A federal judge in Boston has rebuffed a request by Northeastern University and fiduciaries of its 403(b) plan to dismiss allegations of ERISA violations by a former employee who criticized the plan’s record-keeping fees and investment management fees, and alleged lack of competitive bidding.
”Competitive bidding ensures that fees are kept as low as the market will permit, enabling plan participants to earn better returns,” U.S. District Court Judge Nathaniel M. Gorton wrote April 17. “It is certainly plausible that failure to conduct such a process could constitute imprudence.”
The plaintiff also alleged that record-keeping fees were too high in part because the plan executives used revenue sharing and failed to use the plan’s asset size to bargain for better fees.
“Those allegations, in conjunction with the vagueness of the fees collected under the revenue sharing model, make plausible the inference” that the fees were excessive, Gorton wrote in Brookins vs. Northeastern University et al. The plaintiff sued in June 2022, seeking class-action status.
The judge also rejected defendants’ motion to dismiss allegations that fees for several investments in the plan were excessive, saying it is premature at this stage of the litigation for the court “to engage in meaningful benchmark analysis” of the challenged investments.
To make such an analysis “this court would be required to consider the merits substantively in a manner that would conflict with the court’s obligation to draw all reasonable inferences in favor of the plaintiff” at the motion-to-dismiss stage, Gorton wrote.
Northeastern University Retirement Plan, Boston, had $1.9 billion in assets as of Dec. 31, 2022, according to the latest Form 5500.
