That’s Right — Another Multibillion-Dollar University Suit

By Nevin Adams • August 17, 2016 • 0 Comments
Another lawsuit has been filed against a multibillion-dollar university retirement plan — but it’s not their 403(b) plan — and the law firm of Schlichter, Bogard & Denton isn’t involved.

This one, filed by Sanford Heisler, LLP, is a class action filed in the U.S. District Court for the Southern District of New York, alleging $100 million in damages because of the “many ways” in which Columbia University breached its obligation under ERISA to prudently invest its employees’ retirement savings. The law firm describes itself as national public interest class-action litigation law firm with offices in New York, Washington, D.C., San Francisco and San Diego.

This lawsuit, filed on behalf of plaintiff Jane Doe, a faculty member at Columbia University and a participant in the university’s retirement plans, claims that she and a potential class of 27,000 current and former Columbia employees who participated in the university’s retirement plans were harmed by the breaches of fiduciary responsibilities under ERISA. Columbia University, as well as the university’s VP of HR Dianne Kenney, who administers the plans, are named as defendants, according to a press release announcing the action.

According to the complaint, Columbia retained expensive and poor-performing investment options that consistently underperformed their benchmarks. The suit claims that as a result, the university’s 401(k) plan included $4.6 billion of investment options that were primarily poor to mediocre performers.

Among the plans’ poor performers, the complaint specifically points to the plans’ retention of the TIAA-CREF Stock Account R3, which, it alleges, has historically underperformed its benchmarks and other lower-cost investments that were available for inclusion in its retirement plans. That particular fund has been cited in most of the university 403(b) lawsuits filed during the past week, and has almost $1 billion of the Columbia University plan assets. The TIAA-CREF Real Estate Account, also cited in this suit, has been noted in other university retirement plan suits as well.

In addition to retaining poorly performing funds, the suit charges (as all of the university lawsuits have thus far) that Columbia’s plans offer a “dizzying array” of excessively duplicative investments to beneficiaries that, in turn, lead to “decision paralysis” and selection of inferior investments. In addition, the suit claims that the plans charge excessive fees for recordkeeping, administrative and investment services, and retain excessively expensive retail share class options despite the lower-cost options available to their plans.

Two other commonalities the complaint shares with other recent suits: That the Columbia plan employed the services of two recordkeepers rather than a single one; and that Columbia paid for those services via asset-based revenue-sharing rather than on a per-participant basis.

The suit seeks:

  • damages for financial losses to plan beneficiaries resulting from the plans’ underperforming investments and excessive fees;

  • reforms to Columbia’s retirement plans that would remove imprudent investments and ensure only reasonable recordkeeping expenses;

  • removal of the university’s fiduciaries, whom the suit claims have violated their duties to plan beneficiaries under ERISA; and

  • a trial by jury.

Additional coverage of litigation concerning university retirement plans includes the following:

Boiling Points
Will 401(k) and 403(b) Litigation Turn Retirement Plans Into Widgets?