Latest Healthcare Fiduciary Lawsuit Filed Against Wells Fargo

Following in the footsteps of the class action suit filed against Johnson & Johnson earlier this year, another group of employees filed a breach of fiduciary duty lawsuit against Wells Fargo.

The lawsuit, Navarro v. Wells Fargo & Co., contains many of the same allegations as the Johnson & Johnson case. This is the latest in an emerging series of lawsuits that center around whether employers are doing enough to contain health and pharmacy plan costs.

Details of the Lawsuit

Specifically, the plaintiffs in Navarro allege that Wells Fargo paid its pharmacy benefit manager high prices for generic drugs that were available at significantly lower prices. The suit alleges that most of the increased cost was paid by plan assets. Additionally, participants and beneficiaries were required to pay a higher amount in out-of-pocket costs because Wells Fargo failed to act as a prudent fiduciary.

The suit also alleges that Wells Fargo paid too much in administrative fees compared to plans both similar in size to and smaller than the Wells Fargo plan.

ERISA Fiduciary Duties

According to the DOL, “the primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses.”

Plan fiduciaries must act prudently, diversify plan investments where applicable, and strictly follow the terms of their plan documents so long as the documents are consistent with ERISA. Plan fiduciaries must also avoid conflicts of interest.

Breach of fiduciary duty awards are not always limited to the company sponsoring the plan. ERISA fiduciaries may be held personally liable to restore any plan losses or return any profits made through improper use of plan assets.

Historically, and prior to the Johnson & Johnson filing, ERISA fiduciary lawsuits were filed against plan sponsors of retirement plans and often centered around the fees paid to retirement plan advisors, recordkeepers, and vendors. ERISA’s fiduciary duties have always applied to all ERISA covered plans, not just the retirement plans that have been the focus of recent litigation.

In addition, the Consolidated Appropriations Act of 2021 expanded fee disclosure responsibilities of ERISA plans by applying them to health care providers.

Next Steps for Employers

In response to the complaint filed against Wells Fargo, health plan sponsors are encouraged to:

• Review ERISA’s fiduciary requirements and ensure that plan fiduciaries are following the terms of their plan documents.
• Frequently conduct plan and participant fee reviews.

Need support reviewing your plan? Contact a OneDigital consultant and gain compliance peace of mind.

For a deeper understanding of why plan members are suing their employers, view our on-demand advisory session helping employers understand what this legal trend could mean for their business.