A federal appeals court in St. Louis has revived an ERISA lawsuit against Washington University in St. Louis by several 403(b) plan participants who allege fiduciaries condoned excessive fees and kept poor-performing investments in the plan menu.
The ruling by the three-judge appeals court panel reversed part of a decision by a U.S. District Court judge in St. Louis in September 2018 to dismiss the entire lawsuit. The case, Davis et al. vs. Washington University in St. Louis et al, was sent back to the District court.
"The first claim clears this pleading hurdle," said the May 22 appeals court decision in explaining that the excessive fees claim had met the legal burden to overcome being dismissed.
"It alleges that fees were too high and that WashU should have negotiated a better deal," said the opinion, referring to the university's nickname among St. Louis area residents. The lawsuit was filed in June 2017.
However, the appeals court rejected the second claim by plaintiffs about certain investments in the 403(b) plan menu.
"According to the complaint, WashU should have jettisoned them because they were poor performers and cost too much," the appeals court wrote. "But fiduciaries are not required to pick 'the best performing fund.' Nor are they required to pick the lowest-cost fund, particularly when the expense-ratio differences are small."
The Washington University Retirement Savings had $4.49 billion in assets as of Dec. 31, 2018, according to the latest Form 5500.