A pair of relatively unknown law firms have now notched a fourth ERISA excessive fee suit.
The latest has been brought against Cincinnati-based TriHealth, Inc.’s retirement plan by Greg Coleman Law and Jordan Lewis PA on behalf of plaintiffs Danielle Forman, Nichole Georg and Cindy Haney, individually and as representatives of a Class of Participants and Beneficiaries (some 12,168 members, according to the filing).
Like the other three such suits filed to date, the plan is smaller (between $250 million and $500 million in assets) than many that have been sued since the wave began in 2006, most of which have in excess of $1 billion in assets.
That said, the plans aren’t exactly small. They include the $500 million Adidas Group 401(k) Savings and Retirement Plan, the plan of telecommunications provider West Corp. and a subsidiary of Greystar Real Estate Partners LLC. The latter, with between $100 million and $250 million in assets, paid as much as $6.2 million in excess fees compared with similarly sized plans over a four-year period, according to a May 13 lawsuit. The former was alleged to have paid fees 29 times more expensive than comparable alternatives for the plan (which reportedly had between $250 million and $500 million in assets, according to the complaint).
The plaintiffs lawyers here also apparently relied on the same analysis tool used previously, though they note that there are “commercially available programs commonly used by financial advisors and plan fiduciaries to analyze plans’ performance, comparative costs and so on,” and that the program used for their analysis “…contains validated financial information from more than 55,000 financial plans of all types.”
But as for the specific allegations in this case – well, they’re all about the fees paid, with the inference being that the only explanation for the higher fees is imprudence. The suit claims that, for every year between 2013 and 2017 (the same time period in the Adidas case), the administrative fees charged to plan participants was “greater than 90 percent of its comparator fees when fees are calculated as cost per participant or when fees are calculated as a percent of total assets,” and that “the total difference from 2013 to 2017 between TriHealth’s fees and the average of its comparators based on total number of participants is $7,001,443.” Moreover, they claim that 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, and that the TriHealth plan charged 401(k) fees of $328 per person in 2017, when similarly sized plans – those with between $250 million and $500 million in assets – charged an average of only $166 per person that year.
At least part of that differential was attributed to the choice of actively managed funds. The plaintiffs note that, “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.”
They go on to claim that a “prudent investor will not select higher-cost actively managed funds unless there has been a documented process leading to the realistic conclusion that the fund is likely to be that extremely rare exception, if one even exists, that will outperform its benchmark over time, net of investment expenses.”
Ultimately, the suit claims that the plan fiduciaries:
- failed to employ a prudent and loyal process by failing to critically or objectively evaluate the cost and performance of the plan’s investments and fees in comparison to other investment options;
- failed to engage in a prudent process for monitoring the plan’s investments and removing imprudent ones within a reasonable period (resulting in the plan “continuing to offer excessively expensive funds compared to equivalent and/or comparable low-cost alternatives that were available to the Plan”);
- failed to make plan investment decisions based solely on the merits of each investment and in the best interest of plan participants;
- failed to ensure that the plan was invested in the lowest-cost investment vehicles; and
- failed to discharge its duties with respect to the plan with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would have used in the conduct of an enterprise of like character and with like aims, thereby breaching its duties under 29 U.S.C. § 1104(a)(1)(B).
It remains to be seen what will happen with this particular case – but it seems likely that it won’t be the last filed by Greg Coleman Law and Jordan Lewis PA.
