In August 2017, Allina Health System faced a proposed class action in Minnesota federal court filed by former employees alleging that Allina Health flouted ERISA (the Employee Retirement Income Security Act). The employees allege that Allina failed to make sure that the options available were not detrimental to retirement plan participants.
Judy Larson, Janelle Mausolf, and Karen Reese are all ex-employees of Allina Health System. All named Allina Health System (provider of medical care in Minnesota and Wisconsin), the Allina board of directors, the company’s chief administrative officer, chief human resources officer, and entire retirement committee as defendants in the suit. Within the extensive complaint (91 pages in full), the plaintiffs stated that the two defined contribution retirement plans they have an issue with, have more than $1 billion in combined assets, making them jumbo plans. In fact, this makes them amongst some of the largest plans in the entire nation. The sheer size of the plans means Allina has significant buying power regarding expenses and fees that are charged against their participants’ investments.
In spite of this and the opportunity it created to potentially reduce the plans’ costs and otherwise manage the offered investment options in the most prudent fashion, Allina abdicated its fiduciary oversight to Fidelity, the plans’ trustee.
Under Fidelity’s oversight, the plans saw high-cost, non-Fidelity mutual funds through which Fidelity themselves received millions in revenue sharing. The situation also enabled Fidelity to add any Fidelity mutual fund that was available no matter if the funds duplicated other options or not, had higher than norm costs, had low performance, or were otherwise not beneficial to plan participants.
In the end, the plan participants ended up paying fees that were much higher than those from comparable retirement plans with similar asset amounts. The plaintiffs allege the Allina breached its duties of loyalty and prudence through a systematic failure to monitor performance and costs for the retirement plans’ investment options and by including high-cost options that were not only not beneficial, but actually detrimental to participants. The company’s failure to negotiate lower fees and expenses associated with the plans and failing to swap out high-cost/low performance options for better performing, more fiduciary prudent options was also noted in the plaintiffs’ allegations.
The plaintiffs in the case seek class action status that would include tens of thousands of people.
If you have similar allegations or need to ask questions about employment law violations in the workplace, please get in touch with one of the experienced California employment law attorneys at Blumenthal, Nordrehaug & Bhowmik.