The U.S. District Court for the District of Columbia has ruled in favor of the defendants in an Employee Retirement Income Security Act (ERISA) fiduciary breach lawsuit filed against Georgetown University regarding its 403(b) plan.

The text of the defeated complaint closely echoed charges filed previously against other large universities’ 403(b) retirement plans. Plaintiffs suggested that instead of leveraging the Georgetown plans’ substantial bargaining power to benefit participants and beneficiaries, defendants failed to adequately evaluate and monitor the plans’ expenses and caused the plans to pay unreasonable and excessive fees. Among other lines of argument, the plaintiffs claimed defendants failed to negotiate a “separate, reasonable and fixed fee for recordkeeping with a single administrative provider to the plans.” Instead, according to plaintiffs, the Georgetown defendants “continuously retained three different service providers—TIAA, Vanguard and Fidelity.”

Plaintiffs argued it was inappropriate to allow each of these recordkeepers to supply the plans with a separate menu of investment choices including mutual fund share classes that charged higher fees than other alternatives that offered the same investment strategies or less expensive share classes of the exact same investment fund—or both.

Ruling in favor of the university’s motion to dismiss these claims, District Court Judge Rosemary Collyer has published a colorfully worded opinion that chides the plaintiffs for failing to acknowledge basic facts about the way annuities work and their well-established role in 403(b) plans.

“If a cat were a dog, it could bark,” she writes. “If a retirement plan were not based on long-term investments in annuities, its assets would be more immediately accessed by plan participants. These two truisms can be summarized: cats don’t bark and annuities don’t pay out immediately.”

In her opinion, Judge Collyer rules in favor of dismissing the lawsuit in its entirety. She notes that 403(b) plans are organized under Section 403(b) of the Internal Revenue Code, titled “Taxation of employee annuities.” For this reason they have a somewhat different regulatory framework compared with other defined contribution retirement plans, such as 401(k)s.

“This provision predates ERISA and speaks directly to the heritage of the collegiate retirement system,” Judge Collyer observes. “The collegiate retirement system of annuities also predates the enactment of Internal Revenue Code Section 403(b), which was adopted in 1958 to provide favorable tax treatment for ‘tax-sheltered annuities,’ such as those offered by 403(b) plans. When adopting ERISA in 1974, Congress amended the Code so that Section 403 plans could offer mutual funds in addition to annuities.”

According to the judge, no party disputes that annuities constitute long-term investments for anticipated long-term benefits.

“But the modern world moves quickly; the stock market has reached historically high values in recent years, which may render the intended slow and careful growth of annuities less attractive, and plaintiffs chafe at the limitations of access to Participant monies in the TIAA Traditional Annuity,” the decision states. “It may be that plaintiffs want to force Georgetown to reconsider its entire strategy behind the plans and to have them become more like corporate plans under Internal Revenue Code Section 401. However, it is not a breach of fiduciary duty to maintain the plans as established tax-deferred vehicles under the particular protections of § 403(b). Therefore, the question is whether the complaint [sufficiently] alleges fiduciary breaches in the context of the Section 403 Plans in question.”

Judge Collyer notes that, for a plaintiff to have standing to sue about their defined contribution plan, he must show fiduciary breaches that impair his individual account’s value.

“Plaintiffs rely on 29 U.S.C. Section 1132(a)(2) and (3) to support their rights to sue as participants,” the decision states. “These provisions of ERISA, among others, provide standing to beneficiaries to sue fiduciaries for imprudent actions. This statutory authority to sue, however, does not automatically satisfy constitutional standing for all claims in this case.”

The text of the ruling then steps through the specific claims brought by the plaintiffs regarding various investment options in the plan, finding that none of these meet the pleading standards set by the D.C. District Court. On the claims alleging that the university has overpaid in its use of multiple recordkeepers, the judge is equally skeptical.

“When it comes to recordkeeping, the relevant difference between Georgetown’s 403(b) plans and corporate 401(k) plans is not the nature of their defined contributions but the nature of the retirement investment programs offered to their employees, i.e., long-term annuities and short-term investments,” the decision states. “Plaintiffs allege that recordkeeping for their TIAA annuities could and should have been consolidated with recordkeeping for the mutual funds offered by Vanguard and Fidelity, thereby reducing such costs by millions of dollars. The complaint alleges that participants in the Georgetown Plans should pay only $35/year per participant for recordkeeping services for all three investment platforms. While a plaintiff is entitled to the reasonable inferences that may arise from the facts asserted in his complaint, plaintiffs provide no factual support at all for their assertion that the plans should pay only $35/year per participant in recordkeeping fees. They cite no example of any non-TIAA entity performing recordkeeping for TIAA annuities, which, of course, are based on decades’ worth of investments.”

The judge adds that it is “notable” that plaintiffs do not allege that the currently available investment resources would remain available at their preferred price of $35/year.

“Plaintiffs’ allegations challenge the fundamental structures of the Georgetown plans, not the fiduciary attentions or prudence of its trustees,” the decision concludes. “Indeed, the plans could be transformed from what they are to something else. But plaintiffs provide no evidence that the three entirely different current investment platforms—TIAA, Vanguard, and Fidelity—would agree to continue the same offerings at a lesser, or combined, recordkeeping price; nor have they identified any college or university that has accomplished that feat.”

The full text of the decision can be downloaded here.