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Health insurance provider Humana has been charging its employees excessive fees for their retirement funds and mismanaging more than one billion dollars in assets, claims a new class action lawsuit.
The nationwide class action was filed on April 13 in the Western District of Kentucky by Plaintiffs Kena Moore, Timothy Sweeney, Russell Hohman, Susan Smith, and Veronica Cargill. The group alleges that Humana, its board, and other staff breached fiduciary duties by mismanaging the group’s retirement funds and charging “unreasonable” fees.
The group says that two of the mutual funds included in the company’s plan had higher fees than they should have and that the total plan cost was unreasonable compared to other plans.
According to the Humana class action, the group and other employees were charged excessive fees for recordkeeping and administrative costs that climbed as high as $66 in 2017 when they should have been as low as $14.
“Plan with tens of thousands of participants and over a billion dollars in assets could command recordkeeping fees as low as $14-21,” states the class action.
The claim also says that Humana and its board failed to monitor whether the company’s retirement plan was invested in the lowest-cost share class available for its mutual funds. “There is no good-faith explanation for utilizing high-cost share classes when lower cost share classes are available for the exact same investment.”
Employees are able to make contributions of between 1 percent and 35 percent of their pay to their retirement plan, and that amount is matched by Humana. Humana is then able to claim tax deductions on its contributions to employee 401(k) plans.
According to the class action, Humana’s retirement fund has at least $4.2 billion in assets under management. “Given the size of the Plan, Humana likely enjoyed a significant tax and cost savings from offering a match,” states the claim, adding that the size of the plan should have given the company bargaining power to get lower fees and expenses.
The Humana class action highlights that, by law, companies cannot waste beneficiaries’ money.
“In devising and implementing strategies for the investment and management of trust assets, trustees are obligated to minimize costs.”
The Humana employees are suing for breach of fiduciary duty of prudence and failure to adequately monitor other fiduciaries under the Employee Retirement Income Security Act (ERISA). They seek to represent Humana employees nationwide who have entered the plan since 2015.
The group is seeking certification of the Class, losses, damages, interest, legal fees, and a jury trial.
Humana is far from the first company to face a lawsuit over its management of retirement funds. This month, Cerner Corp. agreed to a $4.05 million settlement for allegedly violating the federal ERISA by offering unduly expensive investment options and paying excessive plan administration fees.
While Cerner denies all claims of wrongdoing and denies any liability, it has agreed to the out-of-court settlement. The settlement means retirement plan participants may be eligible to benefit from a $4.05 million settlement.
In March, Teva Pharmaceuticals agreed to a $2.55 million in a now-closed settlement to benefit participants in and beneficiaries of the company’s retirement savings plan. Teva Pharmaceuticals was accused of violating the federal ERISA by failing to attempt to negotiate fees and expenses charged against plan participants’ investments.
Do you have a retirement plan through your employer? Are you happy with the rates you are charged? Let us know in the comments section!
Phillip Blair of Kirk Law Firm, PLLC, and Donald R. Reavey and Mark K. Gyandoh of Capozzi Adler, P.C.
The Humana Retirement Fund Class Action Lawsuit is Moore v. Humana Inc., et al., Case No. 3:21-cv-00232-RGJ, in the U.S. District Court for the Western District of Kentucky.
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