A federal court judge in Hartford, Conn., has rejected a request by Yale-New Haven Hospital Inc. to dismiss allegations by former employees that the hospital's 403(b) plan violated ERISA by overpaying for record-keeping and administrative fees.
Although U.S. District Court Judge Michael P. Shea sided with the plaintiffs in their record-keeping complaint, he dismissed most of the other allegations they had filed in Ruilova et al. vs. Yale-New Haven Hospital Inc. et al.
The judge dismissed the plaintiffs' allegations against the hospital and plan fiduciaries about a menu of high-cost investment options, assorted investments that performed poorly, plan executives acting for their own interests instead of those of participants and the plan's total cost.
The plaintiffs sued in January 2022 — and later amended their complaint — seeking class-action status. The defendants asked the court to dismiss all allegations.
"Plaintiffs infer that defendants paid more than comparable plans for the same services because they failed to use a prudent process" for making a comparison, the judge wrote. "Courts in this circuit have consistently found that allegations of this kind are sufficient to state a claim. Connecticut is in the same federal judicial circuit as New York and Vermont.
The plaintiffs' comparison of record-keeping fees and services plus information about the record-keeping market and the record-keeping fee process "are enough to support a reasonable inference that the defendants' choice to retain Fidelity" as record keeper — "or their failure to use their leverage to negotiate lower fees with Fidelity — was the result of an imprudent process," the judge wrote. Fidelity Investments isn't a defendant.
The judge also wrote that plaintiffs have "adequately pled" the plan's fiduciaries breached their ERISA duties in selecting a record keeper.
Yale-New Haven Hospital and Tax Exempt Affiliates Tax Sheltered Annuity Plan, New Haven, Conn., had $1.93 billion in assets as of Dec. 31, 2021, according to the latest Form 5500.