Duke University Hit With Forfeiture Complaint

Former employees have filed a complaint against Duke University and its investment advisory, accusing them of misusing forfeitures in the Duke University Faculty and Staff Retirement Plan.

The case, Beroset v. Duke University et al., filed in U.S. District Court for the Middle District of North Carolina, alleges Duke University violated the Employee Retirement Income Security Act by breaching its fiduciary duties, violating ERISA’s anti-inurement provision and engaging in prohibited transactions.

According to the complaint, the defendants failed to follow a prudent process in allocating forfeited funds in a loyal or timely manner, costing participants millions of dollars.

Although the complaint acknowledges that the plan allows forfeitures to be applied to future contributions or to pay down plan administrative expenses, the complaint also states that the “defendants exclusively applied forfeitures to offset the employer’s future contributions without weighing the benefits to Plan participants despite owing fiduciary duties to them.”

According to the complaint, from 2019 to 2023, Duke University allocated millions of dollars to reduce contributions but did not allocate any forfeiture funds to pay down plan expenses. Additionally, the complaint states that Duke maintained a balance of unused forfeiture funds each year, which peaked in 2020 at more than $5 million.

The complaint further alleges that the defendants did not investigate the best options for the plan’s participants and beneficiaries, despite a potential conflict of interest, and did not seek advice from an independent decisionmaker to determine the best way to allocate the forfeitures in the plan, which the complaint identifies as a more prudent approach.

According to the plan’s most recent Form 5500 filing, at the close of 2023 and 2022, forfeited nonvested accounts totaled $480,691 and $242,650, respectively. The document asserted that the funds “will be used to reinstate any employer contributions required if the participant is rehired prior to five consecutive years after termination and then any residual amount may be used to pay plan expenses or reduce future employer contributions.”

Meanwhile, the amount of forfeitures used to reduce employer contributions for those years was more than $2 million.

The Duke University Faculty and Staff Retirement Plan had almost $9 billion in assets in 2023, with 65,515 participants, according to the Form 5500.

Attorneys for neither the plaintiffs nor Duke University were immediately available for comment.