Columbia, Four Other Schools Latest To Be Hit With ERISA Suits; Could Signal “Race to Courthouse”

The wave of ERISA lawsuits against top schools’ 401(k) and 403(b) plans continued rolling this week.

The University of Pennsylvania, Johns Hopkins University, Vanderbilt University and Emory University were slapped with lawsuits early this week; more recently, Columbia University joined the fray on Wednesday.

The Columbia suit was, notably, brought by a different law firm than the rest. Observers say it could signal a “race to the courthouse” that could see others firms target new schools.

[Read the Columbia complaint here.]

All the lawsuits are targeting the fees associated with the schools’ 401(k) and 403(b) plan offerings.

More from PlanAdviser:

Excessive fee lawsuits have been filed against 403(b) plans of Emory University, the University of Pennsylvania, Johns Hopkins University and Vanderbilt University.

The complaints are nearly identical to those filed against MIT, New York University, Yale and Duke University, alleging that instead of using the plans’ bargaining power to benefit participants and beneficiaries, the defendants allowed unreasonable expenses to be charged to participants for administration of the plans, and retained high-cost and poor-performing investments compared to available alternatives. And, the suits call out the traditional 403(b) plan model of offering multiple funds (fund lineups of the plans in the suit ranged from 78 to more than 400), including individual annuities, and using multiple recordkeepers.

The cases accuse the plans of not performing a competitive bidding process to consolidate recordkeepers and/or negotiate better recordkeeping fees. They also allege the plans used revenue-sharing.

Details on the Columbia suit, from InvestmentNews:

The plaintiff in the proposed class-action lawsuit is seeking $100 million from Columbia for losses suffered by two retirement plans and their participants due to the allegedly unreasonable investment management and record-keeping fees.

[…]

The Columbia lawsuit stands out among others in the group because it was filed by the law firm Sanford Heisler, not Schlichter, Bogard & Denton, the firm responsible for the prior eight university suits, and whose managing partner, Jerry Schlichter, has been a pioneer of excessive-fee litigation against 401(k) plans.

Indeed, the Columbia lawsuit represents the first Sanford has brought in the ERISA excessive-fee realm, according to Charles Field, partner at the firm and co-chair of its financial services group.

The Columbia case raises the question of how many other firms will “jump on the bandwagon” to sue universities, said Duane Thompson, senior policy analyst at fi360 Inc., a fiduciary consulting firm.

“It looks like we’re seeing a race to the courthouse,” Mr. Thompson said. “You’d have to think the few Ivy League schools that aren’t on this list yet are combing frantically through their investment policy statements.”

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