Compliance

Washington University in St. Louis Faces Second 403(b) Lawsuit

The strongly worded complaint says the plan fiduciaries “utterly abdicated their fiduciary duties to act prudently and loyally” by turning the plan over to TIAA and Vanguard Group.

By Rebecca Moore editors@plansponsor.com | June 27, 2017

Just weeks after being served with a lawsuit about allegedly excessive recordkeeping and investment fees for its 403(b) plan, Washington University in St. Louis is facing a lawsuit by another plan participant.

The strongly worded complaint says the plan fiduciaries “utterly abdicated their fiduciary duties to act prudently and loyally. Instead, they turned the plan over to the Teachers Insurance and Annuity Association of America and College Retirement Equities Fund (TIAA) and Vanguard Group Inc.” The complaint goes on to say that TIAA and Vanguard offered “scores of duplicative, expensive and underperforming” proprietary products.

The lawsuit alleges that TIAA and Vanguard gained multiple layers of fees, but the plan and participants lost the potential growth they could have achieved if plan fiduciaries had properly discharged their duties under the Employee Retirement Income Security Act (ERISA).

The lawsuit says the plan participants were damaged because they paid higher recordkeeping fees than necessary as the plan fiduciaries had allowed TIAA and Vanguard to charge fees based on a percentage of assets rather than on the number of plan participants. In addition, the complaint says, for many funds, participants paid for the higher-cost, retail share class rather than the lower-share-class versions available to large investors such as the plan. It notes that the Washington University plan is one of the largest 403(b) plans in the country, with approximately 24,000 participants and $3.8 billion in assets.

The lawsuit also alleges that participants were offered an excessive number of duplicative funds, including poorly performing funds “bundled into the plan by TIAA and Vanguard mandates,” which enriched TIAA and Vanguard at the expense of plan participants.

The lawsuit seeks, on behalf of all participants in the plan, restoration of losses caused by the defendants’ breaches of fiduciary duties.

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