Novant Health Inc., Winston-Salem, N.C., and participants in seven Novant defined contribution plans reached a preliminary settlement to allegations of fiduciary breaches in which Novant will pay $32 million and enact multiple changes in plan operations.
The settlement of the class-action lawsuit, reached Monday, still requires approval by Judge William Osteen Jr. in U.S. District Court in Greensboro, N.C. Novant operates clinics, outpatient centers and hospitals in four states. The lawsuit was filed in March 2014.
In the case of Kruger et al. vs. Novant Health Inc. et al., the participants alleged, among other complaints, that Novant DC plan executives breached their fiduciary duties by providing “excessive compensation” to service providers and that investment options were “unreasonably expensive,” according to a settlement document.
The two service providers are Great-West Retirement Services, now known as Empower Retirement, and D.L. Davis & Co.
“Defendants admit no wrongdoing or liability with respect to any of the allegations or claims in the complaint,” the settlement document said.
The settlement document contained many provisions that will take effect during a four-year settlement period, including the removal of D.L. Davis and related entities from the employee benefit plans; a review of all current investment options; and the prohibition against offering “any MassMutual investments in the plans or any other investment that provides compensation to Davis and related entities.”
The amount of non-monetary relief “was greater than in any other case” for which Jerome Schlichter has represented participants in fiduciary breach allegations, Mr. Schlichter said in an interview. “It was vital to have it” to achieve the settlement. He is the founding and managing partner of Schlichter, Bogard & Denton.
The agreement also called for the hiring of an independent investment consultant to examine the investment options; an annual review by the consultant of plan management; and issuing RFPs for record keeping, investment consulting and participant education.
The preliminary settlement of $32 million includes plaintiff attorneys’ fees of up to $10.7 million and litigation costs of up to $95,000 that also must be approved by the judge.
Novant did not respond to a request for comment by press time.