A federal judge in Los Angeles has dismissed an ERISA complaint against Molina Healthcare and its 401(k) plan fiduciaries by former employees who alleged the plan offered investment options that cost more than similar ones in the marketplace.
The March 20 decision by U.S. District Court Judge Stanley Blumenfeld Jr. was based on testimony at a six-day bench trial in November 2023 in the case of Mills et al. vs. Molina Healthcare Inc. et al.
The plaintiffs focused on the plan’s offering a target-date series from flexPATH Strategies LLC, a registered investment adviser, which they claimed was “untested” and which performed poorly in comparison to several other target-date series.
“During the class period, the flexPATH TDFs outperformed most other retirement TDFs and all three of the benchmark indices that are appropriate comparators in this case,” Blumenfeld wrote. He certified the lawsuit as class-action covering participants and beneficiaries between March 18, 2016 and October 26, 2020.
“Even using the most profitable reasonable benchmark, the selection of the flexPATH TDFs as the plan’s QDIA did not cause a loss to the plan,” the judge wrote, referring to a qualified default investment alternative. The plan “suffered no losses even if investment manager fees are considered.”
The plaintiffs filed their initial complaint in March 2022. They amended the complaint in July 2022 adding NFP Retirement Inc., an investment adviser, as a defendant. They filed a second amended complaint in September 2022, adding flexPATH Strategies LLC as a defendant.
Court records show Molina plan executives replaced NFP in May 2020 and replaced the flexPATH target-date series in October 2020.
During the course of litigation, the court dismissed all claims against NFP and some claims against the other defendants, the judge’s ruling said.
The bench trial considered the allegations that Molina Healthcare and flexPATH strategies breached their ERISA duties of prudence and loyalty by adding and retaining the target-date series; that Molina and failed to monitor its fiduciaries; and flexPATH Strategies engaged in prohibited transaction.
Because the judge ruled that defendants didn’t violate ERISA’s duty of prudence since the target-date series didn’t cause a loss, he dismissed the failure-to-monitor claim. And because plaintiffs didn’t prove a loss, the wrote that there was “no need” to determine if any defendant breached its fiduciary duties “or engaged in a prohibited transaction."
The Molina Salary Savings Plan, Long Beach, Calif., had assets of $892.3 million as of Dec. 31, 2022, according to its latest Form 5500 filing.
