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Jan. 4 — A proposed class of Anthem Inc. workers accuse the Indiana-based health insurer of loading its 401(k) plan with high-fee mutual funds and paying excessive fees to the Vanguard entities that service the plan.
The workers fault Anthem for not using the plan's large size—allegedly more than $5.1 billion in assets—to secure lower fees. They accuse Anthem of selecting high-priced share classes of mutual funds over the lower-cost share classes of identical mutual funds that are “readily available” to plans of this size. They also challenge Anthem's failure to investigate and offer non-mutual fund investments such as collective trusts and separately managed accounts prior to 2013.
The lawsuit is noteworthy because it takes issue with fees paid to Vanguard, which is not named as a defendant in the suit. Many lawsuits challenging excessive 401(k) fees point to Vanguard funds as examples of lower-cost alternatives that defendant plan fiduciaries could have offered.
This lawsuit caps off a busy December for 401(k) fee litigation, with class actions filed against Deutsche Bank Americas Holding Corp., Fidelity Management Trust Co., New York Life Insurance Co. and Insperity Inc. Prudential Retirement Insurance & Annuity Co. was suedtwice.
In addition to challenging the selection of retail-class mutual fund shares over lower-cost institutional shares, the Anthem workers also argue that the company should have considered Vanguard's collective trust funds. These funds carry lower fees than the Vanguard mutual funds offered by the plan, the workers allege.
Moreover, the workers challenge the record-keeping fees paid to Vanguard, which they contend varied between $42 and $94 per participant annually. According to the workers, the “outside limit” of a reasonable record-keeping fee would have been $30 per participant.
Finally, the workers take issue with Anthem's decision to offer the Vanguard Prime Money Market Fund—which they describe as “microscopically” low-yielding—instead of a stable value fund providing higher returns.
The complaint was filed Dec. 29 in the U.S. District Court for the Southern District of Indiana by Schlichter, Bogard & Denton, a frequent litigator in the world of 401(k) plan fees. The firm seeks to represent a class of about 59,000 participants and beneficiaries in the Anthem plan.
A spokeswoman for Anthem declined to comment on the suit, noting that the company had yet to be served.
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Text of the complaint is at http://www.bloomberglaw.com/public/document/BELL_et_al_v_ANTHEM_INC_et_al_Docket_No_115cv02062_SD_Ind_Dec_29_.
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