The Massachusetts Institute of Technology has agreed to pay $18.1 million to settle allegations of ERISA violations against the university's 401(k) plan, according to a notice filed with a U.S. District Court in Boston.
The proposed settlement, which requires court approval, also contains a series of non-monetary provisions, including MIT's agreement to issue an RFP for record keeping and to conduct annual training for plan fiduciaries on ERISA guidelines.
The proposed settlement also prohibits MIT's current and future record keepers from contacting participants about non-plan products and services such as life insurance and wealth management services unless participants request specific information.
"The non-monetary terms are substantial and materially add to the total value of the settlement," said an Oct. 28 notice of the settlement agreement to the court filed by Jerome Schlichter, the lead counsel for the plaintiff. Mr. Schlichter is the founding and managing partner of Schlichter Bogard & Denton LLP.
The initial complaint was filed by a plan participant in August 2016. In October 2018, the U.S. District Court in Boston granted class certification covering all participants and beneficiaries of the MIT Supplement 401(k) Plan from Aug. 9, 2010 through the date when the court approves the settlement.
The parties reached a settlement on Sept. 12, four days before a trial was scheduled to begin; the terms were announced Oct. 28.
The original complaint alleged a series of ERISA violations, some of which were dismissed or rejected by the court. However, MIT was still subject to a trial on claims of breach of fiduciary duty for failing to monitor plan investments; breach of prudence for excessive record keeping and administrative fees; and failure to monitor fiduciaries.
"Defendants dispute these allegations, deny liability for any alleged fiduciary," the proposed settlement notice said. They also "contend that the plan has been managed, operated and administered at all relevant times in compliance with ERISA and applicable regulations."
Among other non-monetary requirements in the proposed settlement:
- MIT will issue an RFP to at least three record keepers that will agree to assess fees based on a per-participant basis rather than a percentage-of-assets basis.
- If MIT decides to retain its current record keeper, Fidelity Investments, following an RFP, Fidelity will abide by all of the requirements in the proposed agreement.
- MIT will submit information to Mr. Schlichter's firm regarding the results of the RFP process.
- Subject to court approval, Mr. Schlichter's firm will receive no more than $6.03 million plus no more than $525,000 to cover costs, all of which will be paid from the settlement fund.
The MIT Supplemental 401(k) Plan had $4.5 billion in assets as of Dec. 31, according to the latest Form 5500 filing.
