District Court Rejects Sentara Healthcare’s Motion to Dismiss Stable Value Investment Case

A federal judge rejected a motion from Sentara Healthcare Inc. and its fiduciary committee to dismiss a complaint alleging a breach of fiduciary duty related to its 403(b) plan. The plaintiffs allege that the plan sponsor and plan committee failed to monitor the plan’s “underperforming” stable value investment option.

In Carter et al. v. Sentara Healthcare Fiduciary Committee et al., U.S. District Judge Jamar Walker, presiding in U.S. District Court for the Eastern District of Virginia, ruled that one named plaintiff, Bonny Davis, lacked standing because she was not yet a participant in the stable value investment at issue in the case—the Guaranteed Interest Balance Contract, an insurance product provided by Principal Life Insurance Co. However, the court will allow the plaintiffs to amend the complaint to correctly show that Davis had enrolled in the GIBC and, therefore, has standing.

Furthermore, Walker allowed both claims based on the standards of the Employee Retirement Income Security Act to move forward. On the first count, the plaintiffs allege that Sentara’s fiduciary committee breached its fiduciary duty because the GIBC’s “earnings are far short of what the plan can obtain in the marketplace at the same level of risk.” The complaint further alleges that the plan did not adopt a “prudent process” in monitoring the plans investments. The court found the arguments sufficient to survive a motion to dismiss.

On the second count, the plaintiffs alleged that Sentara breached its fiduciary duties by “failing to intervene” with the fiduciary committee’s violation of its fiduciary duties, the court also allowed the claim to continue.

Since Sentara oversees the committee, Sentara has a responsibility “‘to monitor investments and remove imprudent ones,’ just like the committee,” the court stated. “Thus, Sentara has a fiduciary duty to rectify any imprudent choices made by the committee. And because Sentara failed to intervene by ‘periodically solicit[ing] competitive bids.’”

The Sentara 403(b) Savings Plan has more than $3 billion in assets and 40,340 participants, according to its 2023 Form 5500 filing.

The plaintiffs are represented by Casey Jones Law Firm, Engstrom Lee and James White Firm LLC. The defendants are represented by Jones Day.

“We look forward to providing the court with evidence of our prudent fiduciary practices when we file our motion for summary judgment,” a Sentara spokesperson said.