Novant Health has entered a settlement agreement to resolve allegations the Winston-Salem, N.C.-based system charged excessive fees for its defined-contribution retirement plan.
The lawsuit was filed in U.S. District Court for the Middle District of North Carolina in March 2014. Among the plaintiffs in the case are six current and former Novant employees.
The lawsuit alleges Novant breached its fiduciary duties by causing the retirement plan participants to pay millions of dollars in excessive record-keeping and administrative services fees to third-party service providers. The suit alleges a brokerage company that provided the plan with limited marketing and enrollment services was paid excessive fees up to $9.6 million in the form of commissions, and an administrative and recordkeeping provider was paid excessive compensation of $8.6 million.
Novant agreed to pay $32 million to resolve the allegations. According to a memorandum filed by plaintiffs' attorneys, the settlement provides for current plan participants to receive their distributions directly into their accounts tax deferred and gives former plan participants the right to direct their distribution into a tax-deferred vehicle, such as an IRA. The benefit of tax deferral for 20 years is an additional 18.6 percent; therefore, the actual value of the monetary portion of the settlement is nearly $38 million, according to plaintiffs' attorneys.
The settlement also requires Novant to provide members of the affected class a state-of-the-art retirement plan with fiduciary best practices assured for four years after final approval of the settlement. Plaintiffs' attorneys claim the value of the fee reductions and cost savings afforded to class members due to the settlement is $69 million.
The settlement was preliminarily approved by the court in May. A fairness hearing regarding the settlement is set for Sept. 23.
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