Universal Health Services Inc. has agreed to settle an ERISA complaint by former employees who alleged a 401(k) plan charged excessive fees and made imprudent investment selections.
Terms were not disclosed in the agreement in principle filed Wednesday with U.S. District Judge Mark A. Kearney in Philadelphia. The judge told the parties to file a preliminary settlement document by Oct. 20.
Former employees sued the hospital and health services company and its fiduciaries in June 2020. They accused the plan executives of failing to reduce plan expenses or "exercise appropriate judgment" in selecting investments. They criticized the plan fiduciaries for retaining more expensive and worse-performing investments when similar or identical investments were available in the marketplace.
Mr. Kearney rejected Universal's motion to dismiss in October 2020 while granting plaintiffs class-action status covering approximately 60,000 participants.
The 3rd U.S. Circuit Court of Appeals on June 1, 2022, upheld Mr. Kearney's ruling. The appeals court judges and Mr. Kearney rejected Universal's contention that the lawsuit should have been dismissed due to a July 2020 U.S. Supreme Court decision in Thole et al. vs. U.S. Bank NA et al.
The Supreme Court's pro-sponsor ruling said defined benefit plan participants, in an overfunded plan, lacked standing to sue because they weren't harmed financially. The court noted there is a difference between a DC plan and a DB plan.
"The Supreme Court in Thole and the Constitution require plaintiffs demonstrate a concrete stake in the outcome of each of their claims," Mr. Kearney wrote in October 2020. "The employees have done so here."
The question for the appeals court judges was whether the DC participants had standing to sue "when the class representatives did not invest in each of a defined contribution retirement plan's available investment options," they wrote. "We will affirm. Because the class representatives allege actions or a course of conduct by ERISA fiduciaries that affected multiple funds in the same way, their claims are typical of those of the class."
The Universal Health Services Inc. Retirement Savings Plan, King of Prussia, Pa., had $2.8 billion in assets as of Dec. 31, 2020, according to the latest Form 5500.