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Major Universities Face ERISA Class Action Lawsuits

News | August 11, 2016

Class action lawsuits were recently filed against Yale, NYU, MIT, Duke, Vanderbilt, Johns Hopkins, the University of Pennsylvania, and Emory University related to their employee retirement plans. In general, the complaints allege that plan fiduciaries breached their fiduciary duties under ERISA by:

  • Causing plan participants to pay unreasonable fees by failing to consolidate their plans under a single recordkeeper;
  • Failing to monitor recordkeeper fees by, in part, failing to conduct requests for proposals and failing to negotiate flat-fee rates, even though the plans are “jumbo” plans;
  • Causing plan participants to pay unreasonable fees by offering excessive numbers of investment options under each plan (generally, from 100-300 options);
  • Retaining the CREF Stock Account and TIAA Real Estate Account, which allegedly charged unreasonable fees and underperformed passive index funds; and
  • Failing to review or select various low-cost options, including lower-cost share classes, separate accounts, and collective investment trust funds.

Of particular note, TIAA (often regarded as a low cost provider in the higher education community) is one of the service providers mentioned in the complaints. Fidelity and Vanguard are also mentioned in the complaints. In addition to signaling that 403(b) plans are at increased risk of litigation, these complaints highlight the importance of regularly reviewing service providers and negotiating lower fees. 403(b) plan fiduciaries should consider each of the allegations described above as it relates to their plan as well as consider the process they have in place for reviewing and documenting review of such matters.

Our firm regularly works with colleges and universities on retirement plan compliance and fiduciary risk matters, including assisting our clients in organizing, conducting and documenting fiduciary committee meetings. Please contact your Kutak Rock attorney or a member of the Employee Benefits and Executive Compensation Practice Group if you have questions about how these lawsuits impact your retirement plan.