Rush University Medical Center 403(b) Plan Breach of Fiduciary Duty ERISA Class Action

This class action brings suit against Rush University Medical Center, its Board of Trustees, and its Investment Committee. The complaint alleges that these parties, who are responsible for the Rush University Medical Center 403(b) Retirement Savings Plan, have breached their fiduciary duties of prudence and loyalty to the plan by permitting high costs, high fees, and investment choices with high risk and poor performance for the plan. The complaint brings suit under the Employee Retirement Income Security Act (ERISA).

The class for this action is all participants and beneficiaries of the Rush University Medical Center 403(b) Retirement Savings Plan at any time between January 21, 2016 and the date of judgment in this case. Beneficiaries of deceased persons who were participants during this period are also included.

Under ERISA, the parties responsible for retirement plans have the fiduciary duties of loyalty and prudence. However, the complaint alleges that the defendants failed in these duties in a number of ways:

• They “failed to fully disclose the expenses and risk of the Plan’s investment options…”
• They “allowed unreasonable expenses to be charged to participants…”
• They chose, maintained, “and/or otherwise ratified high-cost and poorly-performing investments” as options in the plan, even when more prudent alternatives were readily available.

The plan is a large one, with more than 15,000 participants and assets of around $1.2 billion. It is therefore in the top 0.1% of defined contribution plans by size, the complaint says, and therefore has significant power to bargain for things like recordkeeping and administrative services.

Page 18 of the complaint shows a table comparing recordkeeping and administrative costs for this plan as compared to other plans of a similar size. This plan shows a per-participant fee of $58, while the others show per-participant fees of from $23 to $43.

The complaint alleges that the plan maintained a suite of target-date funds (TDFs, targeted to the participants’ expected retirement dates) which consisted of Fidelity Freedom fund TDFs. These are available in what the complaint calls a riskier and more costly Active suite and a less risky and less expensive Index suite. The complaint alleges that the Active suite was the plan’s qualified default investment alternative.

The complaint alleges that “any objective evaluation of the Active suite would have resulted in an examination of and the selection of a more consistent and better performing and more appropriate TDF…” The Active suite was finally replaced as an investment option by Vanguard TDFs in 2019.

Another important point in retirement plans are the annual fees that its funds charge investors. The complaint claims, “The fees charged by the Active suite are many multiples higher than the Index suite’s industry-leading low costs.” While the Index suite charged just 0.08%, the Active suite charged between 0.42% and 0.65%. These higher fees take money from the participants’ accounts and put it “straight into Fidelity’s pockets[.]” Charts in the complaint offer comparisons in this area as well.

Article Type: Lawsuit
Topic: Employment
Tags: Breach of Fiduciary Duty, ERISA Violations, Employment Violations, Retirement Plans