A St. Louis-based law firm has now brought lawsuits against eight major universities on claims that their retirement plans charged employees excessive fees.
On Aug. 9, Schlichter, Bogard & Denton filed separate class-action lawsuits against Massachusetts Institute of Technology, New York University and Yale University on behalf of more than 60,000 employees in their defined contribution retirement plans.
Two days later, it filed separate class-action lawsuits against four more universities: Duke, Johns Hopkins, the University of Pennsylvania and Vanderbilt.
On Monday, the same firm brought another case against Emory University.
Except for MIT, the universities are using 403(b) plans.
“I think this may be a whole new chapter in 401(k) and 403(b) fee litigation,” Carol Buckmann, partner at Cohen and Buckmann PC, told ThinkAdvisor. “I think that it’s a very big development and I think the plaintiffs’ lawyers have decided this is sort of the new frontier in fee litigation. They’re some very, very large plans. If you look at the summaries of the amounts in these plans, we’re talking huge plans. And, so, the plaintiffs’ lawyers can seek very large damages.”
Buckmann has specialized in employee benefits and executive compensation for more than 30 years.
“The fact that all of these were filed so quickly and so closely together, I think is a sign of things to come,” Buckmann said. “This kind of plan [403(b)s] hasn’t gotten as much attention as 401(k) plans so far. I think this is just the beginning. There are many, many of these plans out there, and they’re not just sponsored by universities, but other not-for-profits.”
Each of the suits alleges breaches of fiduciary duties that caused investors to pay millions of dollars in excessive fees. Among other things, the suits allege that the defendant universities improperly included high-cost investment options in their plans, used multiple providers (known as recordkeepers) which caused excessive fees, offered too many investment options and also charged improper fees for recordkeeping, administrative and investment services.
The complaint against MIT differs slightly in that the university was using a 401(k). The complaint alleges that MIT’s close relationship with Fidelity Investments led to its selection as plan recordkeeper, without any competitive bidding process in violation of the university’s duty to act in the exclusive interest of its employees.
“We contend that these universities, as fiduciaries, have breached their duties under the law to protect the retirement assets of their employees and retirees,” stated Jerry Schlichter of Schlichter, Bogard & Denton, the attorney for the plaintiffs. “These university employees deserve the same right to build meaningful retirement assets as employees of for-profit companies.”
Lou Harvey, CEO of the consulting and auditing firm Dalbar, was particularly concerned about the number of recordkeepers being used by the plans and brought up by the complaints.