An Illinois health system will settle a lawsuit over its 403(b) plans for $3.9 million, recent court records show.
Mercy Health Corp. was sued last year in a case brought by law firms Nichols Kaster, Walcheske & Luzi and The Prinz Law Firm. The plaintiffs alleged the plan’s costs were out of line with other similarly sized defined-contribution plans, pointing to excessive brokerage commissions that totaled nearly $1.4 million in 2018, according to the complaint. They also alleged that the plan sponsor failed to prudently monitor the plan’s investment options.
The proposed settlement was filed Nov. 5 and is pending court approval.
It would apply to participants in the Mercy Health Corporation Employees’ Retirement between Aug. 3, 2014 and the preliminary court order, as well as to those in the Rockford Health System Retirement Plan and Rockford Health Physicians Retirement Plan since Jan. 1, 2017. That settlement class represents about 21,700 people.
As much as a third of the monetary settlement will go toward attorneys’ fees.
There is also a non-monetary component to the proposed settlement. Under that, the health system would retain an independent consultant for at least three years to help review fees and investment options.
CHEMICAL MAKER SUED
Olin Corp., a Missouri-based sponsor of a $1 billion retirement plan, was sued last week.
Plaintiffs in the proposed class-action case allege the company failed to negotiate fair record-keeping costs and opted for more expensive than necessary investment options. The case was filed by law firm Capozzi Adler, which over more than a year has brought many lawsuits against plan sponsors. Law firms Edelson Lechtzin and Carey Danis & Lowe also represent the plaintiffs.
Between 2015 and 2020, per-participant record-keeping costs were as high as $152 a year and as low as $44, according to the complaint. By comparison, a competitive rate for a similarly sized plan would be $35, the plaintiffs claim.
They also take issue with the plan’s investment options. Fees for the T. Rowe Price target-date series in the plan are 43 basis points, higher than the median 34 bps and average 39 bps figures for the category published by the Investment Company Institute, according to the complaint.
The Olin Corporation Contributing Employee Ownership Plan, which includes a Roth 401(k) option, had more than 7,100 participants with account balances as of the end of 2019, the plaintiffs stated. Employees are automatically enrolled in the plan at a default contribution rate of 6% and receive a tiered company match that maxes out at five years of tenure, according to the complaint.
The plaintiffs have two claims — one for alleged breaches of fiduciary duty of prudence and another for failure to adequately monitor other fiduciaries.
Olin Corporation did not respond to a request for comment.
Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.