Banner Health Mismanaged 401(k) Plan, Owes Workers $2.3 Million

A road sign for a nearby hospital stands along a rural road outside Sandwich, Illinois, U.S., on Tuesday, April 14, 2020.
  • Plan participants win on three counts after trial
  • Damages awarded are far less than requested

Banner Health owes participants in its 401(k) plan about $2.3 million, plus interest, for mismanaging the plan in violation of the Employee Retirement Income Security Act, a federal judge in Colorado ruled after an eight-day trial.

Banner breached its fiduciary duties by allowing the plan to pay excessive administrative fees and failing to monitor plan fiduciaries, Judge William J. Martinez of the U.S. District Court for the District of Colorado ruled Wednesday. It also violated ERISA’s prohibited transaction rules by paying certain expenses out of plan assets, he said.

Martinez awarded the plan participants $2,349,469 in damages, plus 3.25% interest—far less than the $85 million they requested.

The 33,000-person class action accuses Banner of mismanaging its $2 billion 401(k) plan by failing to rein in plan recordkeeping fees, allowing imprudent funds in the plan, failing to monitor plan fiduciaries, and using plan assets to pay certain employee salaries.

Martinez sided with the participants on three of their five counts but declined to hold Banner liable for the plan’s investment options. He also calculated the participants’ economic losses himself, after finding their damages calculations were backed by unreliable methodology.

Fees and Losses

Banner’s handling of the plan’s recordkeeping fees was imprudent under ERISA, Martinez said.

He found it “highly significant” that Banner went nearly 20 years without soliciting competitive bids for recordkeeping services through a request for proposal. And he agreed with plan participants that the plan’s prior recordkeeping arrangement—in which the plan paid uncapped, asset-based fees to Fidelity through a contract with no termination date—warranted closer scrutiny by Banner’s Retirement Plans Advisory Committee (RPAC).

The committee “never assessed the reasonableness of fees using any form of a competitive bid process, RFP or otherwise,” Martinez said. “While the RPAC members were notified of their obligation to assess fee reasonableness on an ongoing basis, and warned by legal counsel that the economic recovery following the 2008 recession could lead to excessive fees under uncapped, asset-based revenue sharing arrangements, the RPAC did not thoroughly investigate the fees being paid to Fidelity.”

However, Martinez disagreed that this breach caused $19 million in damages, as suggested by the plaintiffs. Instead, he performed his own calculation that focused on the amount of “revenue credits” that Fidelity refunded to the plan, and awarded the participants $1.7 million in damages, plus interest.

Investment Options

The participants also challenged certain plan investment options, including a suite of Fidelity target date funds.

Martinez sided with Banner on this count, noting that several other large 401(k) plans offer the Fidelity funds. This is “at odds” with the claim that a prudent 401(k) plan fiduciary wouldn’t have offered these funds, Martinez said.

Martinez also rejected the participants’ challenge to the plan’s “mutual fund window,” which he said relied on “unsupported assumptions” that failed to account for individual investors’ preferences.

Finally, Martinez awarded the participants $687,589—plus interest—to account for expenses that Banner impermissibly paid out of plan assets, including salaries for human resources employees that helped administer the plan.

Schlichter, Bogard & Denton LLP represents the plan participants. McDermott, Will & Emery LLP and Caplan & Earnest LLC represent the Banner defendants.

The case is Ramos v. Banner Health, 2020 BL 188868, D. Colo., No. 1:15-cv-02556, 5/20/20.

To contact the reporter on this story: Jacklyn Wille in Washington at

To contact the editors responsible for this story: 

Rob Tricchinelli at

Patrick L. Gregory at