Class Action Claims Humana Failed to Properly Monitor 401(k) Plan Costs, Investment Options

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A proposed class action alleges Humana, Inc. and its board of directors and retirement plans committee are to blame for a number of apparent shortcomings with regard to keeping expenses for the health insurance provider’s employee retirement savings plan low and appropriately judging the prudence of each investment option. 

The 27-page lawsuit claims the defendants have breached the fiduciary duties they owed to Humana retirement plan participants and beneficiaries by 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.” Further, the suit alleges the defendants continued to maintain certain funds in the Humana plan “despite the availability of identical or similar investment options with lower costs and/or better performance histories.”

Lastly, the case, filed in Kentucky federal court, claims the defendants failed to control the plan’s administrative and recordkeeping costs. The complaint says Humana and its directors and retirement plans committee have violated the federal Employee Retirement Income Security Act of 1974 (ERISA). 

From the complaint:

“The Plan’s assets under management qualifies it as a large plan in the defined contribution plan marketplace, and among the largest plans in the United States. As a large plan, the Plan had substantial bargaining power regarding the fees and expenses that were charged against participants’ investments. Defendants, however, did not try to reduce the Plan’s expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the Plan to ensure it was prudent.” 

According to the lawsuit, the Humana retirement plan had at least $3.4 billion in assets under management as of April 13, 2015. At the end of 2018 and 2019, the case says, the plan had upward of $4.2 billion and $5.3 billion, respectively, in assets under management that were/are entrusted to the defendants, i.e. the plan’s fiduciaries.

The suit alleges the defendants’ “mismanagement” of the retirement plan has cost the plan and its participants millions.

“Defendants’ breaches of their fiduciary duties, relating to their overall decision-making, resulted in the selection (and maintenance) of several funds in the Plan throughout the Class Period that wasted the assets of the Plan and the assets of participants because of unnecessary costs,” the lawsuit charges. 

The lawsuit looks to represent all individuals, except from the defendants and their immediate family members, who were participants in or beneficiaries of the Humana retirement plan at any time between April 13, 2015 through the date of judgment in the case. 

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