Nonprofit Nemours Foundation Faces 403(b) Lawsuit

Former employees have filed a class-action complaint against the 403(b) retirement plan at the Nemours Foundation—a nonprofit operator of children’s hospitals—in U.S. District Court. The suit, Jeanna Cannarozzo et. al. v The Nemours Foundation, alleges plan participants were charged excessive fees by recordkeeper Transamerica.

The plaintiffs claim the plan fiduciaries breached their fiduciary duty to participants under the Employee Retirement Income Security Act by failing to observe prudent fiduciary practices to manage and control recordkeeping costs. The plaintiffs also allege that the plan selected the higher-fee retail-share class of investments, rather than an identical, lower-fee share class of the same investment, according to the complaint.

“The plan suffered millions of dollars of losses due to excessive costs and lower net investment returns,” states the complaint. “Had Nemours complied with their fiduciary obligations, the plan would not have suffered these losses, and plan participants would have had more money available to them for their retirement.”

The plaintiffs estimated Nemours’ imprudent choices for the share class resulted in millions of dollars in excessive fees paid by the plan and its participants over the last six years due to the alleged breaches of fiduciary duties, according to the complaint.

As of December 31, 2021, the Nemours Foundation 403(b) plan had $1,041,925,317 in assets and 13,236 participants with account balances, the court filing shows.

“Instead of leveraging the plan’s tremendous bargaining power to benefit plan participants, Nemours caused the plan to pay unreasonable and excessive fees,” states the complaint.

The plaintiffs alleged the plan was eligible—given its size and economies of scale—for discounted pricing on investments, according to the court filing.

The complaint also states that Nemours failed to prudently monitor the plan to determine whether it was invested in the lowest-cost share class available for the plan’s mutual funds, which are identical to the mutual funds in the plan in every way except for their lower cost.

Attorneys for the plaintiffs requested that a class action be certified by the U.S. District Court for the District of Florida’s Jacksonville Division and be applied to all participants in or beneficiaries of the plan at any time between February 1, 2017, and the present, states the complaint.

The Nemours Foundation, based in Jacksonville, was started in 1936 after the death of Alfred I. duPont. It operates children’s hospitals in Orlando, Florida, and Wilmington, Delaware, as well as children’s clinics in several states.

The plaintiffs are represented by the Wenzel Fenton Cabassa PA law firm, based in Tampa, Florida.

Wenzel Fenton Cabassa has filed several retirement plan lawsuits, including one last month against Quest Diagnostics, that made similar claims.