Anthem Excessive Fee Case Moves Forward

The only motion to dismiss by the defendants that the court granted concerned a claim that the 401(k) plan should have offered a stable value fund instead of a money market fund.

By Rebecca Moore | March 27, 2017
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A federal district judge has moved forward most claims in an excessive fee case brought by participants in the Anthem 401(k) Plan.

The defendants, fiduciaries of the plan, moved to dismiss the plaintiffs’ amended complaint, contending that the plaintiffs failed to state a claim upon which relief can be granted. The defendants also assert that the plaintiffs’ claims are untimely.

Under Count I, the plaintiffs assert that defendants breached their fiduciary duty by selecting and retaining plan investment options with excessively high fees instead of choosing identical lower-cost investment options that were available during the relevant period. Citing two prior court cases, the defendants assert they did not breach their fiduciary duty because the plan offered an array of different investments with an acceptable range of fees.

In response, the plaintiffs contend that the defendants’ reliance on the prior cases is misplaced because they do not claim any problem with the “array” of plan investment options offered, but take issue only with the cost of the investment options. The plaintiffs rely on Tibble v. Edison when arguing that the defendants breached their fiduciary duty because, from December 29, 2009, through July 22, 2013, they provided investment options at a higher cost when the same investment options were available at a lower cost. Judge Tanya Walton Pratt of the U.S. District Court for the Southern District of Indiana agreed and denied the defendants motion to dismiss Count I.

Under Count II, the plaintiffs argue that the defendants breached their fiduciary duty because, prior to restructuring the investment lineup in 2013, they failed to solicit competitive bids from vendors on a flat participant fee and failed to monitor recordkeeping compensation to ensure that the plan’s recordkeeper received only reasonable compensation. The plaintiffs assert that a reasonable compensation for recordkeeping is a flat fee of $30 per participant.

But, the defendants contend the court should dismiss Count II because the plaintiffs failed to make any factual allegations that the recordkeeping fees are the result of any type of self-dealing. They argue that the plaintiffs also failed to plead any facts to support the claim that a reasonable recordkeeping fee for the plan would have been $30 per participant or that there were other vendors equally capable of providing recordkeeping services for the plan at that lower cost. They assert that without these facts, the plaintiffs’ claim is nothing more than a conclusory allegation that the plan’s recordkeeping fees were unreasonable because they were higher than what the plaintiffs thought they should be.

But, Pratt found that the plaintiffs were not required to allege that the recordkeeping fees were the result of any type of self-dealing, but were required to assert only that the defendants failed to act with prudence when failing to solicit bids and to monitor and control recordkeeping fees. She denied defendants motion to dismiss Count II.

NEXT: Offering a stable value fund and monitoring fiduciaries