Employees of Novant Health have collectively lost millions from their retirement plans because of unnecessarily high fees and poor investment decisions, a lawsuit filed by current and former employees claims.
Novant’s retirement plan has about 25,000 participants and $1.2 billion in assets, according to the lawsuit. With that size, the hospital retirement plan committee should be able to negotiate lower fees than those available to the typical investor, the lawsuit says.
Instead, Novant’s plan paid much higher rates to invest in mutual funds than other institutional investors – in some cases, more than double, the lawsuit states.
The lawsuit also alleges that Novant paid higher-than-necessary fees to Great-West Life & Annuity Insurance Co., which provided administrative and record-keeping services for the retirement plan, and to brokerage D.L. Davis & Co.
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Between 2009 and 2010, the amount paid to Great-West jumped from $195,899 to $2.4 million, without any new services provided, the suit states. D.L. Davis & Co made more than $3.7 million in 2012 from the plan despite providing “limited services,” the lawsuit says.
The lawsuit details numerous financial ties between the founder of D.L Davis & Co., Derrick L. Davis, and Novant Health. In one instance, Davis gave a $5 million gift to the hospital, the suit states. Davis was not immediately available for comment.
The lawsuit was brought by Karolyn Kruger, a retired doctor who lives in Kernersville, and six other current and former employees living in the Triad area. They are seeking to bring a class-action suit on behalf of Novant employees.
Novant spokeswoman Kati Everett said in a statement that the company has not yet been served with the lawsuit and can’t comment specifically on it. But she said Novant’s retirement plan committee “carefully oversees the selection of the retirement plans’ investment options and any associated fees.” She said the committee receives professional, independent advice and manages the funds in the best interest of the plan participants.
Novant is based in Winston-Salem and manages 14 medical centers and more than 340 clinics across the Carolinas, Virginia and Georgia. The not-for-profit employs more than 10,000 people across four hospitals in the Charlotte area.