Published On: Wed, Nov 14th, 2018

Lawsuit Filed Over Kaleida Health’s 403b and 401k Plans

Kaleida Health has been named as a defendant in a lawsuit which alleges that the healthcare company did not use bargaining power when choosing plans and that the provider only used actively managed mutual funds as an investment option.

The lawsuit relates to the company’s 403(b) and 401(k) plans.

photo/ Rudy and Peter Skitterians

The lawsuit claims that all participants in the plans have had to pay excessive investment fees due to the lack of active bargaining by Kaleida Health.

“Making matters worse, their fees are often not clearly identified or explained, making it hard to know how much you are paying. And just as often, these fees are simply too high. Way too high. Most employees have no idea how much of their 401(k) retirement savings is getting paid to the financial service companies,” explains Meyer Wilson.

Investment options in each plan are similar to the point that they’re almost identical, according to the suit. There are 11 T. Rowe Price target-date funds that are all retail class or adviser class funds. The claim makes note that the plans are not institutional class or investor class funds that would charge a much lower fee.

The 12b-1 fee, which is assessed to institutional or investor class funds, is .25% of the net assets in the funds. Class shares are also not charged a fee under the two.

The suit claims that funds with very high asset values have higher bargaining power, and this allows many plans that have tens of millions or hundreds of millions in assets to negate fees and have lower overall operating expenses.

Participants claim that since almost all of the funds chosen are identical, there is no benefit to choosing one fund over another and that it provides no benefits to the participants.

The lawsuit is seeking to recover damages from the losses suffered from participants in the retirement savings program. The lawsuit is being taken out as a class action lawsuit on behalf of all participants, and Kaleida is being accused of failing to offer a diverse set of investment options to their workers.

The 403(b) plan had net assets of over $370 million at the end of 2016, more than enough in assets to bargain rates down. The 401(k) plan had an additional $69.4 million in net assets at the end of 2016.

Many of the funds had operating expenses that were between .84 and 1.01 in the advisor class and 0.59 to .76 in the investor class options.

Author: Jacob Maslow

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