Cerner Mismanaged Its Employee Retirement Plan, A Worker's Class Action Lawsuit Claims
A class action lawsuit charges that Cerner failed to use its immense bargaining power to limit investment expenses for its employee retirement plan.
A class-action lawsuit filed Monday against Cerner Corp. says the electronic health information giant mismanaged its employment retirement plan by choosing costly investment options and defaulting to its own stock to match employee contributions.
The lawsuit was brought by a former employee, Olathe resident Joshua Clark, and contends the administrators of Cerner’s retirement plan did not take advantage of Cerner’s enormous bargaining power to reduce Cerner’s investment and record-keeping expenses.
"Their actions were contrary to actions of a reasonable fiduciary and cost the Cerner Plan and its participants millions of dollars," the lawsuit states.
The case, filed in federal court in Kansas City, Kansas, is the second lawsuit in the last two months to allege North Kansas City-based Cerner breached its responsibilities to employees by mismanaging the plan. Four Cerner employees sued the company in January, claiming it failed to explore cheaper investment options.
Last week, Cerner asked the court to dismiss that lawsuit and send the case to arbitration. The court has not yet ruled on Cerner’s motion.
Cerner declined to comment on either lawsuit, citing its policy of not commenting on pending litigation.
According to the more recent lawsuit, Cerner’s retirement plan is among the largest 0.1% of all 401(k) plans in the United States as measured by assets and participants.
The lawsuit alleges that Cerner’s own stock was the default matching contribution made by Cerner, resulting in “an enormous concentration of Cerner Plan assets in Cerner company stock.”
From March 31, 2014, through March 31, 2020, the period addressed by the lawsuit, Cerner’s stock increased by roughly 12%, compared with the Fidelity 500 Index Fund, which increased more than 56% during the same period, according to the lawsuit. The Fidelity fund tracks the S&P 500, which is considered a barometer of U.S. equity markets.
Cerner’s choice to use Cerner stock as the match contribution “was an action that put the interests of Cerner ahead of the interests of the Cerner Plan participants and was not in the sole interests of the participants,” the suit alleges.
Scott Nehrbass, Clark’s attorney, declined to comment on the suit.
Nehrbass represented an employee of Kansas City-based Waddell & Reed in a similar case alleging Waddell & Reed, a financial advisory firm, forced plan participants into investment options managed by the company. The case went to arbitration and Waddell & Reed, while denying the allegations, settled last year for $4.88 million.
Cerner is the largest private employer based in the Kansas City area, with roughly 14,000 local employees as of last year. The company employs about 30,000 people worldwide.
Dan Margolies is a senior reporter and editor at KCUR. You can reach him on Twitter @DanMargolies.