Michigan’s Bronson Healthcare Group Inc. will pay $3 million to settle a proposed class action claiming it mismanaged its retirement plan by failing to lower administrative fees or replace expensive and poorly performing investments, according to a federal court filing.
The settlement, announced Monday in the U.S. District Court for the Western District of Michigan, is slated to benefit about 21,528 participants in Bronson’s $737 million retirement plan. The $3 million settlement amount represents more than half of the retirement plan’s allegedly excessive fees and nearly one-fifth of the plaintiffs’ total estimated losses, according to the settlement motion.
The eight-month-old lawsuit accuses Bronson of breaching its fiduciary duties under the Employee Retirement Income Security Act by failing to monitor the retirement plan’s administrative fees, which allegedly ballooned to $81 per person, per year. The lawsuit also takes aim at Bronson’s decision to use a suite of actively-managed target date funds from Fidelity as the plan’s default investment option. This suite is “dramatically more expensive” than a similar suite of passively-managed Fidelity funds, and it’s “riskier in both its underlying holdings and its asset allocation strategy,” plan participants claim.
Several recent lawsuits have targeted 401(k) plans that offer the actively managed Fidelity Freedom Funds. Judges have allowed these cases to move forward against MedStar Health Inc., Zachary Holdings Inc., Prime Healthcare Services Inc., Quest Diagnostics Inc., and others. CommonSpirit Health won early dismissal of these claims.
The parties in the Bronson case reached an agreement following a mediation session in November 2021, according to the settlement motion. Bronson hasn’t filed a formal response to the complaint.
The Bronson plan participants are represented by Walcheske & Luzi LLC and Haney Law, which stand to receive $1 million in attorneys’ fees if the deal is approved. Jackson Lewis PC represents Bronson.
The case is Gleason v. Bronson Healthcare Grp., Inc., W.D. Mich., No. 1:21-cv-00379, motion for settlement approval 1/10/22.