A federal court judge in New York has dismissed a lawsuit by a participant in a 403(b) plan run by Northwell Health Inc. that alleged the plan's record-keeping and administrative fees as well as its investment menu selection violated ERISA.
The fiduciary breach claims relating to the excessive-fee and poor-investment allegations were dismissed because "plaintiff has not adequately pleaded either claim," U.S. District Court Judge Rachel P. Kovner wrote in her Sept. 30 opinion in the case of Gonzalez vs. Northwell Health Inc. et al.
The plan participant sued in July 2020 — and later amended her complaint — claiming that Northwell and its plan fiduciaries chose and retained poor-performing investments compared to better choices that were available in the marketplace. She cited four examples of actively managed funds that she argued should have been replaced.
"Plaintiff has failed to set out circumstantial factual allegations from which a court may reasonably infer that the decision to retain each challenged fund was the product of a flawed decision-making process," the judge wrote.
"Plaintiff alleges that a prudent fiduciary would have replaced these funds with lower-cost alternatives that simply tracked the benchmark indices," the judge wrote. "These allegations of underperformance compared to benchmark indices over a relatively short period of time do not support a plausible inference that defendants acted imprudently in retaining these four funds."
As to the record-keeping allegations, the judge wrote that the plaintiff "has not made allegations permitting a reasonable inference that defendants' process as to recordkeeping fees was flawed."
The judge gave the plaintiff, who is seeking class-action status, 30 days to file a second amended complaint. Otherwise, the judge said she will close the case.
Northwell Health 403(b) Plan, Westbury, N.Y., had assets of $8.6 billion as of Dec. 31, 2020, according to the latest Form 5500.
