March 12 (Bloomberg) -- Novant Health Inc. employees are suing the nonprofit hospital system for allegedly overcharging them in their retirement accounts by millions of dollars, according to a complaint filed today that highlights how workers’ savings are eroded by high fees to financial firms.
In the latest of more than a dozen lawsuits against employers since 2006, a retired doctor and six others are alleging Novant’s plan saw a more than 10-fold increase in fees over three years and contains costly investment choices, according to a complaint filed today in federal court in Greensboro, North Carolina. The lawsuit also highlighted ties between the hospital and a brokerage, D.L. Davis & Co., whose founder Derrick L. Davis gave more than $5 million in charitable gifts to Novant, after which he earned fees from the plan.
Employees usually have little power to change investments and costs in their plans, which is why some -- like those at Novant -- have resorted to filing lawsuits.
About 25,000 Novant employees are in the retirement plan, according to the complaint. The plan’s assets have more than doubled to $1.42 billion from $612 million in 2008, the plaintiffs said.
Investments in 401(k)-type plans have been sold to businesses with built-in expenses paid by workers known as revenue sharing, which can cover employers’ administrative costs for running a retirement program including the use of a recordkeeper or broker.
Separately, a group of employees of Fidelity Investments, the largest provider of 401(k) plans, sued the Boston-based mutual firm last year for self-dealing at the expense of its own workers’ retirement savings. The case is still pending.
The spate of lawsuits has led to heightened scrutiny of 401(k)-type plans by lawmakers, said Mike Alfred, chief executive officer of BrightScope, a San Diego-based firm that ranks retirement plans.
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