The Massachusetts Institute of Technology, Yale, University of Pennsylvania, Vanderbilt and New York University have become the target of a lawsuit seeking class action status on behalf of university employees investing their 401(k) retirement plans, alleging they are being charged too much in investment fees.
Each of the universities all used more than one provider to operate their plans and perform the administrative services . If they consolidated to one provider, they could use their bargaining power to negotiate much lower fees. The suits allege, the plans overpaid millions of dollars each year for several years. The complaints also says that the plans sponsored by the universities offered far too many investment options — many of which were too expensive — when cheaper alternatives were available. It also argued that the long lists of investments served only to confuse investors. Duke had $4.7 billion in assets held by nearly 38,000 participants at the end of 2014, used four providers (TIAA, Vanguard, Fidelity and Valic), offering 400 investment choices.
Vanderbilt had $3.4 billion in assets and nearly 42,000 participants at the end of 2014, used the same four providers, offering 340 investment options, until April 2015. At that time, it consolidated to Fidelity and shrank its plan menu to a core set of 14 investment options, according to the suit, which argues that the changes should have come many years earlier. In addition, the complaint claims that the university continues to pay too much for record keeping.
Johns Hopkins had $4.3 billion in assets, offered more than 440 funds from its plan’s five record keepers. In January, it reduced the number to three.
Jeffrey Newman represents whistleblowers.