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Sentara Healthcare Sued Over ‘Underperforming’ Stable Value Investment Option
Its 403(b) plan committee was accused of failing to monitor its investment in a stable value investment product offered by Principal.
Sentara Healthcare Inc. and its fiduciary committee face a lawsuit over its 403(b) plan, with plan participants arguing that the company breached its fiduciary duty by failing to monitor the plan’s “underperforming” stable value investment option.
In Carter et al. v. Sentara Healthcare Fiduciary Committee et al., plaintiffs Tracey Carter and Bonny Davis accused the fiduciaries of failing to remove and replace the plan’s underperforming investment option, resulting in significant losses to the plan. The complaint was filed in U.S. District Court for the Eastern District of Virginia on January 8.
The stable value investment in question is the Guaranteed Interest Balance Contract, an insurance product offered by Principal Life Insurance Co.
According to the complaint, the GIBC is an off-the-shelf product offered to retirement plans that “lack the bargaining power to negotiate and select competitive stable value products that offer higher returns without additional risk.” The lawsuit argued that Sentara Health has substantial assets to invest in “superior stable value products.”
At year-end 2023, the 403(b) plan had $136 million invested in the GIBC, which the plaintiffs allege gave the plan substantial bargaining power in the stable value marketplace. Their complaint says the GIBC product lagged both the rate of inflation and competitor products by between one and two percentage points per year since 2019.
“[Sentara] had (and continue to have) a fiduciary obligation to seek and utilize superior stable value products available by soliciting proposals from competing stable value providers,” the complaint states. “Defendants have never done this. Had defendants done so, they would have been able to secure a stable value product with higher crediting rates for an equivalent level of risk.”
The plan has been invested in the same GIBC stable value product since 1999, and the lawsuit alleged that the plan has lost more than $11.4 million from 2019 to 2023 due to investing in this product.
The Sentara 403(b) Savings Plan had more than $3 billion in assets and 40,340 participants, according to its 2023 Form 5500 filing.
Represented by the Casey Jones Law Firm, Engstrom Lee LLC and the James White Firm LLC, the plaintiffs are asking the court to declare that Sentara breached its fiduciary duties under the Employee Retirement Income Security Act, replace its committee members and make good on plan losses, among other requests.
A Sentara spokesperson said, “We are aware of the lawsuit, and to maintain the integrity of the process, we are unable to provide comment.”
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