Norton Hospital Sued Over High Fees in $714M Retirement Plan

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

Norton Healthcare Inc. and its directors are accused of allowing participants in the Kentucky-based hospital’s retirement plan to buy more expensive share classes of mutual funds when less expensive share classes of those mutual funds were available.

Norton allegedly wasted plan assets by failing to monitor the available share classes and select lower-cost share classes of mutual funds as investment options for the plan, according to a lawsuit filed Jan. 22 in the U.S. District Court for the Western District of Kentucky. This failure allegedly caused participants to pay approximately $2 million in excessive fees, the lawsuit said.

Norton disagrees with the allegations in the lawsuit and will defend it vigorously, Norton’s assistant general counsel and associate vice president Tom Powell told Bloomberg Law Jan. 23. The hospital “takes the welfare of its employees seriously and strives to provide a solid and successful retirement plan,” Powell said.

The lawsuit is the latest to target a 403(b) retirement plan, which is a 401(k)-type plan for nonprofits. Since 2016, more than a dozen prominent universities and hospitals with such plans have been sued, including Yale University, New York University, Duke, Vanderbilt, Minnesota-based Essentia Health, and Washington-based Providence Health & Services.

The lawsuit, filed by two former participants in the hospital’s $714 million retirement plan, also seeks class treatment for more than 13,000 individuals.

The participants point to certain mutual funds in the plan, including the Principal Income Equity R-5 Fund, the American Funds Europacific Growth Fund A, the Franklin Growth Advisor Class Fund, and the JP Morgan Mid Capital Value Select Fund.

New Class Counsels?

The participants are represented by law firms Bishop Korus Friend PSC, Tomlinson Law LLC, James White Firm LLC, and Johnston Law Firm PC.

Bishop Korus Friend is a Kentucky-based general practice law firm that, according to its website, represents clients in employment, consumer and personal injury disputes. The lawsuit is the first class action under ERISA filed by the three-attorney law firm, according to Bloomberg Law dockets. Bishop Korus Friend didn’t immediately respond to Bloomberg Law’s request for comments.

The other three law firms, Tomlinson Law, James White Firm, and Johnston Law Firm, are based in Birmingham, Ala. The lawsuit against Norton is also the first class action under ERISA filed by each of the three law firms, according to Bloomberg Law dockets.

Tomlinson Law represents clients involved in numerous types of business litigation, according to its website. James White Firm also represents clients in business litigation, including bankruptcy and commercial and construction disputes, according to its website. Johnston Law Firm’s practice focuses on litigation, administrative law, and corporate law, according to its website

The three Alabama law firms declined to comment.

The case is Disselkamp v. Norton Healthcare, Inc., W.D. Ky., No. 3:18-cv-00048, complaint filed 1/22/18.

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