A U.S. District judge in Baltimore partially dismissed a lawsuit against Johns Hopkins University alleging the university had breached its fiduciary duties of its 403(b) plan under the Employee Retirement Income Security Act of 1974.
Judge George L. Russell III on Sept. 28 dismissed the portions of the lawsuit that allege the university breached its duties by offering too many investment options and offering higher-cost share classes in the plan, citing previous similar cases.
The court did rule that the remainder of fiduciary duty breach claims can go forward, including that "a university offering actively managed funds was imprudent ... (concluding that the unreasonable management fees and performance losses count states a claim)" and that "a prudent fiduciary would have chosen fewer record keepers and run a competitive bidding process for the record-keeping services."
The lawsuit, filed in 2016, was one of many lawsuits filed by law firm Schlichter, Bogard & Denton over alleged mismanagement of university defined contribution plans. Other plans the firm sued for excessive fees and the high cost and poor performance of actively managed funds were 403(b) plans of Northwestern University, Cornell University, Columbia University, the University of Southern California, New York University, Yale University, Duke University, University of Pennsylvania, Vanderbilt University, Emory University and Emory Healthcare, and against a 401(k) plan of the Massachusetts Institute of Technology.
"We're pleased that the court ruled that the (lawsuit regarding) actively managed funds that we allege were imprudent will proceed," said Jerome Schlichter, senior partner at Schlichter, Bogard & Denton. "We respectfully continue to believe that retail mutual funds in billion-dollar plans like this are excessively expensive when there are identical institutional funds available."
Tracey Reeves, John Hopkins spokeswoman, could not immediately provide comment.