Participants in two Novant Health Inc. 401(k) plans filed a class-action lawsuit Wednesday against company fiduciaries, alleging excessive fees paid to third-party service providers, imprudent investment choices and concealment of financial arrangements with the providers and a plan adviser.
The lawsuit alleges that Great-West Life & Annuity Insurance Co. which provided record-keeping and administrative services received $8.6 million in excessive fees from 2009 to 2012, plus revenue sharing from companies providing some of the investment options. The complaint also charges plan fiduciaries with paying $9.6 million in excessive fees during that period to broker Derrick Davis with MML Investors Services, a subsidiary of Massachusetts Mutual Life Insurance Co.
The lawsuit also alleges Great-West raised its record-keeping fees to $2.4 million in 2010, from $196,000 in 2009, and faults the fiduciaries for not negotiating a fixed fee arrangement as the number of participants grew.
The class action could potentially include 20,000 current and former employees of Winston-Salem, N.C.-based Novant Health, said plaintiff’s attorney Jerome Schlichter, managing partner for Schlichter, Bogard & Denton.
Mr. Schlichter said in an interview that while the plans’ assets grew in recent years, reaching $1.42 billion in 2012, “some of the fees grew beyond proportion,” in part because plan administrators did not negotiate lower fees or choose lower-cost mutual funds.
Novant Health said in a statement that it has not been served with the lawsuit and could not comment on it, but that its retirement plan committee “is deeply committed to selecting and administering the investment options under the plans in the best interest of participants.”
Calls to Novant Health were not returned by press time.
