Sutter Health Agrees to $4.3 Million Retirement Plan Settlement.
Sutter Health has reached a $4.3 million settlement in response to a class-action lawsuit filed by retirement plan participants.
The lawsuit, which was brought under the Employee Retirement Income Security Act (ERISA), alleged that the nonprofit healthcare system failed in its fiduciary duties by mismanaging target-date funds in its 403(b) retirement savings plan. The proposed settlement stands to benefit approximately 73,000 plan participants who were covered under Sutter’s plan since July 2014.
Lawsuit Allegations and Fiduciary Breach Claims
The lawsuit accused Sutter Health and its Retirement Benefits Investment Committee of breaching their fiduciary duty by failing to properly select and monitor investment options within the employee retirement plan.
Plaintiffs claimed that these investment decisions led to excessive fees and poor investment performance, ultimately harming employees' retirement savings. The lawsuit successfully moved past Sutter Health’s motion to dismiss in 2023, allowing the case to proceed.
Settlement Terms and Court Approval Process
The settlement agreement, which was filed in the U.S. District Court for the Eastern District of California, is currently pending court approval.
Plaintiffs’ attorneys have described the $4.3 million settlement as a favorable recovery, considering the range of achievable outcomes had the case proceeded to trial. A motion for settlement approval was formally filed on Thursday, outlining the benefits that eligible plan participants will receive once the agreement is finalized.
Sutter Health’s Legal History and Financial Overview
This is not the first legal challenge faced by Sutter Health regarding financial practices. In 2021, the healthcare system finalized a $575 million settlement over separate price-gouging allegations in a 2014 class-action lawsuit.
Despite legal setbacks, Sutter Health remains a major nonprofit healthcare provider, reporting $16.1 billion in total revenue and $320 million in operating income in 2023. The organization serves 3.4 million patients and employs over 57,000 people across Northern California.
Impact on Retirement Plan Management and Compliance
The Sutter Health lawsuit highlights the growing scrutiny over fiduciary responsibilities in employer-sponsored retirement plans. Under ERISA, companies must act in the best interests of employees by carefully selecting investment options and minimizing unnecessary costs.
Legal actions like this one serve as a warning for other organizations to review their retirement plan structures, ensure compliance with federal regulations, and implement strong governance practices to protect employees’ retirement savings.
