Altru Health System could pay $975,000 in class-action settlement
Mar. 4—GRAND FORKS — Later this year, a fairness hearing will be held to determine whether Altru Health System will pay $975,000 to create a settlement fund for those affected by an alleged failure to monitor and select the most beneficial 401(k) fund expenses and recordkeeping options for its employees.
A settlement agreement was determined through a class-action lawsuit filed in the North Dakota district of U.S. District Court on Sept. 9, 2020. Plaintiffs are Jana R. Rosenkranz, Joan Mondry and Ramona Driscoll, who sued on behalf of themselves as well as all others similarly situated, according to court documents.
Altru and its retirement committee are listed as current defendants. Various "John Does," who represent those involved whose identities are unknown to the plaintiffs, are also listed as defendants.
The allegations are that, dating back to September 2014, the defendants breached their fiduciary duties by failing to pursue lower cost funds for Altru's 401(k) plan. The plaintiffs additionally allege that the defendants failed to monitor or control 401(k) recordkeeping expenses.
The defendants are accused of wasting millions of dollars as a result of these actions.
The defendants allegedly utilized investment funds that were unnecessarily costly when there were comparable — or nearly-identical — alternatives that were more affordable, according to the class-action complaint.
The expense ratios for some of the funds in Altru's 401(k) plan in 2018 were 44% and 65% above median expense ratios in the same category, the complaint said.
As for record-keeping expenses, the plaintiffs allege the 0.115% fee paid to Alerus from total plan assets each year was excessive. The complaint says Alerus also collected revenue in addition to the 0.115% fee.
"A plan with 200 participants and $20 million in assets has an average recordkeeping and administration cost (through direct compensation) of $12 per participant," the complaint said.
However, in 2014, when Altru had $235 million in assets, and there were 3,074 participants, each participant paid $118.67, the complaint said.
In 2018, when there were $329 million in assets and 4,359 participants, each one paid $117.13, the complaint said.
"The plan, with over $300 million in assets and over 4,000 participants, should have had direct recordkeeping costs below the $5 average, which it clearly did not," the complaint said.
A fariness hearing regarding the settlement has been scheduled for 9 a.m. Aug. 2 at the Quentin N. Burdick U.S. Courthouse, located at 655 First Ave. N. #130 in Fargo.
Attorney fees will be taken from the settlement amount, and cannot exceed one-third of the total, which would be $324,000. Reimbursements cannot exceed $50,000. What remains will be disbursed between eligible recipients. The named plaintiffs — Rosenkranz, Mondry and Driscoll — would share in the net settlement amount, same as the unnamed plaintiffs. They did, however, request that the court award up to $10,000 to each of them for their participation in the case.
Written objections from eligible recipients are due by July 3.
The Herald reached out to Altru for comment.
"Altru has agreed to a settlement in connection with a lawsuit, Rosenkranz v. Altru, alleging a breach of fiduciary duties relating to recordkeeping and certain investment fees of the Altru Health System Retirement Savings Plan," Annie Bonzer, director of marketing and public relations, told the Herald. "Altru denies all claims in the lawsuit, and believes it at all times acted prudently and in the best interest of plan participants, and that the plan's investments and recordkeeping fees were reasonable and appropriate. However, to avoid a drawn out lawsuit and a costly legal battle, Altru decided to settle this matter. This case is one of many across the country in which retirement plan fees are being scrutinized as part of class-action lawsuits."
