Ardent Health Services is the target of a new Employee Retirement Income Security Act (ERISA) lawsuit.
The proposed class action complaint was filed in the U.S. District Court for the Middle District of Tennessee and names as defendants Ardent Health Services, the company’s board of directors and more than 30 individual fiduciary defendants both named and unnamed.
The complaint alleges that the nearly $1 billion-plan’s fiduciaries have failed to objectively and adequately review the plan’s investment portfolio with due care to ensure that each investment option was prudent in terms of cost and performance. The complaint further alleges that fiduciaries inappropriately maintained certain funds in the plan despite the availability of identical or similar investment options with lower costs and/or better performance histories.
“To make matters worse, defendants failed to utilize the lowest cost share class for many of the mutual funds within the plan, and failed to consider collective trusts, commingled accounts, or separate accounts as alternatives to the mutual funds in the plan, despite their lower fees,” the complaint states. “Defendants’ mismanagement of the plan, to the detriment of participants and beneficiaries, constitutes a breach of the fiduciary duties of prudence and loyalty, in violation of 29 U.S.C. § 1104.”
Other allegations include that plan fiduciaries permitted overpayments for recordkeeping and administrative services. The complaint argues that the defendants’ actions were contrary to actions of a reasonable fiduciary and cost the plan and its participants millions of dollars. Based on this conduct, the plaintiffs assert claims against defendants for breach of the fiduciary duties of loyalty and prudence (count one) and failure to monitor fiduciaries (count two).
As have other recently filed ERISA complaints, this new lawsuit anticipates and seeks to overcome challenges to its timeliness.
“Plaintiffs did not have knowledge of all material facts … necessary to understand that defendants breached their fiduciary duties and engaged in other unlawful conduct in violation of ERISA until shortly before this suit was filed,” the complaint states. “Further, plaintiffs did not have and do not have actual knowledge of the specifics of defendants’ decision-making process with respect to the plan, including defendants’ processes for selecting, monitoring, and removing plan investments, because this information is solely within the possession of defendants prior to discovery. Having never managed a jumbo 401(k) plan such as the plan, plaintiffs lacked actual knowledge of reasonable fee levels and prudent alternatives available to such plans.”
One unique feature of this complaint relative to other excessive fee and failure to monitor lawsuits filed in recent years is a short discussion of Sageview Advisory Group being a “non-defendant fiduciary.”
“Upon information and belief, Sageview Advisory Group LLC is the investment consultant hired to assist the committee and Ardent in their role in selecting and monitoring the plan’s investment options,” the complaint states. “Sageview is listed on the 2018 Form 5500 as a consultant and was paid $75,000 in compensation by the plan in 2018. … Although Sageview is a relevant party and likely to have information relevant to this action, it is not named as a defendant given that Ardent remains responsible for the overall selection and monitoring of all investment options. Plaintiffs reserve the right to name Sageview as a defendant in the future if deemed necessary.”
The full text of the lawsuit is available here. Ardent has not yet returned a request for comment.