Beverly Enterprises Settles 401(k) Excessive Fee Charges

Beverly Enterprises has agreed to settle for $6.25 million claims that it caused its 401(k) plan to incur excessive fees.

According to a report by investment adviser Fiduciary Counselors, participants sued to recover losses they allegedly suffered as a result of the defendants’ breaches of fiduciary duties under the Employee Retirement Income Security Act (ERISA). The participants claimed the plan was systemically neglected for a period dating back to 1996 and that virtually all of the investment options offered to plan participants prior to 2006 underperformed.  

The plaintiffs also specifically alleged that in connection with a change of service providers from Diversified Investment Advisors  to Fidelity Investments in 2006, the plan’s fiduciaries breached their duties by causing the plan to incur a $2.3 million market value adjustment (MVA) when defendants chose to liquidate the Stable Value Fund, and improperly transferred assets from the Stable Value Fund, an investment option designed to protect participants’ principal, to riskier mutual funds that subsequently suffered investment losses. Finally, the participants claimed that certain service providers, including Diversified, Fidelity, and Stephens Inc., received excessive fees and as a result engaged in prohibited transactions.  

The settlement agreement was reached in mediation in November before the case went to trial. U.S. District Judge Nathaniel M. Gorton of the U.S. District Court for the District of Massachusetts approved the settlement, which included a payment of $10,000 each to the three lead plaintiffs and a payment of more than $1.9 million to attorneys.

The court had certified a class that included all participants and beneficiaries of the Beverly 401(k) SavingsPlus Plan from 1996 through the present, excluding any defendants.