Excessive Fee Suit Takes a Step Forward

A suit that claims two plans paid “approximately $1 million in excess recordkeeping fees in 2014, and again in 2015” has taken another step forward.

The lawsuit filed earlier this year in the U.S. District Court in Minnesota alleged that Essentia Health “permitted the Plans’ service providers to double down on fees to ensure the Plans paid all fees and none were borne by Essentia, acting with an eye to Defendants’ own interests and putting the best interest of Plans second.”

The two plans in question – the Essentia Health 403(b) Plan and the Essentia Health Retirement Plan – were initially administered separately (the Retirement Plan had 16,848 participants with balances and held approximately $982 million in assets at the end of 2014, while the 403(b) Plan had 2,836 participants with balances and held approximately $103 million in assets, according to the suit).

In considering the fiduciary-defendants’ motion to dismiss (Morin v. Essentia Health, D. Minn., No. 0:16-cv-04397, report and recommendation 9/14/17), Magistrate Judge Leo I. Brisbois noted that defendants contended that the plaintiffs’ claims of breach rest solely on allegations that the plans paid more in recordkeeping fees than what was available to a single plan of similar size, and that this not only amounted to comparing “apples to oranges,” contained “fatally flawed reasoning, and is contradicted by the documents relied upon in the First Amended Complaint.”

However, Judge Brisbois ruled that the allegations that the Essentia plan fiduciaries breached their duties by allowing the plans to pay what were alleged to be higher than reasonable market fees for recordkeeping services, even though comparable or superior services were available at lower cost, were sufficient to survive dismissal. Similarly, Brisbois recommended against dismissing the participants’ claim that the plan fiduciaries here failed to monitor the plans’ fiduciaries and ensure that they were satisfying their duties.

“Taken as a whole, all facts pled therein are taken as true, and all reasonable inferences drawn in Plaintiffs’ favor, Plaintiffs have pled sufficient facts to allege a plausible claim of breach of fiduciary duty to monitor, and to give Defendants fair notice of the grounds for such claim,” Brisbois wrote. He went on to conclude that the complaint “…clearly alleges that Essentia and SMDC (for the time relevant to it) were responsible for appointing and removing fiduciaries for the Plans,” and that it also clearly alleges that Essentia and SMDC “failed to monitor its appointees to ensure that they were satisfying their fiduciary duties, as seen in the allegedly unreasonable recordkeeping fees incurred and paid.” He closed by noting that “It is possible to reasonably infer from what is alleged that Defendants breached their fiduciary duty to monitor so as to put Defendants on fair notice.”

And so, if his recommendation is accepted, another excessive fee suit will go to trial.

Post a Comment

Your email is never published nor shared. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Send this to a friend