The allegations are familiar, but this time they are being aimed at Georgetown University. The latest example of defined contribution litigation to target a well-known U.S. university, the Employee Retirement Income Security Act (ERISA) fiduciary breach lawsuit was filed in the U.S. District Court for the District of Columbia. The suit names Georgetown University and several university officials tasked with overseeing defined contribution (DC) retirement plans as defendants.
The charges filed match almost verbatim previous suits filed with similar allegations made against other large universities’ 403(b) retirement plans. Plaintiffs allege that the university and officials in charge of oversight did not leverage the university’s plans’ substantial bargaining power to benefit plan participants and beneficiaries, failed to appropriately monitor and evaluate plan expenses and allowed the plans to pay exorbitant fees for both administrative and investment services.
The complaint includes claims that the defendants breached their fiduciary duty by failing to select one single, suitable service provider providing administrative and recordkeeping services for the retirement plans in exchange for reasonable compensation for the service provided. Instead, the defendants apparently retained three different service providers consistently – all with separate fees: TIAA, Vanguard and Fidelity. Each supplied the plans with a separate menu of investment options including mutual fund share classes charging higher fees than other alternatives with the same strategies and/or less expensive share classes of the exact same investment fund. According to plaintiffs, the situation caused plan participants to pay asset-based fees for admin services that increased with the value of the accounts even though no additional services were provided.
The three providers resulted in three investing segments for each of the plans. TIAA offered a guaranteed interest annuity. Vanguard offered close to ninety mutual funds. Fidelity offered nearly two hundred mutual funds. Plaintiffs claim that the volume of choices indicates that the defendants were not adequately fulfilling their fiduciary duties for retirement investors by monitoring and evaluating the historical performance and expense of each of the funds in order to compare past performance the options to each other or a peer group of funds to maximize success. Many of the options should have been excluded based on their past performance, etc.
If you have questions about ERISA or if you have knowledge of a fiduciary breach, please get in touch with one of the experienced California employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP.