Compliance June 29, 2007

Court Approves Exelon Fee Case Class Action Status

June 29, 2007 (PLANSPONSOR.COM) - A federal judge has agreed that an excessive fee suit against Exelon Corp. can move forward as a class action.
Reported by

U.S. District Judge John W. Darrah of the U.S. District Court for the Northern District of Illinois ruled that the five employees who brought the lawsuit were adequate representatives of the class because they say they have been hurt by Exelon’s retirement plan practices. Darrah said there could be more than 23,000 former, current, and future participants represented in the case, based on data in court documents.

Darrah claimed that future class members are often included in the group represented by a collective lawsuit and that it made sense to keep them in the Exelon class because plaintiffs were asking the court to not let Exelon continue with its current retirement plan policies.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

The court also pointed out the 7 th U.S. Circuit Court of Appeals had ruled in other cases that ex-workers had legal standing if they left the plan “at a smaller benefit than they were due.”

Darrah also asserted that the St. Louis law firm of Schlichter, Bogard & Denton was qualified to represent the interests of the class members. The Schlichter firm has been in the forefront of much of the current plan fee controversy, going after a number of large corporations in the courts over excessive fee and inadequate fee disclosure allegations.

The Exelon suit alleged that Exelon and fiduciaries of its 401(k) plan breached their Employee Retirement Income Security Act (ERISA) fiduciary duties by paying unreasonable fees and revenue sharing payments to providers such as T. Rowe Price and not adequately telling participants about the payments.

In February, the court threw out the employees’ request for recovery of “investment losses” allegedly incurred when the plan allowed its investment managers and service providers to charge unreasonable fees (See Court Tosses 401(k) Participants’ Request for Investment Losses Relief ).

One court recently granted a plan sponsor victory with the dismissal of a suit against Deere & Co, and two units of Fidelity Investments (See Judge Throws Out Deere-Fidelity Fee Suit ). U.S. District Judge John Shabaz of the U.S. District Court for the Western District of Wisconsin contended that the defendants had followed current laws and regulations regarding retirement plan fee disclosures.

The Exelon case is Loomis v. Exelon Corp., N.D. Ill., No. 06 C 4900, 6/26/07.

Benefits June 28, 2007

HMO 2008 Premium Rate Analysis Finds 14.1% Hike

June 28, 2007 (PLANSPONSOR.COM) - A Hewitt Associates analysis of HMO 2008 premium rates predicts the highest rate increase in four years.
Reported by

A Hewitt news release said data from Hewitt Health Resource (HHR) – its HMO Web site – indicates an initial 2008 increase of 14.1%. That compares with 11.7% in 2007, 12.4% for 2006, and 13.7% in 2005.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

After plan changes, negotiations and terminations, final average HMO rates increased by 8.2% in 2007.

“While the majority of HMOs are proposing initial rate increases that are consistent with those provided in previous years, a few carriers have proposed significantly higher rate increases for 2008, which seems to be the primary reason for the spike in this year’s overall rate increase across plans,” said Jeff Smith, a senior consultant and co-leader of Hewitt’s HMO rate analysis project, in the news release. “We expect that average rates will decrease once negotiations are complete; however, they may continue to be in the double digits.”

Two regions – the Southeast and Midwest – will experience significantly higher than average rates next year, according to Hewitt. Preliminary analysis shows an 18.2% increase for the Southeast in 2008 compared with 11% at this time last year, and an 18.4% increase for the Midwest, compared with 11.5% last year.

Employers are considering a number of cost-cutting strategies, Hewitt said:

  • In recent years, an increasing number of employers have implemented plan designs that encourage employees who are overutilizing or abusing benefits to change their behaviors by increasing costs for those services.
  • As fully insured rates increase in excess of overall medical cost increases, an increasing number of employers plan to further eliminate local HMO offerings and consolidate those plan participants under a self-insured arrangement.
  • As in past years, employers continue to negotiate aggressively with their health plans to try to reduce initial premium increases; however, this is becoming an increasingly difficult strategy for mitigating costs.
  • More companies are encouraging preventive care and developing special programs designed to address the needs of the employee population that have chronic health conditions.

«