Chicago's Rush University Medical Center will pay $2.95 million to settle an ERISA lawsuit by four former 403(b) plan participants who alleged mismanagement of their retirement plan, according to a document filed July 29 in a U.S. District Court in Chicago.
The parties announced in late June that they had reached an agreement in principle. At the time, they didn't describe the terms of the settlement, which requires court approval as well as an endorsement by an independent fiduciary.
"This settlement agreement and the payments made hereunder are made in compromise of disputed claims and are not admissions of any liability of any kind, whether legal or factual," said the document in Barcenas et al. vs. Rush University Medical Center at al.
"Defendants specifically deny any such liability or wrongdoing and state that they are entering into this settlement agreement to eliminate the burden and expense of further litigation," the document said.
The agreement called for plan fiduciaries to initiate a record keeper RFP within three years of the settlement taking effect and an RFP for investment advisory and consulting services within three years of the settlement date.
Also, within one year of the settlement taking effect, "defendants, in consultation with the plan's investment advisor, will review the plan's investment policy statement and reach a written determination as to whether the investment policy statement reflects appropriate criteria for selecting and evaluating the plan's investment options and expenses," the document said.
The former participants sued university officials and plan fiduciaries in January, alleging ERISA violations due to charging "excessive" record-keeping and administrative fees and by offering an actively managed target-date series instead of a similar index-based target-date series, both of which are managed by Fidelity Investments. Fidelity isn't a defendant. The defendants "failed to monitor the average expense ratios charged by investment managers to similarly sized plans," the lawsuit said.
Although the defendants replaced the Fidelity target-date series in 2019 with an index-based Vanguard target-date series, this decision "does not excuse their failure to do so several years prior," the lawsuit said. "Defendants' obstinance in retaining the active suite despite its myriad issues was to the severe detriment of plan participants."
The Rush University Medical Center 403(b) Retirement Savings Plan, Chicago, had $1.2 billion in assets as of Dec. 31, 2020, according to the latest Form 5500.
