University of Chicago Can’t Escape Retirement Plan Lawsuit

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 the University of Chicago of charging high fees in its retirement plans and offering bad investments is moving forward despite being trimmed by a federal judge ( Daugherty v. Univ. of Chi. , 2017 BL 337577, N.D. Ill., No. 1:17-cv-03736, 9/22/17 ).

The judge on Sept. 22 refused to dismiss claims that the plan’s fiduciaries acted imprudently by offering high-fee investment options and poorly performing funds in the school’s $980 million retirement plan. However, the judge dismissed allegations of disloyalty and claims involving a separate retirement plan with $2.1 billion in assets and 13,000 participants.

In the past year, 16 prominent colleges have been targeted by class actions challenging the fees and investment lineups of their retirement plans. Complaints against NYU, Columbia, Duke, Emory, Princeton, and MIT have seen varying degrees of early success. On Sept. 21, the University of Pennsylvania became the first school to win complete dismissal of a lawsuit challenging its retirement plan.

In the Chicago case, the judge said the three plan participants who filed suit lacked standing to challenge aspects of the school’s larger $2.1 billion retirement plan, because none of them claimed to be participants in that particular plan. They also didn’t have standing to challenge a plan loan program administered by TIAA, the judge said, reasoning that none of the participants claimed to have used the program.

In dismissing the plan participants’ disloyalty claims, the judge said there was no indication that the university engaged in any self-dealing or failed to communicate material information. The judges hearing the cases against Princeton, NYU, and Columbia used similar reasoning to dismiss disloyalty claims, while the judge hearing the case against Emory allowed this claim to proceed.

The University of Chicago plan participants are also moving forward with their 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.

Chief Judge Rubén Castillo of the U.S. District Court for the Northern District of Illinois wrote the decision.

Wexler Wallace LLP and Berger & Montague PC represent the plan participants. Sidley Austin LLP represents the university.

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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