Skip to main content

You are here


Another 403(b) Excessive Fee Settlement Announced

The parties in a two-year old 403(b) excessive fee suit against a $2.3 billion plan have come to terms. 

The suit (Garnick v. Wake Forest Univ. Baptist Med. Ctr., M.D.N.C., No. 1:21-cv-00454, complaint 6/4/21) was filed in June 2021 in the U.S. District Court for the Middle District of North Carolina by participant-plaintiffs Shelley R. Garnick, Tanajah Clark and Zoe R. Jones against the fiduciaries of the $2.3 billion Wake Forest Baptist Medical Center 403(b) Retirement Savings Plan—the Medical Center, the Board of Directors of Wake Forest University Baptist Medical Center, and the Retirement Benefit Committee of Wake Forest University Baptist Medical Center—for breaches of their fiduciary duties to the 19,000 participants of that plan.  

The Allegations

Specifically, the plaintiffs claimed those fiduciaries fell short of their obligations under ERISA by:

1. failing to objectively and adequately review the Plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost; 
2. maintaining certain funds in the Plan despite the availability of identical or similar investment options with lower costs and/or better performance histories; and 
3. failing to control the Plan’s administrative and recordkeeping costsall of which, they allege, were “contrary to actions of a reasonable fiduciary and cost the Plan and its participants millions of dollars.”

As have other suits, this one—filed on behalf of the plaintiffs by the law firms Capozzi Adler PC[1] and Matheson & Associates—claims that “Wake Forest and its clients also benefit in other ways from the Plan’s matching program,” specifically citing the benefits in attracting new employees and retaining existing ones, and that “given the size of the Plan, Wake Forest likely enjoyed a significant tax and cost savings from offering a match.”

More specifically, these former participants claimed to have been charged between $110 and $141 per participant, whereas they asserted that participants in comparable sized plans were paying about $40 per participant.

Wake Forest had attempted to get the suit dismissed in December 2021, putting forth arguments that have been successful in other, similar suits—but not here. While the fiduciary defendants had argued that the claims made by the plaintiffs weren’t sufficiently detailed to establish an assessment of their reasonableness, last December U.S. District Judge William Osteen Jr. disagreed—finding sufficient detail in the allegations to proceed to trial.

The Update

In a “Joint Status Report and Notice of Settlement,” the parties say (Garnick et al. v. Wake Forest University Baptist Medical Center et al., case number 1:21-cv-00454, in the U.S. District Court for the Middle District of North Carolina) they “are pleased to report that, following mediation with a neutral, well-respected mediator, the Parties have agreed in principle to resolve the litigation.”

That said, it goes on to explain that those parties “are working to memorialize their agreement and prepare the appropriate papers to submit to the Court for preliminary approval of the settlement under Federal Rule of Civil Procedure 23. The Parties propose that Plaintiffs file a motion for preliminary approval of the settlement and all necessary and appropriate supporting papers by July 10, 2023.”

So, while we don’t yet know the particulars of that settlement, it now looks as though this particular litigation is drawing to an end.

Stay tuned.

What This Means

As has been noted before, there’s little to be drawn from notice of a settlement, certainly not until the terms of the agreement have been finalized. That said, the pattern of a suit filed, followed by an attempt to dismiss the suit based on arguments insufficient to establish a “plausible” case—well, if the judge in question decides the arguments are sufficient—a settlement agreement often follows.


[1] For those keeping track (score?), Capozzi Adler PC has been one of the more active litigants of late. It had a busy 2020, in addition to the suit against LinkedIn (settled for $6.75 million), there have been actions filed against Universal Health Services, Inc., and before that Aegis Media Americas Inc., as well as the $2 billion health technology firm Cerner Corp., Pharmaceutical Product Development, LLC Retirement Savings Plan, Gerken v. ManTech Int’l Corp—and the appeal of losses at the district court in a case involving Salesforce. In May 2021, they also filed suit against the $5.3 billion Humana Retirement Savings Plan, as well as the $2.3 billion Wake Forest University Baptist Medical Center noted above, and in August against the $1.5 billion Baptist Health South Florida, Inc. 403(b).