January 31, 2019
Anthem Inc. employees who sued the company over the fees tied to its $5.1 billion 401(k) plan won a major victory Jan. 30, when a federal judge allowed their case to go to trial.
None of the six claims made in the employees’ sealed complaint can be resolved in Anthem’s favor before trial, Judge Tanya Walton Pratt of the U.S. District Court for the Southern District of Indiana ruled. The employees presented “more than enough evidence” to raise questions about whether the Anthem defendants understood that the share classes of the plan’s investments carried higher fees than other available share classes, Pratt said.
The class action accuses Anthem’s retirement plan committee of causing the plan to pay excessive fees to Vanguard Group Inc.—including by offering retail share classes of Vanguard funds instead of cheaper institutional share classes. The committee is accused of offering a Vanguard money market fund without considering whether a stable value fund was a better option for employees seeking capital preservation.
The case is a rare example of litigation challenging fees paid to Vanguard, which is not named as a defendant. Many lawsuits challenging excessive 401(k) fees point to Vanguard funds as examples of lower-cost alternatives that plans could have offered.
The employees are also moving forward with their challenge to the plan’s money market fund. They presented enough evidence to raise questions about whether the Anthem defendants used an imprudent fiduciary process when they allegedly failed to consider offering a stable value fund instead, Pratt said.
The ruling comes one week after Pratt approved the employees’ requested changes to class definitions. That order created two subclasses in the case, each with “thousands” of members: one of Anthem plan investors subject to a revenue sharing fee structure used between 2009 and 2013, and one of investors who paid flat annual fees for plan administration beginning in 2013.
Schlichter Bogard & Denton LLP represents the employees. Seyfarth Shaw LLP represents the Anthem defendants.
The case is Bell v. Pension Comm. of ATH Holding Co., 2019 BL 30124, S.D. Ind., No. 1:15-cv-02062-TWP-MPB, 1/30/19.