MIT Agrees to Hefty Sum for Alleged Fiduciary Breach

401k, fiduciary, MIT, ERISA

The Massachusetts Institute of Technology in Cambridge.

Massachusetts Institute of Technology employees and retirees will receive an $18.1 settlement as part of a deal struck with ERISA attorney Jerry Schlichter over quid pro quo allegations in its retirement plan.

The plaintiffs in the case sued the school for an alleged breach of fiduciary duties under the Employee Retirement Income Security Act (ERISA), claiming they lost millions in retirement savings because of excessive fees and a failure to monitor investments on the part of Fidelity Investments, its recordkeeper.

MIT made those payments, the complaint read, in part because of an expectation that Abigail Johnson, Fidelity Investment’s CEO and co-owner, would donate to MIT.

MIT vehemently denied it committed any fiduciary breach in its operation of the plan.

Plaintiffs were represented by Schlichter, managing partner of Schlichter Bogard & Denton, who argued before the Supreme Court in Tibble v. Edison International, and targeted a number of venerable institutions recently over their supposed fiduciary failings, including Duke University, John Hopkins, The University of Pennsylvania, Vanderbilt, New York University, and Yale.

The supposed quid pro quo relationship was purportedly summed up by the dean of MIT’s Sloan School of Management: “If we’re not switching to Vanguard or TIAA-CREF, I am going to expect something big and good coming to MIT from the Johnson family.”

Soon thereafter, Schlichter alleged, “Fidelity donated $5 million to MIT—its largest donation in over 15 years.”

Non-monetary changes

Besides the financial compensation, non-monetary relief for a three-year period was also agreed upon, which includes:

“After over [three] years of litigation, the settlement secures both financial compensation for the plaintiffs and mandates non-monetary improvements to the plan going forward, Schlichter said in a statement. “MIT employees and retirees will now benefit from an improved plan that works on their behalf and enables them to build their retirement assets for the future.”

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