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The Latest Excessive Fee Suit… Excessive Participant Mailings

A new excessive fee class action has been brought against a large retirement services provider for breaching its fiduciary duties under ERISA by “engaging in expensive duplicative mailings to beneficiaries in retirement plans it administers, unnecessarily mailing individual monthly statements to beneficiaries in separate mailings.”

The complaint, filed March 15 in the U.S. District Court for the Southern District of New York, alleges that TIAA's duplicative mailing practices resulted in unnecessary, unreasonable and excessive costs in the millions of dollars paid by the plans – expenses that it says were not disclosed to participants in violation of ERISA.

The plaintiff in the case, Harold Jay Lefkowitz, a retired certified public accountant, is a participant and beneficiary of a number of retirement plans administered by TIAA (seven, according to the suit). The suit claims that Lefkowitz receives 15 separate mailings of account each month, and that TIAA was aware of the problem for years, “…yet has failed to take any remedial steps, despite repeated promises to correct the problem, and continues to waste literally millions of dollars on unnecessary mailings.” The suit is being filed on behalf of “all persons who are or have been participants in and beneficiaries of retirement plans administered by Defendants who were affected by Defendant’s conduct set forth in this complaint (to wit, Defendant’s failure to change its mailing systems to avoid multiple separate mailings of account statements) as well as those who will become participants or beneficiaries of plans administered by Defendant in the future.”

The Mailings Multiply

The suit notes that when Lefkowitz began to receive his retirement statements, TIAA used what is called a “household mailing,” meaning that statements and account mailings for multiple accounts belonging to the same person and the same address were combined, thus reducing mail volume and expenses. Approximately eight years ago, however, TIAA ceased this approach, and began to send individual statements in separate envelopes with separate postage to Plaintiff. Beginning in August 2008 Lefkowitz began by writing to a TIAA representative about the problem – and got no response. In January of the following year the suit claims that he wrote to Roger W. Ferguson, President and CEO of TIAA-CREF, got a response confirming receipt thanking him and telling him he could expect a written response, which he claims he didn’t get.

Over the next three years Lefkowitz wrote to – well, just about everybody: the Trustees of TIAA CREF, his senators and representatives, including Sen. Kirsten Gillibrand (D-N.Y.), who forwarded Lefkowitz’ complaint to the Department of Labor (which corresponded with TIAA), the AARP, the Chairman of the PBGC and others (and some more than once, according to the suit).

The Cost of the Mailings

As for how much this mailing was costing, on May 30, 2010, he sent another letter to Ferguson marked “Personal and Confidential” “in the hope that this will reach you and not be buried in the corporate bureaucracy where my numerous previous requests have been buried” that noted that receiving 15 confirmations a month cost $60.48, compared with $5.04, and that, if the statements were consolidated, and assuming a minimum of 1 million pensioners similarly situated, this was costing TIAA at least $60 million a year.

While he received a number of sympathetic acknowledgements from TIAA, he finally got a response that acknowledged that “the cost of pursuing a quick fix to this problem is prohibitive at this time. Presently, we are in the midst of a multiyear transition to replace and upgrade our technology… The good news is that the completion of this plan will make it easier for us to implement the solution you recommend… We are sorry that a nearer term fix does not make financial sense at this time.”

The Claims

The suit notes that while “TIAA has no control over market fluctuations which affect the accounts of participants in the plans it administers, but it does have control over the fees and expenses, which should be reasonable, incurred solely for the benefit of participants, and fully disclosed.” The suit also notes that “TIAA has access to enormous computer programming technology that could be used to provide multiple notices economically in combined mailings” and that “it has a fiduciary duty to administer the plans under its care economically.”

As for damages, the suit asks that TIAA “make good to the plans it administers all losses that the plans incurred as a result of the conduct" described above and restore the plans to the positions they would have been in but for the breaches of fiduciary duty, be ordered to “develop cost-effective systems for notifying beneficiaries of deposits to their accounts,” and that the class, if approved, be awarded “…actual damages to the plans in the amounts of their monetary losses resulting from the breach of duty.”

In response to a request for comment, a TIAA spokesperson said, “We believe these claims are without merit and will vigorously defend ourselves.”

The case is Lefkowitz v. Teachers Ins. and Annuity Assn., S.D.N.Y., No. 1:16-cv-01932.