Challenge to Princeton’s Retirement Plan Kept Alive by Judge

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 Jacklyn Wille

A proposed class action accusing Princeton University of running retirement plans with high fees and bad investments is moving forward ( Nicolas v. Trs. of Princeton Univ. , 2017 BL 330642, D.N.J., No. 3:17-cv-03695, 9/19/17 ).

A federal judge Sept. 19 refused to dismiss key portions of the lawsuit, which alleges Princeton acted imprudently and disloyally by keeping bad investment options in its retirement plans, using multiple plan record keepers, and failing to negotiate lower fees. The Princeton employee who sued the school sufficiently showed that the Princeton behaved imprudently, the judge said. However, the judge dismissed the employee’s claim of disloyalty, finding no indication that Princeton acted to benefit itself or another party at the expense of its workers’ retirement savings.

In the past year, 16 prominent colleges have been targeted by class actions challenging the fees and investment lineups of their retirement plans. Cases against NYU, Columbia, Duke, Emory, and MIT have seen varying degrees of early success. Other lawsuits are pending against Yale, Vanderbilt, Johns Hopkins, Cornell, and others.

With courts refusing to grant quick dismissals in these lawsuits, other private colleges could become targets for retirement plan litigation. As of the 2017 school year, more than 1,900 private, four-year colleges were operating in the U.S., according to data from the National Center for Education Statistics. Public colleges may be less vulnerable to these lawsuits because their retirement plans typically aren’t subject to the Employee Retirement Income Security Act.

In this case, the parties will continue to litigate claims challenging Princeton’s decision to use multiple plan record keepers—a practice that critics say leads to higher costs and participant confusion—and its alleged failure to use its substantial bargaining power to negotiate for lower plan fees.

The plan participant is also moving forward with her challenge to two specific plan investment options: the CREF Stock Account and the TIAA Real Estate Account. Most of the university lawsuits have singled out these investment options as poor performers, and several judges have found these claims to be viable.

Judge Anne E. Thompson of the U.S. District Court for the District of New Jersey wrote the decision.

The Princeton employee is represented by Lite DePalma Greenberg LLC, Schneider Wallace Cottrell Konecky Wotkyns LLP, and Berger & Montague P.C. Princeton is represented by Proskauer Rose LLP.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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