Employees filed complaints against Yale University, the Massachusetts Institute of Technology (MIT), and New York University (NYU) on Tuesday, alleging the schools breached their fiduciary duties in offering high-fee defined contribution (DC) plans.
The three separate class-action lawsuits all target “excessive” fees charged by the funds included in the universities’ employee 401(k) and 403(b) plans.
Attorney Jerry Schlichter, who has filed more than 20 lawsuits on behalf of 401(k) plan participants including US Supreme Court case Tibble v. Edison, is representing each group of plaintiffs.
Yale and NYU were accused specifically of causing plan participants to pay “excessive” administrative fees by using multiple record keepers, while simultaneously failing to “prudently consider or offer dramatically lower-cost investments that were available.”
The complaints also accused both plan sponsors of selecting and retaining a “large” number of duplicative investment options, “diluting” their ability to pay lower fees and “confusing participants”. They further “imprudently retained historically underperforming plan investments,” the plaintiffs argued.
MIT, meanwhile, was sued over its “extensive relationship” with Fidelity Investments, which plaintiffs said led to the university choosing the firm as its record keeper without conducting a “thorough, reasoned” search.
“Fidelity’s relationship with MIT, and the benefits MIT has derived from it, has secured Fidelity’s position as the plan’s record keeper without any competitive comparison from outside service providers,” the complaint stated, resulting in “unreasonable administrative, as well as investment management, expenses.”
Like Yale and NYU, MIT was accused of offering high-fee investment options when cheaper alternatives were available.
The MIT 401(k) plan had $3.6 billion in assets as of December 2014. Yale’s University Retirement Account Plan had $3.8 billion under management, while NYU had $4.6 billion split between university and medical school plans.
The suits follow a string of litigation in the defined contribution sector, including a recent complaint filed against New York Life in July.