N.Y.U. Prevails in Case That Said It Let Retirement Plans Reap Excess Fees

N.Y.U. Prevails in Case That Said It Let Retirement Plans Reap Excess Fees

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New York University has prevailed in a lawsuit that accused it of failing to properly oversee employee retirement plans and causing thousands of workers to pay millions of dollars in excess fees.

In a decision issued on Tuesday, Judge Katherine B. Forrest of Federal District Court in Manhattan found that the plaintiffs had failed to prove that they suffered any losses or that N.Y.U. acted imprudently.

While Judge Forrest ruled in favor of N.Y.U. on all claims, she did find “deficiencies” in the processes used by the university’s retirement plan committee. They included, she said, “a concerning lack of knowledge relevant to the committee’s mandate” displayed by several of its members.

The suit was among about a dozen filed against prominent universities by Jerome Schlichter, a lawyer known as a pioneer in retirement plan litigation. Over roughly the past 12 years, Mr. Schlichter has brought more than 20 suits on behalf of workers enrolled in 401(k) retirement plans, and is widely recognized for helping to lower plan fees across corporate America.

His most recent set of suits has largely involved 403(b) plans. The accounts, named for the section of the tax code under which they operate, are similar to 401(k) plans but are offered by public schools and nonprofit institutions like universities and hospitals.

The N.Y.U. employees bringing the case, which they sought to have certified as a class action, accused the university of failing to meet its obligations under a federal law that requires employers that sponsor retirement plans to manage them in the best interests of employees. The plaintiffs argued that employees had collectively lost $358 million as a result of the alleged failure.

John Beckman, a spokesman for N.Y.U., said the university was pleased with the outcome. “N.Y.U. maintained from the time the plaintiffs first publicized this case that it was baseless, and the judge’s finding supports that,” he said.

Mr. Schlichter, the managing partner of Schlichter, Bogard & Denton in St. Louis, said in a statement that his clients would appeal. “We respectfully continue to believe that retirement plan participants at universities that operate as nonprofits have the same rights and protections under the law to build their retirement savings as workers at for-profit companies,” he said.

Broadly speaking, the 403(b) suits brought by Mr. Schlichter allege that the universities, as plan sponsors, failed to monitor excessive fees paid to administer their plans and did not replace more expensive, poorly performing investments with cheaper ones. Had the plans eliminated their long lists of investment options and used their bargaining power to cut costs, the suits argue, participants could have collectively saved tens of millions of dollars.

The N.Y.U. case involves two 403(b) plans covering faculty, research administration employees and members of the medical school staff. It was the first of Mr. Schlichter’s suits targeting universities to proceed to trial, according to the court decision.

The plaintiffs claimed N.Y.U. did not use its leverage to select a single low-cost record keeper for administrative tasks like sending statements to employees, leading to years of excessive fees.

The suit also singled out certain investments offered by the plan, including the TIAA Real Estate Account and CREF Stock Account, arguing that they underperformed. (A spokesman for TIAA said the company looked forward “to continuing to provide high-quality products and services” for N.Y.U. and its employees.)

A spokesman for Mr. Schlichter said he had nine cases involving university 403(b) plans pending in federal court. Two others — against the University of Pennsylvania and Northwestern University — have been dismissed. Mr. Schlichter plans to appeal those rulings, his spokesman said.

(Original source)

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