Emory University to Pay $16.75 Million to Settle 403(b) Excessive Fee Suit

The agreement also calls for the university to issue an RFP for recordkeeping services and engage an independent consultant to review investments, among other things.

A settlement agreement in the case of Henderson v. Emory University, et. al. has been filed. The parties announced they would settle in April.

Under the settlement agreement, Emory University has agreed to pay $16,750,000 to resolve the class action lawsuit.

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In addition, for a period of three years, within 30 calendar days after the end of each year, the defendants are to provide class counsel with information regarding investment alternatives and their fees, as well as a copy of the investment policy statements (IPS) for the plans. Settlement terms also ask for plan fiduciaries to retain an independent consultant within 90 calendar days of the settlement effective date, to review the plans’ existing investment structure in order to make recommendations. If the defendants fail to follow recommendations regarding the plans’ investment structure, they are required to document the reasoning and state the reasons in writing to class counsel along with the consultants’ reports.

The settlement agreement also calls for Emory to prohibit recordkeepers from using confidential employee information to market non-plan products and services, such as individual retirement accounts (IRAs), non-plan managed account services, life or disability insurance, investment products and wealth management services, unless requested by a plan participant. If the defendants enter into a new recordkeeping agreement during the settlement period, new contracts should include provisions restricting the recordkeeping company from soliciting participants into non-plan products and services.

In addition, the defendants are to issue a request for proposals (RFP) for recordkeeping and administrative services to at least four qualified service providers with experience in handling services to plans of similar size and complexity within 180 calendar days of the settlement effective date. The settlement agreement states that after responses to the RFP are reviewed, an independent consultant will provide recommendations to the plan. If plan fiduciaries choose not to move forward with any recommendations, they will have 30 calendar days to document the reasons for their decision and provide information to class counsel, along with the independent consultant’s report. Plan fiduciaries will also be required to provide class counsel with current recordkeeping contracts for the plans.

The lawsuit, brought on by allegations that the plans’ fiduciaries failed to use bargaining power to negotiate lower costs and use proper judgement when considering plan investments, was first filed in 2016 and is one of a series of litigation claims filed against universities. Plaintiffs in the case had also accused the university of congesting its investment lineup, however, U.S. District Judge Charles A. Pannell, Jr. of the U.S. District Court for the Northern District of Georgia dismissed that claim.

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