Georgetown University has prevailed in a lawsuit regarding its 403(b) plan, with the U.S. District Court for the District of Columbia ruling in its favor over allegations of a breach in its Employee Retirement Income Security Act (ERISA) fiduciary duties.
“If a cat were a dog, it could bark,” Senior Judge Rosemary M. Collyer said in folksy language at the beginning of her opinion. “If a retirement plan were not based on long-term investments in annuities, its assets would be more immediately accessed by plan participants. These two truisms can be summarized: cats don’t bark, and annuities don’t pay out immediately.”
Georgetown and two of its officers were accused of violating federal benefits law by selecting three service providers—TIAA, Fidelity, and Vanguard—for its plan, “causing participants to pay duplicative, excessive fees for record-keeping and administrative services, according to a lawsuit filed Feb. 23, 2018,” Bloomberg BNA reported at the time.
None of the providers were named defendants in the lawsuit.
“The university is also accused of selecting and retaining investment options that underperformed lower-cost alternatives that were available in the market,” Bloomberg added. “The two participants who filed the lawsuit took issue with certain TIAA investments, including the CREF Stock Account and the TIAA Real State Account, which allegedly were ‘dramatically more expensive than far better’ alternatives, such as Vanguard.”
Noting that, “This type of lawsuit seems to have taken higher education by storm, with suits brought all over the country,” Collyer granted the university’s motion to dismiss.
“While a plaintiff is entitled to the reasonable inferences that may arise from the facts asserted in his complaint, Plaintiffs provide no factual support at all for their assertion that the Plans should pay only $35/year per participant in recordkeeping fees,” she stated among other reasons for her decision.
It’s the second win for institutions of higher learning recently, with New York University holding high-profile tort terror Jerry Schlichter at bay last August, defeating an ERISA lawsuit brought by employees that also alleged the university’s retirement account failed to uphold its fiduciary duty.
A number of such suits were filed in 2016. Targets included Duke University, John Hopkins, The University of Pennsylvania, Vanderbilt, Massachusetts Institute of Technology, New York University, Yale and Columbia.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
