A federal judge granted final approval Oct. 21 to a settlement valued at about $42.7 million to resolve a class-action lawsuit that accused Renton, Wash.-based Providence of mishandling forfeited funds in its employee 401(k) plan.
Judge Jamal Whitehead of the U.S. District Court for the Western District of Washington signed the order, reviewed by Becker’s, following an Oct. 20 fairness hearing. Mr. Whitehead found that the settlement was “fair, reasonable, and adequate.” Class members did not object.
Former Providence employee Victoria Halter filed the lawsuit, also reviewed by Becker’s, on Oct. 31, 2024, in federal court in Oregon. The complaint centered on forfeitures: unvested company contributions that exiting employees give up when they leave before fully vesting, which typically takes four to six years under the plan.
The plan’s terms required forfeited funds to go first toward plan expenses Providence did not pay, the lawsuit claimed. Instead, the health system allegedly used them to offset its employer contributions while deducting administrative expenses from participant accounts.
The complaint pointed to the plan’s annual filings. In 2022, more than $63.6 million in forfeited plan assets was available, while participants paid at least $5.8 million in plan expenses through account deductions, the complaint said.
The lawsuit also accused Providence and its plan committee of breaching their fiduciary duties of loyalty and prudence and engaging in prohibited transactions under the Employee Retirement Income Security Act.
The settlement class includes plan participants and beneficiaries from Jan. 1, 2018, through June 4, 2026. Settlement administrator Analytics Consulting will distribute the settlement’s net cash fund and unallocated plan assets to class members under the plan of allocation and settlement agreement. The judge also approved attorneys’ fees and costs for class counsel, settlement administration expenses and a service award for the class representative.
Providence is also facing another proposed class-action lawsuit over its 401(k) plans. In April, five former employees, including a retired chief philanthropy officer, sued Providence, alleging that the system kept an “underperforming” investment option, the Invesco Diversified Dividend Fund R5, for nearly a decade. The lawsuit alleges the system failed to monitor retirement plans that lost nearly $70 million in five years.
Becker’s has reached out to Providence for comment and will update this story should more information become available.
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