The Raleigh, N.C.-based health care system WakeMed has agreed to pay $975,000 to settle a complaint by participants in a company retirement plan that fiduciaries violated their ERISA duties in managing the plan.
The settlement, which requires court approval, was described in a document submitted April 26 to a U.S. District Court in Raleigh.
In addition to the payment, WakeMed, while admitting no wrongdoing, agreed to several other terms: conducting an RFP for investment advisory services within 18 months of formal settlement approval; conducting an RFP within 36 month of approval for record-keeping and administrative services; and within 72 months of approval conducting a second RFP for record-keeping and administrative services.
In each instance, the agreement said WakeMed could retain the current investment adviser and/or the record keepers.
The participants argued that fiduciaries of the WakeMed 403(b) plan should have examined cheaper share classes of identical mutual funds offered in the plan, should have chosen index funds vs. actively managed funds and allowed excessive record-keeping fees.
According to the proposed settlement document, attorneys for both sides began discussing plan issues in August 2020, well before a formal complaint had been filed and following plaintiffs' attorneys' requests for documents in March and April 2020. (The formal complaint was filed April 26, 2021, the same day the settlement agreement was announced.)
"Plaintiffs' counsel inquired about WakeMed's interest in determining whether this matter might be resolved before initiating formal litigation," the document said. "Thereafter, plaintiffs and WakeMed, through counsel, engaged in a series of discussions and arm's-length negotiations over several weeks regarding the basis for plaintiffs' claims, additional details about the plan's operations and administration, and other related issues."
In December 2020, the parties submitted their dispute to mediation, eventually leading to a proposed settlement agreement.
The WakeMed Retirement Savings Plan had assets of $898 million as of Dec. 31, 2019 according to the latest Form 5500.