CHS/Community Health Systems Inc., Franklin, Tenn., and record keeper Principal Financial Group are the targets of a class-action lawsuit filed by a group of participants in the company's 401(k) plan, alleging the company and record keeper violated their fiduciary duties in offering Principal's index funds in the plan.
The lawsuit, filed in U.S. District Court in Nashville on Aug. 8, alleges that CHS breached its fiduciary duties under the Employee Retirement Income Security Act of 1974 by offering "excessively expensive and poorly performing index funds in the plan that were managed by Principal," according to the court filing.
The lawsuit said Principal, the plan's record keeper, had a conflict of interest in offering its proprietary index funds "despite fees that were several times higher than marketplace alternatives that tracked the exact same index" and what the lawsuit said was performance that was worse than alternatives because the funds "deviated further from the benchmark index."
According to the company's most recent Form 5500 filing, the CHS/Community Health Systems Inc. Retirement Savings Plan had $3.3 billion in assets as of Dec. 31, 2017.
Principal said in a statement emailed by spokeswoman Teresa Thoensen: "We disagree with the allegations in this lawsuit and will vigorously contest them. Principal is one of many companies in the industry that have had lawsuits filed against them making these kinds of claims."
CHS spokesman Ross W. Comeaux and Jerry Martin, partner at Barrett Johnston Martin & Garrison, the plaintiffs' attorney, could not be immediately reached to provide comment.