Three former and current University employees can move forward with some of the claims in a class action lawsuit alleging that the University mishandled their retirement funds, according to Chief Judge William Smith in a July order from the U.S. District Court for the District of Rhode Island.
“Our clients (stepped) forward to file suit because they thought it would advance the interests of their fellow employees who participate in the retirement plan,” said Todd Collins, one of the lawyers from Berger Montague representing the plaintiffs. “It is with that goal in mind that on their behalf we are proceeding with the litigation,” Collins added.
“At Brown, we are deeply committed to the well-being of our employees and approach our fiduciary responsibilities in sponsoring retirement plans with the utmost attentiveness,” wrote Brian Clark, director of news and editorial development, in an email to The Herald. “We have a strong case to make and will continue to respond as appropriate through the legal process.”
The judge’s order stated that the case is “one of many look-alike lawsuits filed nationwide.” Yale, Northwestern University, Columbia and Duke University have gone through similar legal conflicts, The Herald previously reported.
The plaintiffs’ complaint refers to two 403(b) plans the University offers faculty and staff: the Legacy Retirement Plan for those hired before March 1, 2001, and the Deferred Vesting Retirement Plan, for those hired after that date. “Faculty and staff who are regularly scheduled to work 1,000 or more hours per year … are generally considered eligible to participate in the plan,” the University’s website states.
The plaintiffs initially filed a complaint July 6, 2017 alleging that the University had mishandling their retirement funds on four counts. Two of the plaintiffs’ allegations satisfied their “burden to overcome (the University’s) motion to dismiss” the case, according to Smith’s order. The other two counts were dismissed, according to Smith’s order.
The plaintiffs claimed that the University breached its duties of “loyalty and prudence” under the Employee Retirement Income Security Act by charging excessive administrative fees and using two recordkeepers that “failed to employ a competitive bidding process,” according to the complaint.
In the complaint, the plantiffs argue that participants in these retirement plans pay roughly $300 annually in administrative fees. Benchmarking data suggests $35 to $45 annually would be far more reasonable, the complaint said.
The plaintiffs also alleged that the University breached its duties of “loyalty and prudence” by investing their money in “more expensive funds with inferior historical performance,” according to the complaint. This allegation references the University’s involvement with the CREF Stock Account and the TIAA Real Estate Account which “drastically underperformed (compared to) comparable lower-cost alternatives over the preceding … periods,” the complaint said.
If the University had removed the CREF Stock Account and the TIAA Real Estate Account “and the amounts (had) been invested in any of the actively managed lower-cost alternatives … participants in the Plans would not have lost millions of dollars’ worth of their retirement savings,” the complaint said.
The plaintiffs argued that “one could reasonably infer from these circumstances alone that the Defendant’s fiduciary decision-making process was either flawed or badly executed,” the complaint said. The plaintiffs seek to “enforce the Defendant’s personal liability … to restore to the Plans all losses resulting from each breach of fiduciary duty,” the complaint added.
“The litigation is now at an active stage as we obtain evidence to support our claims as we head toward trial,” Collins said.
Correction: An earlier version of this article referred to Berger Montague as Berger & Montague, P.C.. The Herald regrets the error.
