Duke University has agreed to pay $10.65 million to settle two lawsuits that alleged it breached its duties under the Employee Retirement Income Security Act (ERISA) by causing its 403(b) plan to incur unreasonable recordkeeping expenses, while providing underperforming investment options.
The settlement came after two years of litigation, more than 762,000 pages of documents, extensive discovery, and almost six months of “arm’s length negotiations” with the assistance of a national mediator, according to documents filed with The US District Court for the Middle District of North Carolina.
“This settlement includes both financial compensation and non-monetary improvements to the plan going forward,” said the plaintiffs’ attorney Jerry Schlichter in a statement. “It will enable Duke employees and retirees to improve their ability to build their retirement assets for years to come.”
The settlement requires the plan’s fiduciaries to retain an independent consultant regarding bids for recordkeeping services, to ease the ability of participants to transfer their investments out of frozen annuity accounts, analyze the cost of different share classes of mutual funds considered for inclusion in the plan, and avoid the use of plan assets to pay salaries of employees who work on the plan.
Duke also agreed to provide a list of the retirement plan’s investment options and fees, and a copy of the plan’s investment policy statement. It is also required to communicate in writing with current plan participants, inform them of the investment options available in the new lineup, including the annuity option, and provide a link to a webpage containing the fees and performance information for the new investment options.
Duke denied it committed any fiduciary breach in its operation of the plan.
“This settlement was made solely to avoid the expense and inconvenience of prolonged litigation, and to ensure that Duke University’s resources are spent on retirement contributions for faculty and staff rather than the costs of litigation,” Michael Schoenfeld, Duke University’s vice president for public affairs and government relations, said in an email to the university’s student-run newspaper The Chronicle.
Under the terms of the proposed settlement, the majority of class members will automatically receive their distributions directly into their tax-deferred retirement account. Those who already left the retirement plan and no longer have an active account will be given the option to receive their distributions in the form of a check made out to them individually or as a roll-over into another tax-deferred account.