Four former employees of Boston Children's Hospital have sued the hospital and its retirement plan fiduciaries for violating ERISA, alleging that a hospital 403(b) plan had high fees and some poor-performing investment options.
"Defendants failed to fully disclose the expenses and risk of the plan's investment options to participants (and) allowed unreasonable expenses to be charged to participants," said the complaint filed Tuesday in U.S. District Court in Boston.
Defendants also "selected, retained, and/or otherwise ratified high-cost and poorly-performing investments, instead of offering more prudent alternative investments," said the complaint in the case of Monteiro et al. vs. The Children's Hospital Corp. et al.
The plaintiffs, who no longer participate in the Children's Hospital Corp. Tax-Deferred Annuity Plan, are seeking class-action status.
They accused the 403(b) plan's fiduciaries of paying fees for record keeping and administration "that far exceeded the reasonable market rate," the lawsuit said.
"Defendants clearly engaged in virtually no examination, comparison or benchmarking" of the plan's record-keeping and administrative fees in the context of "other similarly sized defined contribution plans," the lawsuit said. "To the extent defendants had a process in place, it was imprudent and ineffective given the objectively unreasonable level of fees the plan paid" for record keeping and administrative services.
The plaintiffs also argued that plan fiduciaries should have looked into offering a passively managed target-date series from Fidelity Investments, which was "substantially less costly and less risky" than an actively managed Fidelity target-date series offered by the plan.
"Defendants failed to compare the active and Index suites, as well as all other available TDFs, and consider their respective merits and features," the lawsuit said.
Fidelity, also the plan's record keeper, isn't a defendant.
The 403(b) plan had 18,580 participants and assets of $1.1 billion as of Dec. 31, 2020, the complaint said.
A hospital representative did not respond to a request for comment.