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Courts

ERISA suit against Georgetown 403(b) plans dismissed

A federal District Court judge in Washington dismissed an ERISA complaint against two Georgetown University 403(b) plans by participants who said the plans charged "inappropriately" high administrative fees and failed to prudently manage the plans' investment menu.

"This type of lawsuit seems to have taken higher education by storm, with suits brought all over the country," U.S. District Judge Rosemary M. Collyer wrote in her opinion Tuesday.

"Georgetown moved to dismiss, arguing that plaintiffs have no standing to make some of their claims and that others fail to state a claim on which relief can be granted," Ms. Collyer wrote. "The motion to dismiss will be granted as to all claims."

Georgetown is one of several private universities that has prevailed at the federal District Court level either by dismissal or by trial in lawsuits claiming fiduciaries violated their ERISA duties. Other universities that have defeated legal challenges are New York University, Northwestern University, the University of Pennsylvania and Washington University in St. Louis. Plaintiffs are appealing each case.

The University of Chicago and Duke University have settled 403(b) complaints. Many other 403(b) cases are pending.

In the Georgetown case, participants, who sought class-action status, contended that the two 403(b) plans should have reduced the number of record keepers to one from three.

They also said the plans offer too many investment options, and they criticized some investments as poor performers that should have been removed from the lineups, according to the complaint filed Feb. 23, 2018, in Wilcox and McGuire et al. vs. Georgetown University et al.

The judge dismissed several allegations of poor-performing investment options because the plaintiffs either didn't invest in specific options or invested in options that had performed well. Ms. Collyer noted that they couldn't prove a net loss or they lacked standing to sue.

ERISA "does not provide a cause of action for 'underperforming funds,'" the judge added. "A fiduciary is not required to select the best performing fund." Ms. Collyer also rejected the complaint about too many record keepers.

"Plaintiffs' allegations challenge the fundamental structures of the Georgetown plans, not the fiduciary attentions or prudence of the trustees," Ms. Collyer wrote. "But plaintiffs provide no evidence that the three entirely different current investment platforms — TIAA-CREF, Vanguard Group and Fidelity Investments — would agree to continue the same offerings at a lesser, or combined, record keeping price."

The Georgetown University Defined Contribution Retirement Plan had $1.75 billion in assets, and the Georgetown University Voluntary Contribution Retirement Plan had $555.8 million, both as of Dec. 31, 2017, according to the latest Form 5500 filings for the Washington-based plans.