Retirement Plan Lawsuits Against Top Universities Could Spark Trend
Author: David B. Weisenfeld, XpertHR Legal Editor
August 19, 2016
Class-action lawsuits have been filed against nine of the nation's leading universities claiming that tens of thousands of employees and retirees were forced to pay millions of dollars in excessive fees relating to their 401(k) and 403(b) accounts in violation of the Employee Retirement Income Security Act (ERISA).
These first-of-their-kind lawsuits in the university sphere claim the schools breached their fiduciary duty to employees by selecting high-cost and poor-performing investments.
The litigation includes separate claims against Yale, the Massachusetts Institute of Technology (MIT) and New York University (NYU) on behalf of more than 60,000 employees. A St. Louis-based law firm also filed lawsuits along similar lines against the following universities:
- Johns Hopkins;
- Pennsylvania; and
Meanwhile, still another lawsuit targets Columbia University.
The complaints allege that the universities used multiple recordkeepers rather than one - a result that unreasonably forced employees and retirees to pay dramatically higher fees. They claim that the universities failed to live up to their responsibilities under ERISA.
MIT employees had $3.6 billion in net assets in its retirement plan, making it one of the largest defined contribution plans in the country. The lawsuit against MIT suggests that the school's relationship with Fidelity Investments, the plan's recordkeeper, was compromised because Fidelity's CEO is a member of the MIT Board of Trustees.
In a 2015 ruling, the Supreme Court ruled in Tibble v. Edison International that ERISA requires a 401(k) plan fiduciary to not only exercise prudence in selecting plan investments at the outset, but also in monitoring those investments. The law firm that brought the case, Schlichter, Bogard & Denton, is the same one spearheading the litigation against most of the universities.
Earlier this year, the firm reached a $62 million settlement with Lockheed Martin in a class action lawsuit that accused the company of charging excessive fees for its 401(k) plan.