A federal judge has denied The Cigna Group’s motion to dismiss a lawsuit alleging mismanagement of employee retirement benefits, according to a May 19 ruling.
One year ago, former Cigna employees filed a proposed class action against The Cigna Group 401(k) Plan Retirement Plan Committee over breaches of fiduciary duty.
The two plaintiffs saw “significant underperformance” with Cigna’s fixed-income fund, made up of guaranteed investment contracts. The FIF produced 2.97% to 3.02% returns, while comparable funds returned 3.75% to 4.19%. The complaint said the FIF “wasted” plan and participant assets.
“A prudent fiduciary who adequately monitored the plan’s investments and placed the interests of participants in the plan above all would have recognized that the Cigna FIF was benefitting the insurance companies at the expense of the participants in the plan,” the complaint said.
While Cigna challenged the alleged underperformance due to a lack of outlined benchmarks, the 3rd Circuit Court of Appeals has not adopted benchmarks as a prerequisite. Still, the court backed the plaintiffs’ “examples of investment vehicles for comparison” as sufficient.
If employees leave the company before being fully vested, they forfeit 401(k) matching contributions. The lawsuit also alleged Cigna improperly used these forfeitures, reaching $17.5 million.
The court did not dismiss forfeiture claims because Cigna could not show relevant precedent, some documents are not yet available in discovery and the court does not require exhaustion of administrative remedies in these cases.
According to the complaint, by 2023, the retirement plan had more than 88,000 participants. The class action would include participants and beneficiaries of the plan beginning in May 2019.
The lawsuit seeks repayment of losses, disgorged profits, actual damages, an order enjoining further Employee Retirement Income Security Act violations and other relief.
“We are proud of the benefits we offer our employees, including the 401(k) plan, and we intend to defend our company vigorously against these allegations,” a Cigna spokesperson told Becker’s May 20.
At the Becker's 5th Annual Fall Payer Issues Roundtable, taking place November 2–3 in Chicago, payer executives and healthcare leaders will come together to discuss value-based care, regulatory changes, cost management strategies and innovations shaping the future of payer-provider collaboration. Apply for complimentary registration now.
