A federal judge in Newark, N.J., rejected a request by Barnabas Health Inc. to dismiss an ERISA lawsuit against the company and its fiduciaries filed by two participants in two Barnabas retirement plans.
Barnabas Health asked U.S. District Judge Kevin McNulty to dismiss plaintiffs' allegations, including:
- Barnabas Health and fiduciaries violated ERISA's duty of prudence standard.
- The defendants violated ERISA's duty of loyalty guidelines.
- The defendants failed to monitor the plans' administrative committee.
Mr. McNulty rejected all of the arguments on April 13 in the case of McGowan et al. vs. Barnabas Health Inc. et al. covering a 401(k) plan and a 403(b) plan.
The participants sued in September 2020 alleging, among other things, that the defendants failed to make sure that each investment option was prudent and that fiduciaries failed to consider offering cheaper and better-performing investments compared to some investments in the plans' lineups.
"There are enough allegations to show that participants could have saved costs had the fiduciaries chosen a different record keeper or compensation plan," said the judge, referencing ERISA's duty of loyalty. "This need not imply that the fiduciaries were not acting solely in the participants' interests, but it could."
As for the defendants' challenge to the duty-of-prudence allegation, the judge wrote that their arguments are "unpersuasive."
He added that "because the complaint pleads breaches of other fiduciary duties, a failure to monitor claim is plausible."
As of Dec. 31, 2019, the West Orange, N.J.- based RWJBarnabas Health 401(k) Savings Plan and the RWJBarnabas Health 403(b) Savings Plan had $1.71 billion and $1.08 billion in assets, respectively, according to the most recent Form 5500 filings.