Schlichter, Bogard and Denton filed separate class action lawsuits against three universities, seeking various damages and remedies for some 60,000 employees enrolled in the universities’ defined contribution (DC) retirement plans.
The complaints, David B. Tracey, et al., v. Massachusetts Institute of Technology, et al.; Dr. Alan Sacerdote, et al., v. New York University, et al.; and Joseph Vellali, et al., v. Yale University, et. al., were filed in the U.S. District Courts of Massachusetts, the Southern District of New York, and the District of Connecticut, respectively.
The suits contend these universities, as Employee Retirement Income Security Act (ERISA) fiduciaries, have breached their duties under the law to protect the retirement assets of their employees and retirees. Common to all three complaints are allegations that each of these universities “breached their duties of loyalty and prudence under ERISA by causing plan participants to pay millions of dollars in unreasonable and excessive fees for recordkeeping, administrative, and investment services of the plans.”
The suits resemble numerous previous complaints filed by Schlichter, Bogard and Denton, and other firms, alleging ERISA fiduciaries were more concerned with their employer’s economic interest than in ensuring positive outcomes for plan participants. Defendants in the cases invariably claim the complaints are unfairly critical and seek to punish common and accepted business practices.
The new complaints against MIT, NYU and Yale allege that the universities breached their fiduciary duties by selecting and retaining high-cost and poor performing investment options compared to available alternatives, which according to plaintiffs substantially reduced the retirement assets of the employees and retirees. In the cases of New York University and Yale University, both of which offer 403(b)-type plans, the complaints allege employees paid excessive recordkeeping fees in addition to selecting and imprudently retaining funds which historically underperformed for years.
The complaints also state that in contrast to actions by prudent fiduciaries of other similarly sized defined contribution plans, these universities each used multiple recordkeepers, rather than a single provider. Consequently, by using multiple recordkeepers, the universities are alleged to have caused plan participants to pay “duplicative, excessive, and unreasonable fees” for plan recordkeeping services.
In the case of Massachusetts Institute of Technology, a 401(k) plan, 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 and retirees. It also alleges that MIT placed over 150 Fidelity funds, “including high priced retail funds in the plan,” in spite of it being a $3.5 billion plan able to command lower fees.
The text of the MIT compliant is here.
Text of the NYU complaint is here.
Text of the Yale complaint was not immediately available on the PACER system.