Brown University Retirement Plan Lawsuit Advances

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

Brown University staff can advance some of their claims in a challenge over how the elite college managed their retirement savings.

The workers can move on with their claims related to record-keeping services, including that Brown acted imprudently by using more than one record-keeper, not employing competitive bidding in its selection, and allowing the plans to pay excessive administrative fees, Chief Judge William E. Smith of the U.S. District Court for the District of Rhode Island held July 11.

The workers also can advance their claim that the university breached its fiduciary duties by selecting more expensive funds with poor historical performance, such as the CREF stock account and the TIAA real estate account, Smith said.

Smith’s decision is the latest development in a lawsuit filed last year by workers who are also participants in the university’s two retirement plans, which have more than $1 billion in assets combined.

With the decision, Brown joins other prominent colleges defending claims over alleged mismanagement of their retirement plans, including Columbia, Emory, Johns Hopkins, and Princeton. So far only two colleges have defeated similar claims: the University of Pennsylvania and Northwestern.

Claims Not Moving Forward

The workers conceded that they lacked standing on their claims related to the plans’ loan programs, Smith said.

The workers won’t be able to advance claims that the university was imprudent by allegedly offering investments with multiple layers of fees and using asset-based fees and revenue sharing. The workers didn’t respond to Brown’s arguments on these claims, and thus they waived them, Smith said.

The workers couldn’t state a valid claim that the university was imprudent by offering too many investment options and failing to feature a set of core investment options, Smith said. Courts across the country have rejected similar claims against Emory University, New York University, and Vanderbilt University.

Smith refused to rule on Brown’s argument that the Employee Retirement Income Security Act’s limitation period bars the workers’ claims. Brown argued that ERISA’s six-year statute of limitations bars the workers’ claims because most decisions that they challenge, including selecting various investment accounts, were made more than six years ago. A fuller record is needed to resolve any statute-of-limitations issues in the case, Smith said.

Berger Montague PC, Schneider Wallace Cottrell Konecky Wotkyns, and the Law Offices of Sonja L. Deyoe represent the workers. Nixon Peabody LLP, and Alston & Bird LLP represent Brown.

The case is Short v. Brown Univ., 2018 BL 245773, D.R.I., No. 1:17-cv-00318-WES-PAS, order granting in part defendant’s motion to dismiss 7/11/18.

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