The University of Maryland Medical System has agreed to pay $3.25 million to settle a class-action lawsuit over allegedly high investment and record-keeping fees in the workplace retirement savings plans if offered its employees.
The lawsuit — filed against UMMS and the employee benefits committee in July 2021 by participants in UMMS' 403(b) and 401(a) plans — took aim at the plans' default investment option known as GoalMaker, Prudential's proprietary optional asset allocation service. It claimed that GoalMaker funneled participants' savings into expensive and poorly performing investments that paid kickbacks to Prudential.
"The inclusion and designation of GoalMaker as the plans' default investment caused participants to pay excessive investment management fees and administrative expenses, which over the class period cost participants millions of dollars in retirement savings," the plaintiffs claimed in the lawsuit.
The plaintiffs also alleged that the plans were dominated by high-cost funds that charged overly excessive fees and that they used high-cost share classes when lower-cost share classes were available.
The lawsuit also criticized UMMS and the employee benefits committee for failing to analyze the plans' investment options and remove underperforming funds. Lastly, it faulted the defendants for neglecting to monitor record-keeping costs.
As a result of its failure to seek competitive pricing for record keeping, the amount of record-keeping and administrative fees was excessive and unreasonable, the plaintiffs claimed.
The plaintiffs filed a motion in U.S. District Court in Maryland asking for preliminary approval of the $3.25 million settlement agreement on Dec. 10.
The case is Moler et al v. University of Maryland Medical System.
UMMS' 403(b) plan had $755 million in assets and the 401(a) plan had $463 million as of Dec. 31, 2020, according to court filings.
