Employees sue over ‘excessive fees’ paid to broker

Novant Health violated ERISA when it allowed its Retirement Plus Plan to pay millions of dollars in excessive fees to third-party service providers, including the plan’s broker, a class action lawsuit filed Wednesday by current and former Novant employees claims.

The employees allege the broker, D.L. Davis & Company, headed by principal Derrick Davis, received excessive fees for the allegedly minimal services provided to the plans. According to the complaint, in 2009 Davis received $827,885 in commissions. In 2012, according to the plans’ 5500s, Davis was receiving nearly $6 million in brokerage commissions. The 5500s were amended just a few weeks ago to change this amount to about $3.7 million

Regardless, both the originally stated 2012 amount and the purported amended amount paid by the plan to Davis are “far in excess of a reasonable fee for these services,” the lawsuit says.

Although Davis’ 2009 payment was far in excess of what similarly sized retirement plans paid in commissions to brokers, the commissions Davis received in 2011 ($1.9 billion) and in 2012 are “grossly in excess of not only its previous commission amounts, but by comparison, dwarfs what similarly sized plans pay for brokerage fees,” the suit claims.

Separate from the “excessive commission payments” to Davis, Novant failed to assess the reasonableness of any additional payments or “kick-backs” Davis received from the investment companies of the plan’s investment options, the employees add.

They claim Novant consistently and fraudulently concealed the excessive fees to Davis and other large fees paid to Great-West Life and Annuity Insurance Company for recordkeeping and other administrative services.

ERISA imposes strict fiduciary duties of loyalty and prudence upon Novant as the plan’s sponsor. Novant “breached their fiduciary duties,” the employees claim.

They are demanding a jury trial, an award of monetary losses to the plan, equitable restitution and monetary relief against Novant and removal of Novant’s plan directors from any positions of trust with respect to the plan, the appointment of an independent fiduciary to administer the plan and rescission of the plan’s contracts or agreements with Davis and Great-West.