Law firm targets 4 more universities on fiduciary breaches in DC plans

Northwestern University, Cornell University, Columbia University and the University of Southern California are the latest universities to be sued by law firm Schlichter, Bogard & Denton over alleged mismanagement of their defined contribution plans.

The lawsuits were filed separately Wednesday against the four universities in U.S. District Courts in Chicago, New York, and Los Angeles, on behalf of plan participants.

The lawsuits assert the universities breached their fiduciary duties by charging participants excessive fees and investing their assets in high-cost and poor-performing funds.

Schlichter, Bogard & Denton brought similar allegations against the 403(b) plans of New York University, Yale University, Duke University, Johns Hopkins University, University of Pennsylvania, Vanderbilt University, Emory University and Emory Healthcare, and against a 401(k) plan of the Massachusetts Institute of Technology in lawsuits filed earlier this month.

It is the second time this week Columbia's 403(b) management has been called into question. Law firm Sanford Heisler LLP sued the university on Tuesday for “unreasonable” and “greatly excessive” record-keeping, administrative and investment management fees in its 403(b) plans.

As of Dec. 31, 2014, Ithaca, N.Y.-based Cornell offered 299 investment options in its $1.9 billion retirement plan for the employees of the endowed colleges at Ithaca and 301 options in its $1.2 billion tax deferred annuity plan with TIAA-CREF and Fidelity Investments as record keepers, according to the lawsuit.

As of Dec. 31, 2015, Evanston, Ill.-based Northwestern University's $2.3 billion retirement plan had 242 investment options with TIAA and Fidelity as record keepers and its $530 million voluntary savings plan had 187 investment options with TIAA as its record keeper, according to the NU lawsuit. Although the university is moving to a streamlined investment lineup for its defined contribution plans in October, a couple of costly and underperforming investment options have been retained, the lawsuit argues.

In USC’s case, the Los Angeles-based university’s $2.2 billion 401(a) plan and $2.3 billion tax-deferred annuity plan had 344 options combined with TIAA, Vanguard Group, Fidelity and Prudential Financial as record keepers as of Dec. 31, 2014, the lawsuit said. While changes have since been made to the plans, including the removal of hundreds of mutual funds and Prudential as a record keeper, the plans still have three record keepers, high-cost investment options and excessive record-keeping fees, the lawsuit argues.

As of the same date, New York-based Columbia University's roughly $2.8 billion officers' retirement plan and roughly $1.8 voluntary retirement savings plan each had about 120 investment options with TIAA and Vanguard as record keepers, according to the Wednesday lawsuit.

Columbia spokeswoman Caroline Adelman said the university does not comment on pending litigation but maintained Friday that Columbia is “proud of the retirement benefits offered to its faculty and staff and takes its responsibility as a fiduciary seriously.”

Northwestern spokesman Alan K. Cubbage said in an e-mail: “The university believes the claims to be baseless and intends to defend them aggressively. Northwestern has carefully managed its retirement plans for the benefit of its faculty and staff members, as evidenced by the financial stability and success of those plans, and the university will continue to do so.”

USC and Cornell officials said they will also “vigorously” defend against the litigation.

“Cornell University continues to responsibly manage its retirement plans for the greatest possible benefit to employees and retirees, and has been responsive to their interests in having a reasonable range of funds available,” spokesman John J. Carberry in an e-mail. “We are proud of the work of our team of professionals, aided by the retirement plan oversight committee, in maintaining this level of fiduciary responsibility and responsiveness in serving all employees in Ithaca and at Weill Cornell Medicine. The university will vigorously defend against this litigation.”

USC “takes its responsibilities to help our plan participants secure a strong retirement very seriously. We will vigorously defend the university against this lawsuit,” said Carol Mauch Amir, senior vice president and general counsel, in an e-mailed statement.