Columbia University is facing a $100 million lawsuit over allegations that it “retained expensive and poor-performing investment options” in its defined contribution (DC) plan.
Law firm Sanford Heisler filed the class action in New York yesterday, claiming that Columbia University “breached its obligation… to prudently invest its employees’ retirement savings,” according to its statement.
Columbia is the latest in a string of universities to face legal action over its DC investment options. In recent weeks, employees filed complaints against eight university DC plans, including Yale, Duke University, and the University of Pennsylvania, all represented by attorney Jerry Schlichter.
Columbia is accused of including DC options that “consistently underperformed their benchmarks, causing its plans and their participants to suffer hundreds of millions of dollars in losses to retirement savings.”
The claim singled out fund manager TIAA’s TIAA-CREF Stock Account R3 as an example of the university’s “poor to mediocre” fund options.
“Columbia was on notice that TIAA-CREF was a deficient investment,” claimed David Sanford, chairman of Sanford Heisler and lead counsel. “It wasn’t merely that TIAA-CREF performed poorly in a single year or two. In fact, the TIAA-CREF Stock Account has been poor for many years compared to both available lower-cost index funds and the index benchmark.”
TIAA had not responded to a request for comment by publication time. The fund manager has not been sued and is not accused of any wrongdoing.
By keeping underperforming funds in its DC plan, “the university breached its fiduciary duties to 27,000 plan beneficiaries,” the lawyers added.
Columbia was also accused of offering “excessively duplicative investments”—defined by Sanford Heisler as “too many choices”—and of charging “excessive fees.”
“Columbia is proud of the retirement benefits offered to its faculty and staff and takes its responsibility as a fiduciary seriously,” the university said in a statement. “Columbia does not comment on pending litigation.”