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Defined Contribution

Kaleida Health sued over DC plan investment options

Current and former participants of two retirement plans run by Kaleida Health, have sued the non-profit Buffalo, N.Y., corporation and plan fiduciaries, alleging they violated their duties under ERISA because they didn't offer certain lower-cost investment options.

"Defendants failed to take advantage of the plans' bargaining power, and impaired participants' returns by only offering actively managed retail mutual funds as investment options instead of identical investor class mutual funds with lower operating expenses," said the complaint filed Oct. 10 in U.S. District Court in Buffalo.

The complaint noted the investment options are nearly identical for the Kaleida Health Savings/Investment 403(b) Plan, which had $370.1 million in assets as of year-end 2016, and the Kaleida Health Savings/Investment 401(k) Plan, which had $69.5 million as of year-end 2016.

The complaint focuses on both plans' offering a target-date mutual fund series from T. Rowe Price. The target-date series advisor class contained retail-priced funds plus a 12b-1 fee, said the complaint in Lutz et al. vs. Kaleida Health et al., which is seeking class-action status.

"The retail shares have a 12b-1 fee, resulting in higher annual operating expenses and lower returns for the retail class investors," said the complaint. The plans should have sought an institutionally priced target-date series from T. Rowe Price without the 12b-1 fee, the lawsuit said.

Further information could not be learned immediately. A call to Kaleida Health was not returned.