The law firm of Schlichter, Bogard & Denton has now turned its attention to the education sector, filing separate class action lawsuits against three universities on behalf of over 60,000 employees in their defined contribution retirement plans, both 401(k) and 403(b).
According to a press release, 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.
“We contend that these universities, as fiduciaries, have breached their duties under the law to protect the retirement assets of their employees and retirees,” Jerry Schlichter of Schlichter, Bogard & Denton, the attorney for the plaintiffs stated. “These university employees deserve the same right to build meaningful retirement assets as employees of for-profit companies,” Mr. Schlichter added.
The press release claims that common to all three complaints are allegations that each of these universities, as employee retirement plan sponsors, 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 complaints further allege that the universities breached their fiduciary duties by selecting and retaining numerous high-cost and poor-performing investment options compared to available alternatives, which they claim “substantially reduced the retirement assets of the employees and retirees.”
In the cases of New York University and Yale University, both 403(b) type plans, the complaints allege employees paid excessive recordkeeping fees in addition to selecting and imprudently retaining funds which the plaintiffs claim have historically underperformed for years. Moreover, the complaints challenge the use of multiple recordkeepers, rather than a single recordkeeper — a practice that they claim “… caused plan participants to pay duplicative, excessive, and unreasonable fees for plan recordkeeping services.
In the case of Massachusetts Institute of Technology’s 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. The complaint goes on take issue with Fidelity CEO Abigail Johnson’s position on the MIT Board of Trustees for years, and the inclusion of more than 150 Fidelity funds on the $3.5 billion plan menu — funds that the complaint describe as “high priced retail funds,” while alleging that plan was large enough to command lower priced funds.
Since 2006, the law firm of Schlichter, Bogard & Denton, based in St. Louis, Missouri, has filed 20 such complaints and secured 9 settlements.