Lawsuit Targets California Medical Center 403(b) Plan

A former employee and plan participant has targeted the Cedars-Sinai Medical Center, Cedars-Sinai Board of Directors and 10 unnamed defendants in a complaint alleging fiduciary breaches that led to overly high fees and poor investment returns on participants’ retirement assets.

Plaintiff Jason Zimmerman—represented by Christina Humphrey Law PC and Bradley/Grombacher LLP— claims in the lawsuit two fiduciary breach counts against the defendants.

Zimmerman claims plan fiduciaries for the Cedars-Sinai Health System 403(b) Retirement Plan breached their duties under the Employee Retirement Income Security Act by overpaying for covered service providers; offering and maintaining investment funds with higher-cost share classes when identical lower cost shares were available; retaining and offering poorly performing funds within the plan; and depriving participants of compounded returns through the excessive costs and investment in expensive underperforming funds.

Because of the alleged fiduciary misconduct, “The Plan, the Participants, and members of the putative class suffered substantial losses and legal damages in the form of higher fees and lower returns on their investments than they would have otherwise experienced due to investment in the Plan and Plan wide-misconduct,” the complaint states.

The lawsuit, Zimmerman et al. v. Cedars-Sinai Medical Center et al., was brought in U.S. District Court for the Central District of California. Cedars-Sinai Medical Center is located in Los Angeles.

In 2021, the Cedars-Sinai plan was comprised of 16,140 participants with account balances and more than $2.15 billion in assets, as of the most recent available data from Brightscope.

Although not named as defendants, covered service providers are relevant to the litigation. According to Form 5500s filed by the plan, Cedars-Sinai contracted with Voya Financial Partners to serve as the plan’s investment adviser and Voya Retirement Insurance & Annuity to serve as the plan’s recordkeeper. Voya was not named as a defendant in the complaint.

The Cedars-Sinai plan used a revenue-sharing arrangement to compensate Voya.

Retirement plan fiduciaries are not barred from using revenue-sharing agreements—variable direct and indirect compensation fees to a covered service provider—to offset investment funds’ expenses.

“The use of expensive share classes was likely motivated by an improper desire to hide fees from Plan participants by using revenue sharing to pay some or all of the participants’ fees instead of directly drawing them from the Plan or Defendants being billed directly for the fees,” the complaint alleges.

Zimmerman is seeking monetary damages, a judgment that the defendants are liable to make good all losses resulting from the alleged fiduciary breaches and certification of a class period applying to all participants and beneficiaries of the Cedars-Sinai plan from six years prior to the filing through the date of judgment.

A representative from Cedars-Sinai said the medical center does not comment on pending litigation.