Compliance August 22, 2022

Plaintiffs Say Swiss Re Plan Fiduciaries Committed Breaches

The plaintiffs suggest their retirement plan’s fiduciaries failed to fully disclose the expenses and risk of the plan’s investment options to participants and beneficiaries, among other allegations.

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A new Employee Retirement Income Security Act lawsuit has been filed by a proposed class of plaintiffs in the U.S. District Court for the Southern District of New York, naming as defendants the Swiss Re American Holding Corporation, the firm’s board of directors and various committees allegedly tasked with operating the company’s defined contribution retirement plan.

As is common in ERISA lawsuits filed against large employers, the plaintiffs suggest their retirement plan’s fiduciaries failed to fully disclose the expenses and risk of the plan’s investment options to participants and beneficiaries. The lawsuit also alleges that plan fiduciaries allowed unreasonable expenses to be charged to participants and selected, retained or otherwise ratified high-cost and poorly performing investments.

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“Prudent investments were readily available at the time defendants selected and retained the funds at issue and throughout the class period,” the complaint states.

According to the plaintiffs, the defendants breached their fiduciary duties of prudence and loyalty and mismanaged the plan by paying excessive recordkeeping fees to the plan’s recordkeeper, Great-West Financial, which is not named as a defendant in the lawsuit. They allege the breaches collectively cost the plan millions of dollars over the course of the relevant time period.

Swiss Re has not yet responded to a request for comment about the allegations. The filing of the latest ERISA suit comes during a busy year for retirement industry litigation, with multiple key rulings being issued by important courts and no sign of a slowdown in the overall pace of cases.

Resembling many of the prior lawsuits, the new complaint against Swiss Re includes an extensive generalized discussion of the retirement plan industry, seeking to establish that the costs of investment services and recordkeeping have fallen significantly in recent years. The plaintiffs argue the fees they paid during the proposed class period were substantially higher than industry averages, and they use this fact to allege that fiduciary imprudence or disloyalty must have occurred on the part of plan’s fiduciaries.

Similar allegations have met with very different results in previous ERISA cases, depending on the specific facts at hand and the precedents set in the specific district or circuit court hearing the case.

The full text of the complaint is available here.

Data and Research August 19, 2022

Employer Health Care Costs Will Spike Less Than Inflation

Insurance costs were muted during 2020, the first year of the COVID-19 pandemic, but they will return to rise at ‘more typical levels,’ research shows.

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Average health care costs for U.S. employers are expected to increase in 2023 at a slower rate than inflation, according to Aon research.

Aon data show that average costs for U.S. employers that pay for their employees’ health plans will increase 6.5% in 2023, to more than $13,800 per employee. The projected figure is less than the 9.1% inflation level over the 12 months through June, according to Consumer Price Index data from the Bureau of Labor Statistics.

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Aon’s forecast is more than double the 3.7% increase to health care budgets which employers experienced from 2021 to 2022, according to historical data and numbers from the firm’s Health Value Initiative database. Costs for employees were projected to rise 0.6% in the same period, the research shows.

U.S. health care plan costs from 2021 to 2022 increased 3.1%, to $13,020 from $12,627, according to Aon’s Health Value Initiative. Average employer costs rose 3.7%, to $10,500 from $10,123.

Aon’s data show that for most employers, medical claims were lower during the first year of the COVID-19 pandemic because many workers skipped or postponed medical care while under quarantine.

The new data show that for employers, medical claims will “return to more typical levels of growth and anticipate inflationary cost pressures in the coming year,” an Aon news release says.

Research also shows an increase in average costs for employees in 2022. Total employee costs for health care increased 2.6% from 2021, rising to $4,412 from $4,302; employee out-of-pocket costs extended 5.2% to $1,892 in 2022, from $1,798 in 2021; and employee premiums from paychecks grew 0.6% to $2,520 from $2,504.  

Aon’s Health Value Initiative includes information from nearly 700 U.S. employers representing approximately 5.6 million employees. The Aon database was launched in 1996 to captures health care cost and benefit data for employer clients, says a spokesperson. 

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