Chicago's Rush University Medical Center has agreed to settle an ERISA lawsuit by four former participants in a 403(b) plan who claimed medical center officials and fiduciaries mismanaged the plan in violation of ERISA.
Attorneys for the plaintiffs and the defendants filed a joint notice on June 27 in a U.S. District Court in Chicago that they had agreed in principle to settle the case of Barcenas et al. vs. Rush University Medical Center et al. Terms were not immediately disclosed. The notice said details will be made available to the court on July 29.
The former participants sued in January, accusing the medical center and fiduciaries of violating ERISA by 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 active suite chases returns by taking levels of risk that render it unsuitable for the average retirement investor, including participants in the plan," the lawsuit said.
The defendants "failed to monitor the average expense ratios charged by investment managers to similarly sized plans," the lawsuit said. "Participants were offered an exceedingly expensive menu of investment options, clearly demonstrating that defendants neglected to benchmark the cost of the plan lineup or consider ways in which to lessen the fee burden on participants during the majority of the pertinent period."
The plaintiffs, who were seeking class-action status, alleged that the ERISA abuses started on Jan. 21, 2016.
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 assets of $1.2 billion as of Dec. 31, 2020, according to the latest Form 5500.