This month, employees at seven elite institutions filed discrete but similar class-action lawsuits against their universities, alleging the schools selected retirement plans that charged excessive fees.
Lawsuits were filed against Duke University, Johns Hopkins University, the University of Pennsylvania, Vanderbilt University, New York University, Yale University, and the Massachusetts Institute of Technology.
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Jerome Schlichter is representing the plaintiffs, who claim the schools didn't do enough to negotiate lower fees on 403(b) retirement plans, and that the plans offered too many, too expensive investment options in place of cheaper alternatives.
The schools each used multiple record keepers, or providers, to operate the plans–though using just one provider would have granted them more bargaining power, says Schlichter.
At the end of 2014, four providers offered Duke 400 investment options, in which about 38,000 participants had $4.7 billion in assets.
A university spokesperson said the school offers such options to provide more flexibility, and those options "are reviewed and carefully managed in accord with federal law to provide low costs and good outcomes."
In April 2015, Vanderbilt downsized from four providers and 340 options to just one provider and 14 core options. The lawsuit against the school alleges that the change should have been implemented much earlier—and that record keeping still costs too much.
Leaders at universities with large endowments are likely to find themselves facing similar lawsuits, writes Jarrett Carter at Education Dive.
"And when that happens, they must be prepared for the legal and public relations costs of explaining why they made what could have been a simple, transparent process more complex to the detriment of employees," Carter writes (Carter, EducationDive, 8/15; Siegel Bernard, New York Times, 8/11).
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