A federal court judge in Fresno, Calif., has rejected a request by Sutter Health to dismiss a lawsuit filed by current and former employees alleging ERISA violations in the hospital and clinic operator's 403(b) plan.
The plaintiffs sued in July 2020 — and later amended their complaint — contending that plan fiduciaries failed to reduce expenses and retained high-cost and poor-performing investment options.
They complained that plan fiduciaries should have replaced an actively managed target-date series from Fidelity Investments with a cheaper, passively managed target-date series from Fidelity, which isn't a defendant.
Based on data provided by the plaintiffs as well as third-party comments, U.S. District Court Judge Jennifer L. Thurston on Feb. 9 rejected Sutter Health's motion to dismiss. This "raises plaintiffs concerns above the bar of mere suspicion," she wrote. "The court therefore finds the allegations in the complaint sufficient to allow a reasonable inference of a flawed process."
The information provided by the plaintiffs also "plausibly alleges a breach of defendants' duty of prudence as to excessive record-keeping fees and total plan cost," the judge wrote in the case of In re Sutter Health ERISA Litigation.
The plaintiffs are seeking class-action status, alleging the ERISA violations started on July 21, 2014 and continue to the present.
"It is sufficient at this stage that plaintiffs allege specific facts supporting their claims that the plan's fees and total plan cost were excessive for its size," the judge wrote. "On these facts, the court can draw a plausible inference that defendants failed to act prudently when negotiating fees and costs for the plan."
The Sutter Health 403(b) Savings Plan, Sacramento, California, had assets of $6.38 billion as of Dec. 31, 2021, according to the latest Form 5500.