UPenn Victorious in Retirement Plan Fiduciary Battle

Plaintiffs alleged three main fiduciary failures on the part of the university

403(b), retirement plan, lawsuitThey don't call them the 'Fighting' Quakers for nothing.

The Quakers stay true.

The University of Pennsylvania beat back a court challenge to its 403b fiduciary practices, winning a dismissal of all counts contained in a lawsuit brought by its participants.

Plaintiffs had alleged excessive fees and fund underperformance in bringing the action, among other fiduciary-related claims, which District Judge Gene Pratter didn’t buy.

“[T]he plaintiffs claim that select funds were outperformed by the rest of the market, claiming that 60 percent of the Plan’s investment options ‘underperformed their respective benchmarks over the previous 5-year period,’” Pratter wrote in the opinion. “To begin, there is no cause of action in ERISA for ‘underperforming funds.’”

The Plan participants brought the case, individually and a class action, as beneficiaries in the University of Pennsylvania Matching Plan, against the University of Pennsylvania and its Vice President of Human Resources, for breach of fiduciary duties.

They alleged three main fiduciary failures on the part of the university.

First, they claimed that the defendants breached their fiduciary duty by “locking in” Plan investment options into two investment companies.

Second, they claimed that the administrative services and fees were unreasonably high due to the defendants’ failure to seek competitive bids to decrease administrative costs.

Third, they argued that the fiduciaries charged unnecessary fees while the portfolio underperformed.

“The University of Pennsylvania, as manager of one of the largest funds in the country, has a diverse array of beneficiaries to serve, from grounds and cleaning crews to renowned Wharton School and Law professors, physicists, anthropologists, hockey coaches and endless others,” the judge noted. “These individuals have different goals, risk tolerances, investment acumen and income.”

The suit was part of a spate of similar cases against venerable institutions of higher learning, including Duke University, John Hopkins, Vanderbilt, Massachusetts Institute of Technology, New York University, Yale and Columbia, first filed in August 2016.

Like their 401(k) counterparts, tort lawyers claim excessive fees and breach of fiduciary duty in almost all.

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