The U.S. Chamber of Commerce and healthcare industry groups have filed an amicus brief asking a U.S. District Court to dismiss a “cookie-cutter” class-action lawsuit alleging Beth Israel Deaconess Medical Center's (BIDMC's) costly and poorly performing retirement plans constitute a breach of its fiduciary duties to participating employees.
In a complaint filed in January, former BIDMC employees alleged the medical center did not fully disclose the expenses and risks of its 401(k) and 403(b) plans to employees and allowed “unreasonable expenses” to plan participants. They also said BIDMC had the option to offer “readily available” investment alternatives that performed better and had lower costs.
Citing violations of the Employee Retirement Income Security Act (ERISA), the plaintiffs asked the court for relief and compensatory damages from the medical center.
BIDMC has since filed for a dismissal of the suit, writing among other arguments that “underperformance does not equal imprudence” and that identifying other incomparable plans with lower fees is not enough to characterize the BIDMC plan fees as “excessive.”
BIDMC’s defense has now picked up the support of the U.S. Chamber of Commerce, the American Hospital Association and the Association of American Medical Colleges.
In an amicus brief filed May 20, the groups reiterated BIDMC’s arguments and characterized ERISA lawsuits against hospitals as a growing and worrying trend.
“What began as a steady increase has exploded in the past two years, culminating in over 100 excessive-fee suits in 2020—a five-fold increase over the prior year,” the groups wrote in their brief citing a Bloomberg Law analysis.
“The last 16 months have only seen more of the same—and, recently, hospitals have been a particularly popular target. This year alone, complaints have been filed against Boston Children’s Hospital, Dartmouth-Hitchcock Medical Center, Mass General Brigham, Munson Healthcare, NorthShore University Health System, Rush University Medical Center, Yale New Haven Hospital, and, of course, Defendants here.”
These “cookie-cutter lawsuits” should be particularly difficult to peg to hospitals due to their “especially broad employee populations that encompass varying income levels and degrees of financial flexibility,” the groups wrote.
The spread between medical residents, hospital executives and cafeteria workers requires hospitals to carry a “broad array” of investment options to meet their needs, they wrote. Fear of costly ERISA lawsuits at a time when hospitals are already operating on thin margins could lead hospitals to begin limiting their retirement offerings.
“If these types of conclusory and speculative complaints are sustained, hospital employees will be the ones who suffer,” the groups wrote.
“[T]hese suits exert pressure on hospital fiduciaries and plan sponsors to limit investments to a narrow range of options at the expense of providing a diversity of choices with a range of fees, fee structures, risk levels and potential performance upsides, as ERISA expressly encourages, and as is particularly important for employers with a diverse employee population.”