ERISA Litigation Continues in the New Year

A proposed class action lawsuit was filed last week alleging that fiduciaries of the Consolidated 403(b) Plan of Mass General Brigham and Member Organizations failed to ensure investment and recordkeeping fees were not excessive.

According to the complaint, the health care system’s plan qualified as a “jumbo” plan and one of the largest in the United States. As such, the plaintiffs allege, its fiduciaries had substantial bargaining power regarding the fees charged to participant accounts.

The lawsuit claims that the fiduciaries “did not try to reduce the plan’s expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the plan to ensure it was prudent.” The defendants are accused of failing to objectively and adequately review the plan’s investments with due care to ensure that each investment option was prudent, in terms of cost and of failing to control the plan’s recordkeeping costs.

In another court filing, fiduciaries of retirement plans sponsored by energy company PPL Corp. are accused of failing to act diligently and prudently by retaining a suite of “unproven collective investment trust [CIT] target-date funds [TDFs] as investment options in the plan, known as the Northern Trust Focus Funds.”

The complaint alleges that “the Focus Funds suffered from significant and ongoing quantitative deficiencies and managerial turnover resulting in massive underperformance relative to that of well-established, prudently managed, comparable target-date funds that were available to the plan.” The plaintiffs suggest that a prudent fiduciary would have removed the Focus Funds and replaced them with a prudent investment alternative. They say the fiduciaries’ breaches of Employee Retirement Income Security Act (ERISA) fiduciary duties cost participants who were invested in these funds millions of dollars in losses.

The PPL lawsuit also says that because of the plan’s size, the fiduciaries had “tremendous bargaining power to demand lower fees.”

Northern Trust is not listed as a defendant in the lawsuit against PPL, but it is facing a lawsuit about the use of the Focus Funds in its own retirement plan, among other claims.

The pace of ERISA litigation shows no signs of slowing in the new year. Also last week, a lawsuit was filed against fiduciaries of Milliman Inc.’s 401(k) plan alleging that the poor performance of a suite of target-risk funds resulted in a nearly $250 million loss to participant accounts.

In a statement to PLANSPONSOR, PPL said: “PPL offers comprehensive benefits programs for employees, including voluntary 401(k) plans that enable employees to set aside a portion of their pay to save for retirement. Participants may select their own investments from a diverse array of investment options available in the plans. 

“PPL’s 401(k) plans are administered by Fidelity Investments, undergo a rigorous evaluation annually to compare costs and investment performance against industry benchmarks, and are regularly reviewed by an independent board to ensure they align with our investment policy and meet plan objectives. 

“We are confident in the soundness of our retirement plans and believe the fees associated with those plans are reasonable. We’re confident we’ve acted lawfully and appropriately at all times. Any claims to the contrary are entirely without merit.”

Mass General Brigham has not yet responded to a request for comment.