Parties Reach Settlement Agreement in Anthem 401(k) Excessive Fee Case

The case is notable for arguing that an investment that had only a 4 basis point annual fee could have been replaced by one charging only 2 basis points.

The parties in an excessive fee lawsuit filed against the committee that oversees the Anthem 401(k) plan have reached a settlement agreement.

A February 19 docket entry in the case of Bell v. Anthem says, “The parties have reached a resolution subject to class approval.” The judge ordered that on or before March 15, 2019, the parties are to file a motion for preliminary approval of class settlement. Details of the settlement will be available then.

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In the complaint, it is alleged that plan fiduciaries allowed unreasonable expenses to be charged to participants for administration of the plan, and that they selected and retained high-cost and poor-performing investments compared to available alternatives. The complaint suggests the Anthem plan, “as one of the country’s largest 401(k) plans … with over $5.1 billion in total assets and over 59,000 participants with account balances,” should have gotten as good or better a deal than anyone in the institutional investing markets, but it failed to do so in a variety of ways, leading to about $18 million in unnecessary fees/losses for participants.

Surprisingly, most of the “imprudent” funds cited by name are provided by Vanguard, widely known for transparency and affordability, and are actually quite cheap from an industry-wide perspective—below 25 bps in annual fees. One fund cited has just a 4 bps annual fee, but according to the compliant an otherwise identical 2 bps version could have been obtained by an investor with the size and sophistication of the Anthem plan. Therefore an alleged breach occurred when Anthem continued offering the 4 bps version.

A judge moved forward claims in the case last March and denied summary judgment for the 401(k) plan fiduciaries just weeks ago. A trial date had been set.

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