Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Essentia Health couldn’t convince a federal magistrate judge to dismiss a lawsuit accusing it of violating federal law by allowing excessive record-keeping fees for its workers’ retirement plans ( Morin v. Essentia Health , D. Minn., No. 0:16-cv-04397, report and recommendation 9/14/17 ).
The allegations that Essentia fiduciaries breached their duties by allowing the plans to pay higher than reasonable market fees for record-keeping services and that comparable or superior services were available at lower cost are sufficient to survive dismissal, Magistrate Judge Leo I. Brisbois said Sept. 14. In his report, Brisbois also recommended not dismissing the participants’ claim that Essentia failed to monitor the plans’ fiduciaries and ensure that they were satisfying their duties.
If the recommendation is adopted, the Minnesota health-care nonprofit that also serves North Dakota, Wisconsin, and Idaho will have to defend a lawsuit that seeks class treatment for thousands of participants in Essentia’s retirement plans. The plans—a 401(k) and a 403(b)—had more than 19,000 participants and over $1 billion in assets combined at the end of 2014, according to court documents.
Employee Retirement Income Security Act lawsuits over excessive fees in employer-sponsored retirement plans haven’t slowed down in the past year. Recent challenges against large employers have been filed against Wal-Mart Stores Inc., Delta Air Lines, and Starwood Hotels. Private universities have also been targeted, with lawsuits against Yale, Vanderbilt, Johns Hopkins, Cornell, Princeton, and others pending. Smaller companies haven’t been spared either—new lawsuits have targeted Nationwide Life Insurance Co. and Voya Financial Inc. over the fees they charge to small retirement plans.
The claims of fiduciary breach were based on the alleged excessive fees charged to the plans since at least 2010. At that time, BMO Harris received $142 per participant in addition to revenue sharing while alternate record-keeping services were allegedly available for $60-$80 per participant. The plans later changed providers to Transamerica, which collected $94 per participant in 2014 and $88 per participant in 2015, while comparable services were allegedly available for between $35-$45 per participant.
Brisbois rejected Essentia’s argument that the fiduciary breach claim should fail because the participants made an “apples to oranges” comparison between the fees the plans were charged and other lower cost available alternatives.
Nichols Kaster PLLP and Madia Law LLC represent the participants. Dorsey & Whitney LLP represents Essentia.
To contact the reporter on this story: Carmen Castro-Pagan in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Text of the report and recommendation is at http://www.bloomberglaw.com/public/document/Morin_et_al_v_Essentia_Health_et_al_Docket_No_016cv04397_D_Minn_D/4?doc_id=X1Q6NT9V6R82&fmt=pdf.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)