Employees at Indianapolis-based health care insurer Anthem Inc. are sick of the retirement-fund fees they’re paying.
Anthem’s retirement plan is accused in a lawsuit of forcing about 60,000 workers and retirees to pay excessive fees by having to invest in Vanguard Group funds billed as low-cost options.
The case is part of a recent wave of suits targeting company 401(k) retirement plans that subject participants to exorbitant fees for low-performing funds. Lockheed Martin Corp agreed last year to pay $62 million to settle a suit that made such claims on behalf of the defense contractor’s 120,000 workers and retirees.
Officials overseeing Anthem’s 401(k) plan, which holds more than $5 billion in funds, “allowed unreasonable expenses to be charged” and only offered Vanguard funds that were “high-cost and poor-performing investments,” the workers said in the suit, filed Dec. 29 in Indianapolis federal court.
Malvern, Pennsylvania-based Vanguard, the biggest U.S. mutual fund provider, also serves as the plan’s record keeper. Vanguard wasn’t named as a defendant in the suit.
Jill Becher, a spokeswoman for Anthem, the third-largest health insurer in the U.S. by market value, declined to comment on the lawsuit.
Anthem’s plan managers selected the higher-cost Vanguard offerings for the fund lineup and ignored identical lower-cost options, the workers said in the suit. Plan overseers also didn’t properly negotiate for lower investment fees, according to court filings.
The plan accepted excessive fees charged by Vanguard to handle record-keeping duties, which caused beneficiaries to lose “millions of dollars in retirement savings,” according to court filings.
Anthem agreed in July to buy Cigna Corp. for $48 billion, one of two pending deals that would reshape the U.S. health-insurance industry. Anthem’s offer, along with Aetna Inc.’s proposed acquisition of Humana Inc., was fueled in part by the 2010 Patient Protection and Affordable Care Act.