Plaintiffs in a recent ERISA lawsuit against health insurance giant Humana didn’t get the diagnosis they hoped for. Initially filed in 2021, the suit went through multiple attempts at prior dismissal that, early on, looked promising for the plaintiffs. But in May of 2024, a district court judge dismissed the case, citing a lack of sufficient evidence, and declared Humana’s plan fit. Key to the company’s clean bill of health was its frequent benchmarking and solicitation of an RFP, underscoring the importance of robust documentation and proactive measures when it comes to maintaining reasonable fees.
The First Symptoms
Upon filing the suit, plaintiffs alleged Humana had failed to properly use its bargaining power to negotiate lower recordkeeping fees. Due to the company’s size, they argued, Humana should have been able to reduce fees for participants, contending that the failure to do so cost them millions. The plaintiffs cited two of the company’s main mutual funds, which were significantly more expensive than those in similarly sized plans, as evidence of improper monitoring. The original complaint stated, “There’s little question the plan was paying at least 100% more in total plan costs than its peers.”
Over the course of the suit, Humana attempted to have the case dismissed twice but was denied each time. While these initial denials may have indicated a poor prognosis for the company, the eventual examination by Judge Rebecca Grady Jennings of Kentucky left a bitter pill for the plaintiffs to swallow.
Just What the Judge Ordered
In May 2024, Judge Jennings ruled that Humana’s plan was fit. Although the fees may have been higher than those of comparable plans, Jennings stated, the plaintiffs failed to show that fees were excessive given the services provided. She added that the plans used for fee comparisons were not similar enough to Humana’s plan to be relevant. The judge’s decision stated that the defendants demonstrated the plan’s recordkeeper provided the lowest fees among all providers solicited through an RFP, and that annual benchmarking confirmed the recordkeeping fees remained reasonable.
An Ounce of Prevention
Top advisors need fast and accurate benchmarking tools at their disposal to use in between customary three- to five-year live bids. With RFP Express, you can receive actual quotes from leading providers within 24 hours. And Prism Total Fees Benchmarking can give you a two-minute fee checkup to quickly diagnose potential fee problems.
Don’t wait for symptoms of high fees to turn into a bigger problem — use PlanFees to help keep your clients’ retirement plans in good health.
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