Spectrum Health System has agreed to pay $6 million to settle an ERISA lawsuit by two participants in a company 403(b) plan who accused plan executives of overpaying for poor-performing target date funds and allowing high record-keeping fees.
The proposed settlement, which is subject to court approval, was submitted March 10 to a U.S. District Court in Grand Rapids, Mich., in the case of McNeilly et al. vs. Spectrum Health Systems et al.
"Defendants deny all of these claims and deny that they ever engaged in any wrongful conduct," said the settlement document filed by the plaintiffs' attorneys.
Defendants were sued in September 2020 — the complaint was later amended — arguing that the plan's offering of a target-date series from Voya Financial performed worse — and cost more — than other Voya target-date series. Plaintiffs also alleged record-keeping fees were excessive. Voya isn't a defendant.
Defendants petitioned for a dismissal, which was rejected in July 2021.
During legal discovery in which parties provide documents to each other, lawyers for both sides began meeting with a mediator. They subsequently agreed on a preliminary settlement.
"If this case were to go to trial both sides would face burdensome litigation involving intricate fact discovery and the costs to retain experts in areas such as ERISA duties, damages, and defined contribution investing," the settlement document said.
The Spectrum Health System 403(b) Plan, Grand Rapids, Mich., had assets of $2.68 billion as of Dec. 31, 2021, according to the latest Form 5500.