Several prominent universities have all been hit with claims under the Employee Retirement Income Security Act (ERISA) recently. Specifically, New York University, the Massachusetts Institute of Technology, Yale University, Duke University, the University of Pennsylvania, Johns Hopkins University, and Vanderbilt University all face proposed class actions accusing the schools of causing retirement plan participants to pay millions of dollars in excessive fees.
In the similar suits, beneficiaries alleged that the institutions, as employee retirement plan sponsors, breached their fiduciary duty under the ERISA by causing plan participants to pay excessive fees for record keeping, administrative and investment services of the plans.
The complaints also similarly allege that each school improperly selected and retained numerous high-cost and poor-performing investment options as compared to available alternatives, which substantially reduced the retirement assets of the employees and retirees.
The firm representing Plaintiffs and proposing to be lead counsel, Schlichter Bogard & Denton, successfully appealed a case last year involving retirement plan fees to the U.S. Supreme Court, Tibble v. Edison International, which is currently pending. The types of plans involved differ slightly with MIT offering its employees a 401(k), while the others offer their employees 403(b) plans, which are retirement plans for certain employees of public schools or nonprofit corporations or organizations. Jerry Schlichter of Schlichter Bogard & Denton, said his clients have the same rights to build retirement assets as corporate employees. He said in a statement:
The universities don’t have high-priced retail mutual funds in their billion-dollar endowments, yet they have high-priced retail funds in their employees’ retirement plans. This is diminishing their employees’ and retirees’ retirement savings.
The Plaintiffs claim in all of the cases that had the schools adhered to their fiduciary monitoring duties, the plans would not have suffered the alleged losses. It’s alleged that, as a direct result of the breaches of fiduciary duty alleged herein, “the plans, the Plaintiffs and the other class members lost tens of millions of dollars of retirement savings.” In the case of MIT, the complaint against that school also alleges that MIT has retained Fidelity Investments as record-keeper for nearly two decades without a competitive bidding process. The fact that Fidelity Investment CEO Abigail Johnson is also a member of the Board of Trustees for MIT, according to the complaint, shows the school and the company share an overly close relationship.
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