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Friday, August 19, 2016

More Retirement Plan Lawsuits

An increasing number of universities may soon be facing lawsuits alleging retirement plan mismanagement. Since my last post, the list of universities currently facing lawsuits has grown to include Columbia, Cornell, Northwestern University, Yale, M.I.T., NYU, Emory, Johns Hopkins, Vanderbilt, the University of Pennsylvania, Duke, and the University of Southern California.  The lawsuits often allege that plans contained overpriced options that consistently performed below benchmarks.  

Some faculty have even started reaching out to Jerry Schlicter, the attorney behind the suits, for assistance reviewing their retirement plans.  One interesting contention is that universities that provide faculty with the option to select between different retirement plan providers may breach their duties by not consolidating and using the larger asset pool to negotiate lower fees:   

Some suits also allege that universities cost employees by using multiple companies as retirement plan providers, or record keepers. An institution can negotiate lower fees by consolidating to one record keeper, increasing its bargaining power, the suits argue.

From a practical perspective, having multiple 403(b) plan providers or record keepers unlikely to yield any worthwhile benefit.  It also seems that giving more "choices" in this context may drive increased costs for all faculty.  

Posted by Benjamin P. Edwards on August 19, 2016 at 12:09 PM | Permalink

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