Memorial Hermann Health System, a Texas nonprofit hospital system, has settled a suit under the Employee Retirement Income Security Act (ERISA) relating to 401(k) plan fees and fund choices. Participants in the health system’s 403(b) and 401(k) plans, which hold more than $2.5 billion in assets, alleged that the company breached ERISA by charging excessive fees and maintaining underperforming target-date funds (TDFs) as investment choices in its plans. The case is Jones et al. v. Memorial Hermann Health System et al., No. 4:24-cv-02105 (S.D. Tex.).
Plan participants filed the proposed class action in June 2024, claiming that plan fiduciaries violated their duties of prudence and loyalty under ERISA. More specifically, the participants charged the health system with paying unreasonable administrative and investment advisory fees, including $2.3 million to one advisory firm and over $429,000 to an investment services firm for its 403(b) plan over four years. The participants also claimed the company charged each plan participant excessive administrative fees and failed to monitor and/or remove certain underperforming TDFs, such as J.P. Morgan Smart Retirement Funds. As a result of these actions, plan participants allegedly suffered millions in investment losses.
The court allowed the case to move forward despite the defendants’ multiple motions to dismiss, the most recent of which was recommended for denial by a federal magistrate judge in May 2026. The judge disregarded the motion to dismiss as a repetitive motion containing arguments the court had already rejected. The parties settled shortly after the judge issued that recommendation. While the details of the proposed settlement are unavailable, the settlement terms will be subject to court approval.
This lawsuit involves some of the largest plans that ERISA litigation has addressed, challenging fees and investment choices. This settlement adds to the steadily increasing number of proposed class actions that have been settled before going to trial.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
