The Massachusetts Institute of Technology is being hit with a lawsuit alleging the college’s 401(k) plan overpaid Fidelity by millions of dollars in exchange for a donation from Fidelity CEO Abigail Johnson, all while participants were hit with excessive recordkeeping fees.
Schlichter Bogard & Denton LLP filed opposition papers Monday in Massachusetts federal court arguing that MIT ensured that Fidelity received millions of dollars of excessive payments from MIT’s 401(k) Plan.
Since the fall of 2010, the plaintiffs allege, MIT’s employees have lost millions in retirement savings because of Fidelity’s excessive recordkeeping fees and its failure to monitor investments.
The filing states that MIT took actions favoring Fidelity while expecting donations in return.
In 2015, MIT kept Fidelity as recordkeeper in the 401(k) plan after being told by a Fidelity executive that Fidelity would “really care about being the recordkeeper and keeping as much actively managed [assets under management] as possible.”
The original complaint against MIT was filed in 2016. A number of different procedural filings in the case have occurred over the past three years. The plaintiffs’ Monday filing is in response to MIT attorneys’ July 15 request for summary judgment.
The Schlichter Bogard & Denton attorneys contend that the Dean of MIT’s Sloan School of Management (where Johnson also served on the School’s Visiting Committee), stated that “If we’re not switching to Vanguard or TIAA-CREF, I am going to expect something big and good coming to MIT from the Johnson family.”
Soon thereafter, Fidelity donated $5 million to MIT — its largest donation in over 15 years.
“The actions of MIT and Fidelity illustrate a clear arrangement through which MIT ignored its fiduciary duties to its employees and retirees, in order to benefit Fidelity and its owners,” said Jerry Schlichter of Schlichter Bogard & Denton, lead attorney for the plaintiffs.