The terms of a quickly settled excessive fee suit involving a 403(b) plan have come to light.
The plan fiduciaries here are Springfield, Massachusetts-based Baystate Health Inc. – and they were sued just last Nov. 17 by participant-plaintiffs Michael Chechile and Sonia Lopez (who were represented by Paul Secunda of Walcheske & Luzi LLC).
They had claimed that the $910 million plan paid, on average, $70/participant for record-keeping fees (to Empower Retirement and Massachusetts Mutual Life Insurance Co.), compared to those in similarly sized plans that allegedly paid $31/participant for what were said to be comparable services. They also alleged that the plan fiduciaries failed to regularly monitor and evaluate those services, accounting for that alleged disparity in fees.
The settlement was announced in late February – following a Feb. 10 mediation before a private mediator – and now we have the particulars.
The settlement agreement (Michael Chechile et al. v. Baystate Health Inc. et al., case number 3:22-cv-30155) notes that “This motion is not opposed by Defendants, but Defendants do not agree with the averments, statements, allegations, and claims stated by Plaintiffs in this Memorandum of Law in Support of the Motion for Preliminary Approval of Settlement.”
That said, the headline is the cash settlement of $500,000 – an amount that the parties say represents “a significant monetary recovery[i] for the Class [some 26,800 members – you can do the math] in relation to the claims that were alleged and falls well within the range of negotiated settlements in similar ERISA cases.”
From that sum will be deducted:
- Fees and expenses for the plaintiffs’ attorneys (to be submitted for court approval “no later than twenty-one (21) days prior to the deadline for objections for an award of attorneys' fees” not to exceed a third of the settlement amount (or $165,000);
- Case Contribution Awards for the participant-plaintiffs named in the suit of up to $5,000 each; and
- Costs of an Independent Fiduciary “to review and authorize the Settlement on behalf of the Plan.”
If approved, the plan calls for the settlement amount to be paid out based on the length of time they were contributing to the plan.
Now we’ll see if the court approves.
[i] According to the settlement, “For purposes of mediation, Plaintiffs alleged that the total recordkeeping fees exceeded a reasonable amount by $4.8 million. Based on this allegation, the $500,000 recovery represents 10.4% of the total estimated losses. This is on par with numerous other ERISA class action settlements that have been approved across the country.”