Having settled one count in a multicount ERISA complaint against Cornell University's management of two 403(b) plans, participants in the plans are now seeking to resurrect other allegations against the university and fiduciaries that were previously rejected by a federal court judge in New York.
The participants and the university agreed to a $225,000 settlement in September 2020 in the case of Cunningham et al. vs. Cornell University et al., regarding allegations of high fees for a target-date series. The defendants admitted no wrongdoing.
However, based on complaints initially filed in August 2016 and later amended, U.S. District Court Judge P. Kevin Castel had dismissed some complaints during the long-running case. He had granted summary judgment against the plaintiffs on other complaints.
In an April 27 appeal to the 2nd Circuit Court of Appeals, New York, the participants contended that the judge erred in rejecting their allegation of ERISA violations. "Although the District Court deemed defendants' conduct prudent as a matter of law, its conclusions misread the record and are legally invalid," the appeal document said.
"Cornell breached its duty of prudence and caused prohibited transactions by failing to monitor and control the record-keeping fees paid to TIAA and Fidelity, resulting in $30 million in losses compared to reasonable market rates for the same services," the complaint said.
Fidelity Investments and TIAA-CREF aren't defendants.
"Plaintiffs further allege that Cornell and CAPTRUST failed to prudently review the fees and performance of the plans' investment options," the complaint said. CAPTRUST Financial Advisors, a defendant, is the plans' fiduciary investment adviser, the complaint said.
"For 92 of the plans' mutual funds, defendants provided retail-class shares designed for individuals with small amounts to invest, instead of lower cost — but otherwise identical — institutional-class shares of the same funds designed for large investors like the plans," the complaint said.
"Cornell also did not monitor most of the Plans' investment options," the complaint said. "As a result, the plans included many funds with severe long-term under performance."
The Cornell University Retirement Plans for the Endowed Colleges at Ithaca and the Cornell University Tax Deferred Annuity Plan had combined assets of $4.2 billion for the year ended Dec. 31, 2019, according to the latest Form 5500s.
