Columbia University Target of ERISA Excessive Fee Suit

The lawsuit claims the university’s 403(b) plans’ investment options were imprudent and expensive.

An employee of Columbia University has filed a lawsuit on behalf of participants and beneficiaries in the Retirement Plan for Officers of Columbia University and the Columbia University Voluntary Retirement Savings Plan for breach of fiduciary duties under the Employee Retirement Income Security Act (ERISA).

In a statement to PLANSPONSOR, the university said, “Columbia is proud of the retirement benefits offered to its faculty and staff and takes its responsibility as a fiduciary seriously. Columbia does not comment on pending litigation.”

The claims in the lawsuit are similar to lawsuits filed against eight other large universities in the past couple of weeks. However, this lawsuit was filed by a different law firm. This case involves more than 27,000 participants and former participants of the plans. 

According to the complaint, billion-dollar defined contribution plans, like Columbia’s plans, have tremendous bargaining power to demand low-cost administrative and investment management services. The case alleges that instead of leveraging the bargaining power of both plans, Columbia University caused the plans to pay unreasonable and greatly excessive fees for recordkeeping, administrative, and investment services. In addition, it claims that instead of using its sophistication to identify and select high-quality investments that benefited participants and beneficiaries, Columbia University selected and retained expensive and poor-performing investment options that consistently and historically underperformed their benchmarks and similar funds. 

“By acting contrary to their fiduciary duty, Columbia University caused both plans, and hence participants, to suffer hundreds of millions of dollars of staggering losses to retirement savings,” the complaint states. 

The complaint specifically mentions the TIAA-CREF Stock Account R3, which represented nearly $1 billion of the plans’ assets, saying it ranked in the bottom quartile for the past three, five, and 10 years for like investments, according to Morningstar. In addition, the complaint says Columbia University loaded the plans with many retail share class options that were more expensive than the institutional share class options in the same mutual funds that were otherwise available for Columbia University to include in the plans. 

The complaint also calls out annuity products offered by the plan which have restrictions for when participants can liquidate assets in the products and charge a surrender fee if they liquidate assets before the restriction period.

According to the complaint, Columbia University used two recordkeepers for its plans, TIAA and Vanguard, which caused participants in the plans to pay duplicative, excessive, and unreasonable fees for plan recordkeeping and administrative services.

The lawsuit seeks damages for financial losses to plan beneficiaries resulting from the plans’ underperforming investments and excessive fees; reform to Columbia’s retirement plans that would remove imprudent investments and ensure only reasonable recordkeeping expenses; and the removal of the University’s fiduciaries who have violated their duties to plans’ beneficiaries under ERISA.