Attack Against Large University Retirement Plans Continues
The law firm of Schlichter, Bogard & Denton has filed four more lawsuits against major universities for excessive fees in its 403(b) plans.
Cornell University, Columbia University, Northwestern University and the University of Southern California are the latest targets. This is the second lawsuit filed this week against Columbia University, as another law firm filed a complaint with similar allegations.
As with the previous lawsuits filed by Schlichter, the complaints call out the large number of investment options offered to participants, high expenses for these investment options and the use of multiple recordkeepers, resulting in duplicative expenses for recordkeeping services.
The lawsuit against the University of Southern California notes that in March 2016, the university made certain changes to its plans. It removed one of the plan’s four recordkeepers for future contributions, eliminated hundreds of mutual funds, removed certain fixed and variable annuity investment options, and froze contributions to certain other fixed and variable annuity investment options. The changes made by the university resulted in participants now being offered a total of approximately 34 investment options, rather than 340, across the plans’ three remaining recordkeepers.
However, the complaint says, despite these changes, the defendants in the case continue to include high-priced investment options in the plans, retain three recordkeepers, and continue to allow excessive recordkeeping fees to be charged to the plans. The complaint also alleges that as part of the communications about the changes to participants, the university acknowledged that the plans’ previous structure caused the plans to pay unreasonable recordkeeping and investment fees.
The Northwestern University complaint also notes that in 2016, the university eliminated hundreds of mutual funds provided to plan participants and selected a tiered structure comprised of a limited core set of 32 investment options.
Attorneys feel the distinctions between 403(b)s and 401(k)s may give 403(b)s different arguments in such lawsuits.