INDIANAPOLIS (CN) - Mismanagement of Anthem's 401(k) retirement plan lost millions to unnecessary fees and bad investments, members claim in a federal class action.
Shortly after changing its name from WellPoint in December 2014, Anthem's 401(k) plan represented one of the largest in the country, with $5.1 billion in assets and 59,000 participants, the complaint states.
Three Indiana-based beneficiaries of the plan claim in the Dec. 29 class action that Anthem and its board of directors fumbled their bargaining position to allow "unreasonable expenses," which participants must shoulder, for the plan's administration.
Anthem also selected high-cost and poor-performing investments, plaintiffs Mary Bell, Janice Grider and Cindy Prokish say.
The lawsuit alleges that some investments included fees upwards of three times higher than the cheaper options. Citing data from the U.S. Department of Labor, just one percentage point of higher fees can negatively impact a 401(k) plan by 28 percent over the course of 35 years, the plaintiffs say.
Though lower-fee investments had been available for years, it wasn't until 2013 that Anthem restructured its plans to offer the less-fee intensive options, according to the complaint.
Had Anthem chosen cheaper investments between December 2009 and July 2013, "plan participants would not have lost over $18 million of their retirement savings through unnecessary expenses," the complaint states.
As for failing to make smart and prudent investments, the class claims that Anthem simply failed to explore the clear advantages, such as safety and higher returns, available through other investments.
The complaint specifically targets an investment called the "Vanguard Prime Money Market Fund," which it claims was a riskier and lower-yielding option compared with some alternatives that could have been included within the 401(k) plan.
In fact, by placing that investment in a better option, "plan participants would not have lost over $65 million in their retirement savings, and continue to suffer additional losses to the present, as a result of the fund being retained in the plan," the complaint states.
In addition to the alleged improper fees and investments, the lawsuit also seeks damages for Anthem's failure to monitor the amount another company charged it to manage plan records.
Bell and the other beneficiaries say Anthem paid investment group Vanguard for recordkeeping services, using two models of payment prior to September 2013.
One model was a simple fee paid for each participant; the other was called an "asset-based revenue-sharing plan," which paid Vanguard fees based on the total size of the investment.
Because the total investment grew from $3.3 billion to $5.1 billion during the timeframe, Vanguard collected growing fees for the same work, the complaint states.
The class also suggests that the flat-rate fee was over twice as high as should be reasonably expected. Anthem has more recently switched to a flat $42 per-person payment to Vanguard, but the class says even that is too high, as an estimated payment of around $30 would be reasonable.
In addition to damages for Anthem's failure to properly monitor these payments, the class wants a reimbursement of all alleged plan losses. It is represented Jerome Schlichter with Schlichter, Bogard & Denton in St. Louis.
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