On June 27, 2022, counsel for the proposed class and counsel for Defendants Rush University Medical Center (“RUMC”), the Board of Trustees of Rush University Medical Center, the Rush University Medical Center Investment Committee, and the Rush University Medical Center Administrative Committee (collectively, “Defendants”) jointly filed a status report notifying the court that they reached a settlement in their 401(k) plan mismanagement litigation.
According to the settlement agreement, RUMC will pay $2.95 million to resolve the class action lawsuit filed by four former employees and participants the Rush University Medical Center 403(b) Retirement Savings Plan (the “Plan”) in January 2022.
Former employees John Barcenas, Mary Brown, Patrick Russo, and Teneka Ware (collectively, “Plaintiffs”) sued RUMC on behalf of the Plan and a class of similarly situated participants and beneficiaries of the Plan (the “Class”), alleging that RUMC violated the Employee Retirement Income Security Act (“ERISA”) by (1) offering underperforming investments with greater fees than readily available better performing alternatives, and (2) charging the Plan management fees significantly higher than the average charged to similarly sized plans.
Specifically, Plaintiffs alleged Defendants selected and retained the actively managed Fidelity Freedom Fund target date suite, even though Fidelity also offered an index suite of passively managed target date funds that was a prudent alternative. Plaintiffs also claimed Defendants failed to leverage the Plan’s size to negotiate lower recordkeeping and administrative fees. As of December 31, 2020, the Plan had 15,503 participants with account balances and assets totaling approximately $1.2 billion, placing it in the top 0.1% of all defined contribution plans by plan size.
On June 21, 2022, while Defendants’ motion to dismiss the litigation was still pending, the parties engaged in a mediation session before Mark Segall, Esq. of JAMS, a well-qualified, neutral mediator experienced in resolving ERISA claims. After hours of negotiation, the parties reached an agreement in principle to settle the action.
Plaintiffs moved for preliminary approval of the settlement on July 29, 2022, stating that, “[t]he Settlement is the product of arm’s-length negotiations between the parties and their counsel, all of whom comprehensively litigated this matter, are well-informed regarding all the issues in this litigation, and have significant experience in complex litigation of this type.” Plaintiffs are represented by Miller Shah LLP, Capozzi Adler PC, and Novack and Macey LLP. Defendants are represented by Morgan, Lewis, and Bockius LLP.
The Class includes all participants and beneficiaries in the Plan at any time on or after January 21, 2016 to present, including any beneficiary of a deceased person who was a participant in the Plan during this period. Former participants without an active account in the Plan will need to fill out a claim form to be eligible for compensation.
On August 12, 2022, the Court granted preliminary approval of the settlement. A final fairness hearing is set for January 19, 2023.
The caption for the lawsuit is Barcenas et al v. Rush University Medical Center et al., Case No. 1:22-cv-00366, filed in the Northern District of Illinois.
The legal team at Miller Shah LLP has extensive experience representing class action matters. If you have any questions regarding this subject or this post, please contact Jacob Levin (email@example.com) or Alec Berin (firstname.lastname@example.org). The Firm can also be reached toll-free at (866) 540-5505.
Miller Shah LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, and Pennsylvania. The firm is an active member of Integrated Advisory Group (IAG Global), which provides clients access to excellent legal and accounting resources across the globe. For more information about the firm, please visit https://www.millershah.com.