Parties Reach Settlement Agreement in Anthem 401(k) Excessive Fee Case

The parties in an excessive fee lawsuit filed against the committee that oversees the Anthem 401(k) plan have reached a settlement agreement.

A February 19 docket entry in the case of Bell v. Anthem says, “The parties have reached a resolution subject to class approval.” The judge ordered that on or before March 15, 2019, the parties are to file a motion for preliminary approval of class settlement. Details of the settlement will be available then.

In the complaint, it is alleged that plan fiduciaries allowed unreasonable expenses to be charged to participants for administration of the plan, and that they selected and retained high-cost and poor-performing investments compared to available alternatives. The complaint suggests the Anthem plan, “as one of the country’s largest 401(k) plans … with over $5.1 billion in total assets and over 59,000 participants with account balances,” should have gotten as good or better a deal than anyone in the institutional investing markets, but it failed to do so in a variety of ways, leading to about $18 million in unnecessary fees/losses for participants.

Surprisingly, most of the “imprudent” funds cited by name are provided by Vanguard, widely known for transparency and affordability, and are actually quite cheap from an industry-wide perspective—below 25 bps in annual fees. One fund cited has just a 4 bps annual fee, but according to the compliant an otherwise identical 2 bps version could have been obtained by an investor with the size and sophistication of the Anthem plan. Therefore an alleged breach occurred when Anthem continued offering the 4 bps version.

A judge moved forward claims in the case last March and denied summary judgment for the 401(k) plan fiduciaries just weeks ago. A trial date had been set.