A participant in a 403(b) plan offered by the University of Rochester has sued the university, alleging it violated its fiduciary duties under ERISA by offering a plan that charged "grossly excessive" fees due to the plan's administration by TIAA-CREF.
"TIAA's fees are tethered not to any actual services it provides to the plan, but rather to a percentage of assets in the plan," said the complaint filed May 11 in a federal District Court in Rochester, N.Y. TIAA-CREF, the plan's record keeper, was not named as a defendant.
"Instead of leveraging the plan's tremendous bargaining power to benefit plan participants, the university has failed to adequately take proper measures to understand the real cost to plan participants for TIAA's services," said the complaint in the case of Christopher D'Amore vs. the University of Rochester. The complaint seeks class-action status.
The University of Rochester Retirement Program had $4.2 billion in assets as of June 30, 2017, according to its latest Form 5500 filing.
The complaint alleged that, unlike other universities and their 403(b) plans, the University of Rochester "did not retain a third party to review TIAA's fees," adding that the university "did not act on information about fees in its possession as a prudent fiduciary would."
The complaint added that the university failed to seek competitive bids for the services that TIAA provides. "Had it done so, defendant would not have allowed the plan to continue to pay excessive administrative fees," the complaint said.
The plaintiffs' lawyers "have unfortunately gotten many of the facts wrong," Sara Miller, a university spokeswoman, wrote in an email. "In fact, the fee paid to TIAA for its record-keeping and administrative services by the university's retirement plan is actually below the $50 per-participant fee that the complaint alleges is reasonable."
Ms. Miller added that "allegations reporting the total amount paid to TIAA and the amount paid by Mr. D'Amore for these services are wrong." The university has made sure "that its retirement plan assets are prudently managed and the fees charged are competitive and reasonable," she wrote.