The first court ruling interpreting the U.S. Supreme Court’s Jan. 24 decision on 401(k) fee disputes resulted in a victory for retirement investors, when a federal judge on Tuesday declined to dismiss claims against Georgia’s Columbus Regional Healthcare System Inc.
Participants in the Columbus Regional plan can move forward with claims that the plan offered underperforming, actively managed, and retail share class mutual funds, Judge Clay D. Land of the U.S. District Court for the Middle District of Georgia ruled. Under the Supreme Court’s decision in Hughes v. Northwestern Univ.—issued one day before Land’s opinion—plan fiduciaries can’t avoid liability for offering allegedly imprudent investments by pointing to the low-cost index funds also made available to participants, he said.
“An ERISA fiduciary’s imprudent decisions are not excused simply because the participants had the ‘ultimate choice over their investments’ and could have chosen lower cost ones,” Land said, citing Hughes. “The fact that Plaintiffs in this action had some lower cost index fund options is not dispositive of whether Columbus Regional satisfied its duty of prudence as a matter of law. Dismissing this claim would not comport with recent Supreme Court precedent.”
In Hughes, the Supreme Court ruled in a short, unanimous opinion that plan participants’ ultimate choice over their retirement investments doesn’t excuse a fiduciary’s decision to offer allegedly imprudent funds. If fiduciaries “fail to remove an imprudent investment from the plan within a reasonable time, they breach their duty” under the Employee Retirement Income Security Act, the court said.
Land also cited Hughes in allowing the Columbus Regional plan participants to advance a challenge to the plan’s record keeping fees, which they say were “nearly double” what a reasonable fee would have been for a similarly sized plan.
Williamson & York LLC and James White Firm LLC represent the Columbus Regional plan participants. Smith, Gambrell & Russell LLP represents Columbus Regional.
The case is Goodman v. Columbus Reg’l Healthcare Sys., 2022 BL 24373, M.D. Ga., No. 4:21-cv-00015, 1/25/22.