The parties in one of the first university 403(b) plan excessive fee suits brought by the St. Louis-based law firm of Schlichter, Bogard & Denton have come to terms.
This time it’s a suit brought against the Emory University Retirement Plan and the Emory Healthcare, Inc. Retirement Savings and Matching Plan, plans that had more than $3 billion in assets between them (or did, as of Dec. 31, 2014, with some 45,000 participants across the two plans. The plan fiduciaries had been accused of allowing “unreasonable expenses to be charged to participants for administration of the Plans, and retaining “high cost and poor-performing investments compared to available alternatives.”
Unique Aspects?
The Emory case did have a couple of unique elements; the plaintiffs cited the plan’s investment policy statement (IPS), which they claim requires “that passive index funds be considered for efficient markets such as large capitalization equities, where the IPS recognizes the difficulty in obtaining performance above benchmarks,” and that it required “consideration of fees and expense ratios when selecting Plan investment options.” The suit also contrasted the plans in question with that of the Emory Clinic, Inc. Retirement Savings Plan is a 403(b) plan with $310.4 million in assets, but that used only a single recordkeeper, and that allegedly invested in lower-cost share classes than the plans challenged “for many of the same investment options.”
At this point we know only (Henderson v. Emory Univ., N.D. Ga., No. 1:16-cv-02920, order on settlement notice 4/17/20) that “as a result of an in-person mediation session with private mediator Hunter Hughes, Esq. of Hunter Hughes Alternative Dispute Resolution and subsequent extended settlement discussions, the Parties have reached an agreement in principle to resolve this matter.”
That said, the parties here asked Judge Charles A. Pannell Jr. for “additional time to finalize the settlement terms and prepare the papers to support a motion for preliminary approval of the settlement.” Which Judge Pannell granted, with that agreement due on or before May 29, 2020.
Eight ‘Slate’
Of the roughly 20 universities that have been sued over the fees and investment options in their retirement plans since 2016, there have been seven announced settlements (now eight, of course); the largest to date with MIT, for $18.1 million, and prior to that Vanderbilt University, which in April 2019 announced a $14,500,000 cash settlement, as well as a long list of process/procedural changes that were, as with the MIT settlement, also to be monitored over a three-year period, and the most recent was a little more than a month ago with Johns Hopkins, which settled for $14,000,000, also alongside a number of plan design/procedural changes. In March, Brown University settled for $3.5 million, as well as “other, structural relief.” In May 2018, the University of Chicago entered into a class action settlement for a $6.5 million cash payment and changes to the university’s $3 billion plan, while earlier that year Duke University announced a $10.65 million settlement. Princeton University announced a settlement just last week, so those terms are not yet known.
On the other hand, St. Louis-based Washington University, New York University and Northwestern University have thus far prevailed in making their cases in court. The University of Pennsylvania, which in 2017 won at the district court level, in 2019 had that decision partially overturned by an appellate court, though the plan fiduciaries’ motion for an en banc review of that decision was rebuffed.
