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Lehigh Valley Health Network Inc., a Pennsylvania health system, has agreed to settle a 401(k) forfeiture suit for $1.15 million. The company operates 32 hospitals in Pennsylvania and New Jersey after a 2024 merger with Jefferson Health and employs about 65,000 workers. The case is Kiskeravage et al. v. Lehigh Valley Health Network Inc. et al., case number 5:24-cv-05567, U.S. District Court for the Eastern District of Pennsylvania.
The five Lehigh Valley workers who filed the proposed class action allege that the company unlawfully used forfeited retirement plan funds to fulfill its matching contribution duties, while overcharging plan participants for administrative fees.
The workers have asked the court to certify a class for settlement purposes, covering all plan participants since October 21, 2018. As of 2023, the plan covered about 26,000 participants. At the same time, the workers have asked the court to grant preliminary approval of the settlement, which would provide substantial immediate payments to class members.
About one-third of the $1.15 million settlement amount, or $380,000, would go to pay attorney fees, $75,000 for litigation costs, and $5,000 for each of the five named class representatives.
The five workers filed suit against the health network in October 2024, claiming that it had violated its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by reevaluating existing plan administrative fees. Lehigh Valley reportedly failed to consider or get competitive bids from other providers. As a result, plan participants paid as much as $115 in annual recordkeeping fees, compared with similar-size plans, where participants paid only $22 to $30 per year.
The workers also accused the health network of misusing forfeited plan funds or employer-matching funds that plan participants forfeit when they leave their employment before becoming fully vested. Lehigh Valley reportedly used the forfeited funds to pay for its future contributions to employee plans rather than for administrative fees, leaving plan participants to bear those costs. Since 2018, the health network has allegedly used $400,000 in forfeited plan funds to benefit itself in violation of ERISA.
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