Appeals court allows ERISA suit against TriHealth to proceed

A federal appeals court in Cincinnati reversed a lower court's dismissal of a complaint against TriHealth Inc. by 401(k) plan participants who alleged a series of ERISA violations in management of the plan.

Although the 6th U.S. Circuit Court of Appeals upheld most of the allegations dismissed by a U.S. District Court in September 2021, the three-judge panel wrote that one allegation could proceed to trial. U.S. District Court Judge Matthew W. McFarland had dismissed all allegations, saying the plaintiffs' arguments "do not raise a plausible inference that defendants breached their fiduciary duties."

The 6th Circuit judges disagreed with McFarland's dismissal of participants' contention that TriHealth and its fiduciaries should have selected institutional-priced shares instead of retail-priced shares in 17 of 26 funds offered by the plan.

"These allegations permit the reasonable inference that TriHealth failed to exploit the advantages of being a large retirement plan that could use scale to provide substantial benefits to its participants," the appeals court judges wrote Wednesday.

"Under common law of trusts, which supplied the backdrop to ERISA when Congress enacted it in 1974, that would state a claim of imprudence," the judges wrote in Forman et al. vs. TriHealth Inc. et al. The plaintiffs are seeking class-action status.

The plaintiffs filed an initial complaint in July 2019 and later amended it, making several allegations, most of which were rejected by the appeals court judges.

Plaintiffs alleged the plan charged excessive fees, but the judges wrote that "this overall attack on the plan's expense ratio falters due to pleading failures." The plaintiffs never alleged that the fees were high compared with services offered by the plan, they wrote.

The participants also complained that for eight investment options, the plan should have selected cheaper and better-performing investments. "They do not plausibly plead that these available alternatives were otherwise equivalent to the selected funds," the judges wrote.

The plaintiffs also accused fiduciaries of choosing investments that would "unduly profit third-party investment managers," a claim rejected by the judges because there was no proof of self-dealing under ERISA guidelines.

The TriHealth Inc. Retirement Plan, Cincinnati, had $905 million in assets as of Dec. 31, 2020, according to its latest Form 5500 filed with the Labor Department.