “significant bargaining power and the ability to demand low-cost administrative and investment management services…” That market “can be competitive when fiduciaries of defined contribution retirement plans act in an informed and prudent fashion.”

The fiduciaries for the plan, including the defendants in this case, are fiduciaries under ERISA. They are therefore “obligated to (a) act for the exclusive benefit of participants, (b) ensure that the investment options offered through the plan are prudent and diverse, and (c) ensure that Plan expenses are fair and reasonable.”

Instead of this, the complaint alleges, the fiduciaries of the Northwell plan have allowed the plan to be charged unreasonable recordkeeping and administrative expenses and have chosen and retained “high-cost and poorly-performing investments, instead of offering more prudent alternative investments when such prudent investments were readily available…”

The average cost per account for recordkeeping and administration in 2017, for much smaller plans (100 participants and $5 million in assets), was $35 per participant. It would therefore seem that the Northwell plan should be able to obtain these services, the complaint says, for “a per-participant cost significantly lower than $30 per participant.”

However, for the class period under consideration in this case, participants in the Northwell plan paid a flat fee of $60 per participant. The cost was reduced as of January 1, 2020 to $52 per participant, but this is still “far in excess” of what it should be, the complaint claims. It alleges that the fiduciaries of the plan “engaged in virtually no examination, comparison, or benchmarking” of the fees to compare them with other plans—either that or they were “complicit in paying grossly excessive fees.”

The complaint asserts that “the risks associated with an investment must first be justified by its potential returns for that investment to be rational.” It then goes on to examine specific investments of the fund, with charts and bar graphs showing that they have underperformed.

Article Type: Lawsuit
Topic: Employment

Most Recent Case Event

Northwell Health 403(b) Plan Breach of Fiduciary Duty Complaint

July 21, 2020

The complaint for this class action brings suit against Northwell Health, Inc. and the Northwell Health, Inc. 403(b) Plan Committee for breach of fiduciary duties. A 403(b) retirement plan is similar to a 401(k), except that it is for employees of tax-exempt and nonprofit organizations, like certain schools and hospitals. Like 401(k) plans, it is governed by ERISA, or the Employee Retirement Income Security Act.

Northwell Health 403(b) Plan Breach of Fiduciary Duty Complaint

Case Event History

Northwell Health 403(b) Plan Breach of Fiduciary Duty Complaint

July 21, 2020

The complaint for this class action brings suit against Northwell Health, Inc. and the Northwell Health, Inc. 403(b) Plan Committee for breach of fiduciary duties. A 403(b) retirement plan is similar to a 401(k), except that it is for employees of tax-exempt and nonprofit organizations, like certain schools and hospitals. Like 401(k) plans, it is governed by ERISA, or the Employee Retirement Income Security Act.

Northwell Health 403(b) Plan Breach of Fiduciary Duty Complaint
Tags: Breach of Fiduciary Duty, ERISA Violations, Employment Violations, Retirement Plan Mismanagement, Retirement Plans