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Third University 403(b) Excessive Fee Settlement Announced


Another settlement has been announced in the series of university 403(b) plan excessive fee suits.

The latest settlement (Cassell v. Vanderbilt Univ., M.D. Tenn., No. 3:16-cv-02086, status report 2/25/19) involved Vanderbilt University, where fiduciaries of Vanderbilt’s $3.4 billion (as of 2014) plan were alleged to have not taken advantage of their “jumbo” plan size to negotiate better deals for their 40,000 plan participants and beneficiaries, that they opted for active management solutions when (cheaper) passive alternatives were available, that they used mutual funds – and retail mutual funds at that – rather than collective investment funds or separately managed accounts, and that they flooded their plan with a “dizzying” array of fund choices that not only stymied participant decision-making, but resulted in higher-than-reasonable fees.

But now, as a result of an in-person mediation session with private mediator Hunter Hughes, Esq. (of Hunter Hughes Alternative Dispute Resolution), as well as “subsequent settlement discussions, the Parties have reached an agreement in principle to resolve this matter,” but “seek additional time to finalize these settlement terms and prepare the papers to support a motion for preliminary approval of the settlement.”

Schlichter Bogard & Denton LLP and Hawkins Hogan PLC represent the plaintiffs, and Morgan Lewis & Bockius and Bass Berry & Sims represent the Vanderbilt fiduciaries.

While at least 20 universities have been sued over the fees and investment options in their retirement plans since 2016, this is only the third announced settlement; in May the plaintiffs and 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 this year Duke University announced a $10.65 million settlement.

On the other hand, St. Louis-based Washington UniversityNew York University, the University of Pennsylvania and Northwestern University have prevailed in making their cases in court.

Details the Vanderbilt settlement should be made public by April 22, according to the filing.