You’ve probably heard of the sterling reputations of institutions such as Yale, NYU (New York University), Columbia, Duke and MIT (Massachusetts Institute of Technology). They are highly revered due to their world-class academic standings and prestigious alumni. However, those institutions and many like them are currently being sued. The cause of action are allegations that they have been improperly administrating their 403(b) plans (retirement plans used by such institutions and other non-profits in place of a traditional 401(k) or IRA).
According to the Bloomberg article by Stephen Mihm, Jerome Schlichter, an ERISA plaintiff’s attorney who has already sued many employers for wrongful 401(k) administration, alleges that the universities have breached their fiduciary duty by failing to use their leverage in order to get the best fund options for their employees, causing their retirement accounts to fall victim to excessive record-keeping and plan administration fees.
For example, the lawsuit against Duke University alleges that the Duke 403(b) retirement plan had over 400 different investment options, which drove up the cost of administrating those plans significantly and well beyond reason. The suit also alleges that having so many options caused “decision paralysis” for plan participants, meaning that the over-abundance of choices made making a decision incredibly difficult and caused poor to no decision making on the part of participants.
The lawsuits further allege that the plan administrators would have served participants better by consolidating investments of similar types into single options, which would lead to lower administrative costs.
Here are some of the case citations for the pending suits.
- Cassell v. Vanderbilt Univ., M.D. Tenn., No. 3:16-cv-02086;
- Clark v. Duke Univ., M.D.N.C., No. 1:16-cv-01044;
- Kelly v. The Johns Hopkins Univ., D. Md., No. 1:16-cv-02835;
- Sacerdote v. N.Y. Univ., S.D.N.Y., No. 1:16-cv-06284;
- Sweda v. Univ. of Penn., E.D. Pa., No. 2:16-cv-04329;
- Tracey v. Mass. Inst. of Tech., D. Mass., No. 1:16-cv-11620;
- Vellali v. Yale Univ., D. Conn., No. 3:16-cv-01345.
As more updates regarding this latest ERISA litigation trend come in, we will try to post follow-up articles.