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401(k) plan participants, Anthem reach preliminary settlement

Signage is displayed on the exterior of an Anthem Inc. Blue Cross Blue Shield office building in Wallingford, Connecticut, U.S., on Tuesday, Nov. 22, 2016.

Participants in a 401(k) plan managed by the health insurer Anthem Inc. have reached a preliminary settlement in an ERISA fiduciary breach lawsuit, leading to a settlement of $23.7 million.

The settlement, which requires court approval, also contains non-monetary agreements, according to an April 5 settlement document in the case of Bell et al. vs. ATH Holding Co. LLC et al. ATH is the parent company of Anthem.

"Defendants deny all allegations of wrongdoing and deny all liability for the allegations and claims made in the class action," the settlement document said.

The participants sued in December 2015, alleging that plan executives failed to investigate changing the plan's money market fund to a stable value fund, arguing that the latter could provide better returns.

They also complained that the plan paid "unreasonable" investment management fees and administrative fees to its record keeper, Vanguard Group, which isn't a defendant.

U.S. District Judge Tanya Walton Pratt in Indianapolis denied the defendants' petition for summary judgment on Jan. 30, 2019. The defendants' had argued that the participants failed to sue within a three-year ERISA statute of limitations. The judge said the statute of limitations didn't apply in this case because participants didn't receive adequate information on how some investments were chosen or what alternatives were available. Participants, she added, didn't receive enough comparative information about fees.

According to the settlement terms, the defendants will create a $23.7 million settlement account from which a maximum of $7.9 million will be set aside for attorneys' fees and a maximum of $650,000 to cover court costs. Participants are represented by Schlichter Bogard & Denton.

Among the non-monetary terms, the defendants agreed to:

• Provide a fact sheet to participants about the risks and returns of the money market fund, as well as the "benefits of diversification."

• Hire an independent investment consultant to review the plan's investment lineup, make recommendations about investment options and make a recommendation about whether to add a stable value fund.

• Examine, with the help of the consultant, offering lowest-cost share classes of mutual funds, revenue-sharing rebates, collective trusts and/or separate accounts.

• Issue, within the first 18 months of the settlement agreement, an RFP for a record keeper, noting that the plan could decided to keep the incumbent or hire a new firm.

Anthem 401(k) Plan, Indianapolis, had $7.1 billion in assets as of Dec. 31, 2017, according to the latest Form 5500.