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Compliance August 1, 2019
Trend of Excessive Fee Suits Against Smaller Plans Continues
When the wave of excessive fee cases began against retirement plan sponsors, most targeted large or mega plans, based on assets. However, a new case against TriHealth Inc. continues a trend of targeting smaller plans.
Reported by Rebecca Moore
A class-action lawsuit has been filed against TriHealth Inc. regarding administrative and investment fees in the TriHealth Inc. Retirement Plan.
The complaint states, “for every year between 2013 and 2017, the administrative fees charged to plan participants is greater than 90% of its comparator [, or peers’,] fees when fees are calculated as cost per participant or when fees are calculated as a percent of total assets.”
By way of a commercially available program that the lawsuit says is commonly used by financial advisers and retirement plan fiduciaries to benchmark costs, the complaint shows that in 2017, for example, TriHealth’s plan carried a cost of 86 basis points (bps) per participant. This compares with the mean of 44 bps across 27 peer plans. As a total of plan assets, in 2017, TriHealth’s plan cost 86 bps compared with a mean of 41 bps.
“The total difference from 2013 to 2017 between TriHealth’ fees and the average of its comparators based on total number of participants is $7,001,443. The total difference from 2013 to 2017 between TriHealth’s fees and the average of its comparators based on plan asset size is $7,210,002,” the complaint states. TriHealth’s plan was benchmarked against peer plans with an asset range of $250 million to $500 million.
According to the complaint, the plaintiffs—participants in the plan—had no knowledge of how the fees charged to and paid by TriHealth plan participants stood up against any of TriHealth’s comparators.
The lawsuit also claims TriHealth plan’s fees were excessive when held up against other comparable mutual funds not offered by the plan. “By selecting and retaining the plan’s excessive cost investments while failing to adequately investigate the use of superior, lower-cost mutual funds from other fund companies that were readily available to the plan or foregoing those alternatives without any prudent reason for doing so, TriHealth caused plan participants to lose millions of dollars of their retirement savings through excessive fees,” it alleges.
TriHealth is accused of failing to employ a prudent and loyal process by not critically or objectively evaluating the cost and performance of the plan’s investments and fees in comparison with other investment options. “TriHealth selected and retained for years as plan investment options mutual funds with high expenses relative to other investment options that were readily available to the plan at all relevant times,” the complaint states.
Among other things, the lawsuit asks for an order that requires TriHealth to make good to the plan all losses resulting from each breach of fiduciary duty and to otherwise restore the plan to the position it would have occupied but for those breaches. It also requests an order to remove the fiduciaries who are accused.
When the wave of excessive fee cases began against retirement plan sponsors, most targeted large or mega plans, based on assets. However, in recent years a number of cases have been filed against so-called “small” plans. For example, the Greystar 401(k) Plan, with less than $250 million in assets, was the target of a complaint filed earlier this year. Similarly, fiduciaries of the approximately $500 million 401(k) program offered by Pioneer Natural Resources USA settled a lawsuit that was filed a year ago.