Plan Sponsors Under the Microscope as Fiduciary Breach Cases Make Headlines
Prestigious universities’ 403(b) plans are facing lawsuits for alleged breaches of fiduciary duties under ERISA. Universities in the midst of active lawsuits include Emory University, Johns Hopkins University, Massachusetts Institute of Technology (M.I.T.), N.Y.U., Yale University, University of Pennsylvania, Duke University, and Vanderbilt University, among others. The university lawsuits stem from allegations that the institutions failed to consider low-cost investment options and in many cases used multiple record keepers for their plans, driving up participant fees unnecessarily.
In Emory’s case, it’s not just the university being sued. Additional defendants include Emory Healthcare, Inc., Emory Pension Board, Emory Investment Management, and the Vice President of Investments and Chief Investment Officer. Jerome Schlicter, who represents employees of Emory University in the class-action, stated in a recent interview that the surge in retirement plan litigation correlates with increased employee knowledge and media coverage of retirement plans.
Major universities aren’t the only ones currently under the microscope. According to an August 18 article on Bloomberg.com, “Class-action lawyers are targeting a wider variety of alleged breaches of fiduciary duty in retirement offerings and suing a broader range of entities.”
The story of Novant Health, Inc., a nonprofit hospital system, serves as a cautionary tale for plan sponsors. After paying a $32 million settlement related to corporate fiduciary breaches in its retirement plan, Novant subsequently was required to hire an outside consultant, revise its investment options, and provide accurate communications to its participants. These are all steps Novant could have taken prior to the class action with the help of a good ERISA attorney.
Is it time to take a closer look at Retirement Plan Legal Compliance? Hall Benefits Law recommends that every business undergo a thorough legal review of its fiduciary responsibilities related to retirement plans.