Hospitals: Retirement plan lawsuits could have 'significant detrimental' effect

The American Hospital Association, U.S. Chamber of Commerce and Association of American Medical Colleges filed a friend-of-the-court brief urging the dismissal of a lawsuit alleging that Boston-based Beth Israel Deaconess Medical Center violated the Employee Retirement Income Security Act by choosing a retirement plan other than the least expensive available.

The brief points to an increase in retirement plan litigation filed against hospitals and health systems in the last year. In addition to the Beth Israel case, this includes lawsuits against Boston Children's Hospital, Lebanon, N.H.-based Dartmouth-Hitchcock Medical Center, Boston-based Mass General Brigham, Traverse City, Mich.-based Munson Healthcare, Evanston, Ill.-based NorthShore University HealthSystem, Chicago-based Rush University Medical Center and Yale New Haven (Conn.) Hospital.

"Using the benefit of hindsight, these cookie-cutter lawsuits challenge the decisions that retirement plan fiduciaries made about the investment options available to plan participants or the arrangements the fiduciaries negotiated with the plan's service provider," the brief states. "The complaints typically point to alternative investment or service options (among tens of thousands of investment options offered in the investment marketplace and the dozens of service providers with a wide variety of service offerings and price points) and allege that plan fiduciaries must have had a flawed decision-making process, and therefore violated ERISA’s fiduciary duties, because they did not choose one of those alternatives."

The brief argues that hospitals "have especially broad employee populations," which "requires concomitantly diverse investment options."

"After all, a highly compensated surgeon may look for different investment opportunities than a hospital orderly with less flexibility to take financial risks," the brief argues. 

The brief also argues this retirement plan litigation against hospitals "threatens to have a significant detrimental impact on hospitals and hospital employees alike. Hospitals, like all fiduciaries, must make careful decisions based on an array of factors. But these lawsuits push them to reflexively focus on just one factor: the lowest-cost option."

The brief was filed May 20 in the U.S. District Court for the District of Massachusetts.

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