Washington University Sued Again Over Its $3.8B Retirement Plan

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

Washington University in St. Louis was hit with a second lawsuit accusing it of filling its $3.8 billion retirement plan with duplicative, expensive, and underperforming investment options ( Sims-King v. Wash. Univ. in St. Louis , E.D. Mo., No. 4:17-cv-01785, complaint filed 6/23/17 ).

The university and its board of trustees allowed the Teachers Insurance and Annuity Association of America and Vanguard to put their high-cost proprietary investments in the plan, resulting in millions of dollars in losses to the participants, according to a lawsuit filed June 23. TIAA and Vanguard reaped multiple layers of fees, and the participants lost the potential growth their investments could have achieved had the university properly discharged its fiduciary duties under the Employee Retirement Income Security Act, the lawsuit filed in the U.S. District Court for the Eastern District of Michigan says.

The inefficient and costly structure maintained by the university and trustees, coupled with the bundled services provided by TIAA and Vanguard, as the plan’s service providers, cost participants millions of dollars in excessive and duplicative fees, the lawsuit says.

Washington University doesn’t comment on pending litigation, university’s spokesperson Susan Killenberg McGuinn told Bloomberg BNA via e-mail.

The lawsuit, filed by a former employee, is the second against the institution over the way it managed its employees’ retirement savings. In the past year, 14 other prominent colleges have been hit with lawsuits, including Yale, NYU, Vanderbilt, and Cornell, for allegedly allowing their retirement plans to charge excessive administrative fees and retaining too many investment options. Two lawsuits have seen early success, with judges refusing to dismiss many of the claims against Emory and Duke. Since those rulings in May, three new schools have been targeted: the University of Chicago, Princeton, and Washington University.

The new lawsuit alleges Washington University and its trustees violated federal law by allowing TIAA and Vanguard to overchage for record-keeping services and to mandate the bundling and inclusion of expensive and underperforming TIAA and Vanguard products in the plan. The university also allegedly allowed TIAA and Vanguard to include higher priced versions of investment options in the plan and to offer to many investment options that were often inefficient and duplicative, the lawsuit says.

The lawsuit seeks class treatment for 24,000 current plan participants.

Carey, Danis & Lowe and Chimicles & Tikellis LLP represent the proposed class.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

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

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