The retirement plans of three large universities were recently hit with lawsuits charging the plan fiduciaries with a breach of their duties and for maintaining plans with excessively expensive investment options.
The class action lawsuits are primarily the work of one New York law firm (Schlichter, Bogard & Denton), who have filed 20 such complaints (with 9 settlements) since 2006. The most recent plans to be sued were those of MIT, Yale and New York University. Columbia University also faces a similar suit filed by a different firm. The suits target both 403(b) and 401(k) plans of the nonprofit institutions.
The suits claim various breaches of fiduciary duty, alleging that plan fiduciaries selected and retained numerous high-cost and poor-performing investment options compared to available alternatives. The suits charge that these actions caused plan participants to pay millions of dollars in unreasonable and excessive fees that substantially reduced retirement income. The claims of damages against these plans are in the billions of dollars.
In addition, some of the lawsuits assert that the use of multiple record keepers, rather than a single provider (common in many 403(b) programs) has caused duplicative fees to be charged to plan participants.
While being served by a class action lawsuit is unlikely, except for the largest plans, these complaints do provide some valuable information to all plan fiduciaries against similar claims from plan participants.
Plan investments should be measured (benchmarked) against industry standards for both performance and fees. Plan fiduciaries must document their actions and maintain plan documents and records. Service providers must also be evaluated regularly to determine whether their fees are reasonable compared to the services rendered.
We have resources and checklists to assist plan fiduciaries in executing their duties and protecting their plans from claims. We can also refer plan sponsors to qualified partners to perform benchmarking on investments and fees.
For more information or questions about this article, please contact Richard Green at firstname.lastname@example.org or toll free at 844.4WINDES (844.494.6337).