United Surgical Partners agrees to $1.48M settlement in 401(k) fee lawsuit

Editor's Note

United Surgical Partners International Inc. has agreed to pay $1.48 million to settle a proposed class action alleging its 401(k) plan charged excessive fees and included costly investment options, according to a motion filed in Texas federal court, Law360 January 6 reports. The settlement resolves a lawsuit brought in April 2021 under the Employee Retirement Income Security Act (ERISA), representing at least 16,600 participants in the company's 401(k) plan from April 2015 to December 2018.

The settlement, which requires court approval, includes a $5,000 award for each of the five named plaintiffs and allocates one-third of the settlement, approximately $492,700, for attorney fees. Plaintiffs estimate the $1.48 million payout represents 28% of the plan's maximum potential damages, which they calculated at $5.2 million. The lawsuit claimed administrative fees ranged from $71 to $98 per participant, significantly higher than the $22 to $38 charged by similar plans, and alleged damages from recordkeeping fees and investment costs exceeded $2.4 million and $2.8 million, respectively.

The case was initially dismissed in 2023 by US District Judge Brantley Starr, who ruled plaintiffs had not demonstrated that lower-cost investment options were comparable or that administrative fees were disproportionate. However, the Fifth Circuit revived the suit in April 2023, citing the Supreme Court’s decision in Hughes v. Northwestern University as a precedent.

Settlement negotiations began in late summer 2024 following discovery and a written settlement demand. If approved, the agreement would bring the 4-year litigation to a close, providing immediate financial relief to participants and avoiding the risks and costs of continued legal proceedings.