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Defined Contribution

Court rules in favor of NYU in excessive fee case against university

New York University won a class-action lawsuit on Tuesday alleging the university mismanaged two of its 403(b) plans, violating provisions of ERISA.

In the case, Sacerdote et al. vs. New York University, the plaintiffs — participants in the NYU 403(b) plans — claimed the university mismanaged the hiring and monitoring of record keepers for the two defined contribution plans, which resulted in excessively high fees.

The plaintiffs allege the university failed to properly manage the RFP process seeking record keepers, failed to allow RFP respondents to propose pricing for all plan assets vs. only non-annuity assets, and had pre-determined that TIAA, which was the university's annuity assets record keeper, was the preferred record keeper.

The plaintiffs also alleged the university failed to remove the TIAA Real Estate Account and the CREF Stock Account as investment options, thereby continuing to allow the plaintiffs to invest in such funds. Finally, the suit asserted the university used confusing and inappropriate financial benchmarks to review performance of the two funds and they objectively underperformed, resulting in significant losses.

All told, the plaintiffs alleged they suffered more than $358 million in total losses.

U.S. District Judge Katherine B. Forrest in New York wrote in her final decision that the plaintiffs failed to prove "that the (university's retirement) committee acted imprudently or that the plans suffered losses as a result."

"Accordingly, the court finds in favor of NYU on all claims," Ms. Forrest added.

In response to the decision, university spokesman John Beckman said via email, "NYU maintained from the time the plaintiffs first publicized this case that it was baseless, and the judge's finding supports that."

The suit was filed by the law firm of Schlichter Bogard & Denton. Since 2016, the law firm has sued many large private university defined contribution plans, including those of Duke University, Johns Hopkins University and Yale University.

A representative from the employee group or Schlichter Bogard & Denton could not be immediately reached for comment.