Current and former participants in a 401(k) plan run by CEP America LLC sued the company and its fiduciaries alleging a series of ERISA violations.
Plaintiffs accused the company of overpaying the plan's record keeper, Charles Schwab & Co., alleging those payments were "excessive and unreasonable," according to a complaint filed Nov. 1 in a U.S. District Court in Oakland, Calif. Charles Schwab isn't a defendant.
"The company also paid itself millions of dollars per year in excessive compensation from the plan in violation of ERISA," said the complaint in Nagy et al. vs. CEP America LLC et al. Plaintiffs are seeking class-action status. The proposed class period covers participants since Nov. 1, 2017.
CEP America is a physician-led and physician-owned multispecialty partnership doing business as Vituity, whose retirement plan is the 401(k) Profit Sharing Plan for Employees of MedAmerica Inc.
The plan's retirement and benefits committee "failed to have a prudent process for evaluating the amount and reasonableness of Schwab's compensation," the lawsuit said. "Instead of evaluating the cost of these services in the marketplace, the committee permitted Schwab to serve as the record keeper for the plan without meaningful market competition."
As a result, "defendants allowed Schwab to generate higher fees even though market rates for record-keeping services dropped during the relevant period," the lawsuit said.
"Vituity has a robust and extensive process in place to ensure that our retirement plans are properly managed in the best interests of plan participants and beneficiaries, including in the selection and monitoring of the plan's investment funds," John Hansen, Vituity's director of marketing and public relations wrote in an email.
The plan relies on members of its internal benefit plan committee and external investment consultants to evaluate investments and financial issues as well as outside counsel to "assist with legal compliance, including providing training and education to keep the committee current on legal developments," Hansen wrote.
The 401(k) Profit Sharing Plan for Employees of MedAmerica Inc., Emeryville, Calif., had assets of $1.36 billion as of Dec.31, 2022, according to the latest Form 5500.