The law firm of Schlichter Bogard & Denton has announced the terms of another settlement of a 403(b) excessive fee case.
According to a press release by the St, Louis-based law firm, it has filed a preliminary settlement approval motion on behalf of Columbia University employees and retirees in their suit against the university involving their 403(b) retirement plan.
The settlement was announced in early April. The case itself (Cates, et al. v. Trustees of Columbia University, et al.), was filed in the U.S. District Court in the Southern District of New York and was scheduled to be one of the first cases to go to trial in that federal court since the onset of the COVID-19 pandemic. In fact, the suit was one of the first “wave” of 403(b) university suits filed by the law firm of Schlichter Bogard & Denton in August 2016. The plan offered 116 options, with two recordkeepers (TIAA-CREF and Vanguard), and the plaintiffs had alleged that, “By failing to monitor and control the compensation paid to TIAA-CREF and Vanguard for recordkeeping and administrative services, Defendants caused the Plans to pay unreasonable expenses for administration, resulting in Plan losses of at least $15–$20 million.”
According to the press release, Columbia has denied it committed any fiduciary breach in its operation of the plan. After the lawsuit was filed, the Columbia fiduciaries consolidated the plans’ administrative services and capped costs to a flat, per-participant fee.
Settlement Terms
According to the plaintiffs’ counsel, Columbia has agreed:
- with consent of an independent consultant, to request competitive bids for administrative services again in the next 3-4 years;
- to maintain the lowest share class of plan investments in annuities and mutual funds;
- to continue to use an independent consultant to make recommendations;
- to prohibit the recordkeeper from using confidential information obtained from plan participants to sell other investment and wealth management services; and
- to ensure all participants are informed of their ability to move assets out of frozen investment options.
Additionally, Schlichter Bogard & Denton says it will monitor compliance with these terms for a three-year period.
“We are pleased that this settlement, which came on the eve of trial, includes both monetary and non-monetary relief for plan participants, including financial compensation and significant non-monetary improvements to the plan going forward. These key changes will enable Columbia employees and retirees to build their retirement assets for many years to come,” said Jerry Schlichter, founding and managing partner of Schlichter Bogard & Denton.
As for other expenses of the suit—notably the fees for plaintiffs’ attorneys—those will be requested and considered by the court later.
What This Means
At least 20 universities have been sued over the fees and investment options in their retirement plans since 2016, and to date settlements have been struck with the University of Pennsylvania, Brown University, Vanderbilt University, Cornell University and the University of Chicago. Oh, and they continue to be filed, the most recent against the University of Miami in early May 2020.
On the other hand, St. Louis-based Washington University, New York University and Northwestern University have prevailed in making their cases in court—although Washington University’s victory is under appeal and that of Northwestern was taken to the U.S. Supreme Court last year, due to what the Schlichter law firm termed its “chilling effect” on this type litigation.
Ultimately, there seems to be no end to this type of litigation—at least not as long as there are multibillion-dollar 403(b) plans to be sued.
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