Columbia Retirement Plan Lawsuit Advances After NYU Ruling

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

Columbia University employees and retirees are moving forward with allegations that the school’s retirement plans carried high administrative and investment management fees ( Cates v. Trs. of Columbia Univ. , 2017 BL 302499, S.D.N.Y., No. 1:16-cv-06524-KBF, 8/28/17 ).

Three days after issuing a similar ruling in a case against New York University, Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York denied Columbia’s request to dismiss claims challenging mutual fund fees and record keeping arrangements tied to its retirement plans. In both cases, Forrest dismissed many of the other claims, including the allegations that the schools chose expensive share classes and stuffed their plans with too many funds altogether.

Since last August, 16 prominent colleges have been targeted by class actions challenging the fees and investment lineups of their retirement plans. The cases against Duke and Emory also saw early success, with other cases pending against Yale, Vanderbilt, Johns Hopkins, Cornell, Princeton, and others.

The lawsuits implicate the retirement benefits of as many as 400,000 university workers and retirees, according to the complaints.

The cases are noteworthy for making the novel claim that offering too many investment options in a retirement plan—Columbia allegedly offered more than 100—can be imprudent in violation of the Employee Retirement Income Security Act. The investors claim that too many investment options causes confusion among plan participants and prevents the plan from obtaining lower fees through consolidation. So far, only the judge hearing the case against Duke has allowed this claim to survive a motion to dismiss.

Another novel claim raised by the lawsuits is that it’s imprudent under ERISA to use multiple plan record keepers. The investors say this practice is inefficient and keeps fees high. So far, no school has succeeded in seeing this claim dismissed.

Judge Forrest’s short Aug. 28 decision in the Columbia case didn’t include substantial legal reasoning. Rather, she cited to the lengthy opinion she issued on Aug. 25 in the case against NYU, noting that the allegations made in both cases were substantially similar for purposes of these rulings.

Schlichter Bogard & Denton LLP represent the Columbia plan investors, along with the university investors bringing 11 other pending cases. Mayer Brown LLP represents Columbia.

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

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