If you’re a university with a defined contribution plan, be afraid—be very afraid. Columbia University and Northwestern University are the latest institutions for higher learning to be accused of mismanaging their employees’ retirement plans.
In Columbia’s case, the complaint says the Ivy League university retained expensive and poor-performing investment options that consistently under-performed their benchmarks, according to Reuters.
“This caused its (retirement) plans and their participants to suffer hundreds of millions of dollars in losses of retirement savings,” said law firm Sanford Heisler LLP, which filed the complaint in U.S. District Court in Manhattan. “As a result, the University’s 401(k) plan included $4.6 billion of investment options that were primarily poor to mediocre performers.”
The news service notes the plaintiff in the case is an unnamed faculty member at Columbia who is suing on behalf of herself and 27,000 current and former Columbia employees, and is seeking class action status for the case.
In the Northwestern case, star attorney Jerome Schlichter and his firm, St. Louis-based Schlichter, Bogard and Denton, filed a complaint in federal court in Chicago on behalf of two Northwestern plan participants alleging the university “retained high-cost and poor-performing investments compared to available alternatives.”
The latest round of complaints were filed after similar filings last week against Duke University, John Hopkins, The University of Pennsylvania, Vanderbilt, Massachusetts Institute of Technology, New York University, and Yale.
“All of the suits …share similar overarching themes: The universities all used more than one provider, known as a record keeper, to operate their plans and perform the administrative services to keep them running,” The New York Times reports. “Had they consolidated to one provider, the plaintiffs claim, they could have used their bargaining power to negotiate much lower fees. Instead, the suits allege, the plans overpaid millions of dollars each year.”