Emory University, Atlanta, agreed to pay $16.75 million to settle an ERISA complaint against two retirement plans by participants, according to a preliminary settlement agreement.
The parties reached an initial settlement in April, but didn't reveal the terms of the agreement until May 29 in a document filed with a U.S. District Court in Atlanta.
The plaintiffs had argued that plan executives of the two 403(b) plans violated their fiduciary duties because the plans charged excessive fees for administration and investment options, in the case of Henderson et al. vs. Emory University et al.
"Defendants admit no wrongdoing or liability with respect to any of the allegations or claims in this action," the settlement document said. "Defendants maintain that they are without fault or liability and are settling the class action solely to avoid litigation costs."
The settlement agreement, which requires court approval, also contains several non-monetary terms, most notably Emory University's promise to restrict its relationship with record keepers.
"In performing previously agreed upon record-keeping services with respect to the plans, (record keepers) must not use information received as a result of providing services to the plans and/or the plans' participants to solicit the plans' current participants for the purpose of cross-selling non-plan products and services," the document said.
This requirement will be in force through the settlement period, which will run for three years following formal approval of the agreement.
Non-plan products include individual retirement accounts, non-plan managed account services, life or disability insurance, investment products and wealth management services, "unless in response to a request by a plan participant," the document said.
The same guidelines apply to new contracts with existing record keepers and contracts with new record keepers, the document said.
The record-keeping restrictions are similar to those in settlements involving 403(b) plans from Johns Hopkins University, Baltimore, which agreed to pay $14 million, and Vanderbilt University, Nashville, Tenn., which agreed to pay $14.5 million. The federal court-approved settlements for the former took effect in January and for the latter in October.
The Emory terms are similar to record-keeping restrictions involving a 401(k) plan for the Massachusetts Institute of Technology, Cambridge, Mass., whose settlement of $18.1 million was approved by a federal court in May
Plaintiffs in the Emory, Johns Hopkins, Vanderbilt and M.I.T. settlements were represented by St. Louis law firm Schlichter, Bogard & Denton LLP.
"This settlement includes both financial compensation and very significant additional non-monetary improvements to the plan going forward," said Jerome Schlichter, founding and managing partner of the firm. "It will enable Emory employees and retirees to improve their ability to build their retirement assets for many years to come.
A representative for Emory could not be reached for comment.
Among other settlement terms, the university agreed to:
- Provide a list of investments and fees and the investment policy statement to Schlichter's firm.
- Retain or hire an independent consultant to review and evaluate the plans investment structure and make recommendations for plan design and investment option removal or retention.
- Implement recommendations. If fiduciaries decline to do so, they must file a written report with the Schlichter's firm on why they didn't act.
- Issue a record-keeping RFP within 180 days of the settlement's effective date. The RFP will be presented to the independent consultant. If the fiduciaries don't follow the consultant's recommendations, they must file a written report with Schlichter's firm.
- Provide to the law firm the terms and costs of the record keeper selection through the RFP.
Emory plan participants sued the university and its fiduciaries in August 2016, alleging a series of ERISA violations. A U.S. District Court judge in May 2017 dismissed some allegations but allowed others to proceed to trial. The plaintiffs filed an amended complaints in December 2017.
The parties began talking with a mediator in May 2019, reaching an agreement on monetary terms in February and an agreement on non-monetary terms in April.
The class-action lawsuit covers plan participants from August 2010 until final court approval of the settlement. The court must approve plaintiffs' attorneys' fees, which the document said are $5.83 million plus up to $675,000 in litigation expenses. These payments will come from the $16.75 million settlement account.
The Emory University Retirement Plan had assets of $3.16 billion in assets and the Emory Healthcare Inc. Retirement Savings and Matching Plan had assets of $231 million, both as of Dec. 31, 2018, according to each plan's latest Form 5500.