New York University, Yale University, and the Massachusetts Institute of Technology are being sued by employees of the institutions over their handling of employee retirement plans, which they say carry excessively large fees totaling millions of dollars.
Representing the employees is Missouri law firm Schlichter, Bogard & Denton. Their argument is that the fees charged by the institutions in conjunction with the retirement plans is causing working to pay “unreasonable and excessive fees” in relation to their 401(k) or 403(b) accounts. This includes fees paid for record keeping expenses and fees charged by the mutual funds offered in the plans.
“It is important for retirees and employees of universities to have the same rights and ability to build their retirement assets as employees of for-profit companies,” said Mr. Schlichter, a founding partner of Schlichter Bogard & Denton in St. Louis. “They shouldn’t be penalized.”
The three universities each have retirement plans with more than $3 billion in assets, and are each being individually sued by several of their employees in cases looking for class-action status, writes Tara Siegel Bernard for The New York Times.
Each of the three lawsuits state that the schools have not kept up with their obligations as outlined in the Employee Retirement Income Security Act, which require schools to act in the best interest of participants and plan beneficiaries. The lawsuits go on to argue that the schools did not select the most cost-effective or best-performing options for their retirement plans, causing employees to lose a portion of their retirement savings.
The lawsuit against MIT also brings into question its relationship with Fidelity Investments. As the plan’s record keeper, the lawsuit suggests that this was influenced by Fidelity CEO Abigail Johnson, who is also a member of the MIT board of trustees.
Both MIT and Fidelity have refused to comment on the pending litigation.
The lawsuit argues that the $3.5 billion plan in use at MIT hired Boston-based Fidelity as record keeper without competitive bidding. In addition, it states that more than a dozen Fidelity mutual funds were offered as investment options, including retail shares, which are more expensive than institutional shares.
“Retail share class mutual funds are designed for small individual investors and are identical in every respect to institutional share class funds, except for much higher fees,” according to the complaint filed by St. Louis law firm Schlichter, Bogard & Denton, which filed the suits against all three universities.
Meanwhile, NYU spokesman John Beckman said the university has carefully made its selection of retirement plans for its employees and that the school uses feedback from employees when making such decisions. “We will litigate this case vigorously and expect to prevail,” he said.
Yale, currently facing a lawsuit filed in the US District Court in Connecticut, said it had yet to be officially served with the complaint. “We are cautious and careful in administering our plans and we will defend ourselves vigorously,” Yale spokeswoman Karen Peart said.