A class-action lawsuit filed Aug. 11 alleges that Emory University breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA) to more than 41,000 employees by incurring excessive fees and retaining poor investments in retirement plans. The suit alleges the University failed to consider low-cost, high-performing alternative investment options and that its use of multiple recordkeepers resulted in excessive administrative fees.

Schlichter Bogard & Denton filed the lawsuit in federal court on behalf of 12 employees who represent participants of the University’s 403(b) plans — retirement plans similar to 401(k) plans available for certain government and tax-exempt groups and other non-profit organizations. The defendants are Emory University, Emory Healthcare, Inc., Emory Pension Board, Emory Investment Management and Vice President of Investments and Chief Investment Officer Mary L. Cahill. With this suit, Emory joins the list of several top universities also recently sued for allegedly mishandling their employees’ retirement plans, including Duke University and New York University (N.Y.U.).

Emory’s retirement plans held over $3.5 billion in investments as of Dec. 31, 2014, and are considered “jumbo plans” for being in the top one percent of high-value contribution plans, said the lawsuit. As of Dec. 31, 2014, there were 20,261 participants in the Emory University Retirement Plan and 21,536 participants in the Emory Healthcare, Inc. Retirement Savings and Matching Plan. Both plans operate under a defined contribution model, in which funds composed of both employee and employer contributions are invested.

The plans use three independent vendors for recordkeeping: Fidelity, TIAA-CREF and Vanguard. Both University and Healthcare retirement plans offer employees 110 investment options: 43 from Fidelity, 23 from TIAA-CREF and 44 from Vanguard.

By offering three recordkeepers and failing to take advantage of its multi-billion dollar endowment — which hit a record high of $6.7 billion last year — Emory lost negotiating power when determining recordkeeping fees, said the suit. This cost participants millions of dollars in administrative fees. In 2011, TIAA-CREF received $5.69 million from Emory in recordkeeping fees. In 2012, the amount increased to $6.16 million.

“The Emory plan is excessively priced,” said Jerome Schlichter, founding and managing partner of Schlichter Bogard & Denton and attorney representing the Emory employees. “Under the law [ERISA] that applies to the University, [Emory] must make sure fees are reasonable and … that the investments are prudent.” The University has failed to uphold these obligations, he added.

Emory wrote in a statement to the Wheel that it views multiple options in its retirement plans as beneficial to University and Healthcare faculty and staff.

“Through our retirement programs, we offer access to a range of investment options to provide flexibility in meeting individual needs and retirement goals,” University Associate Director of Media Relations Elaine Justice wrote. “We are committed to these principles and operate our retirement programs in accord with federal law.”

Plaintiffs declined to comment on the ongoing litigation.

Schlichter recently filed class-action lawsuits in federal courts against other major universities with 403(b) plans for breaching fiduciary duties under ERISA, including Johns Hopkins University, Massachusetts Institute of Technology (M.I.T.), N.Y.U., Yale University, University of Pennsylvania, Duke University and Vanderbilt University. Sanford Heisler, a law firm specializing in class-action suits, filed a similar class-action suit against Columbia University Aug. 16 for excessive retirement fees in its 403(b) plans, according to a press release.

The surge in retirement plan litigation in these cases is correlated with increased employee knowledge and media coverage of retirement plans, according to Schlichter.

Complaints allege that universities such as N.Y.U. and Yale have multiple recordkeepers, excessive fees and too many options in their retirement plans, which cost employees tens of millions of dollars, according to The New York Times.

Schlichter’s firm has litigated multiple lawsuits involving 401(k) plans. He settled other suits involving corporate fiduciary breaches in retirement plans, one case being a 2014 suit against Novant Health, Inc., a nonprofit hospital system. In addition to the $32 million settlement, Novant updated its plan operations by hiring an outside consultant, revising investment options and providing accurate communication, according to the Winston-Salem Journal. Schlichter said he hopes for similar changes in the universities’ retirement plan operations.

Julia Munslow contributed reporting. 

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anwesha.guha@emory.edu | Anwesha Guha (18C) is from Montgomery, Ala., majoring in English and quantitative science with a concentration in biology. She served most recently as news editor. In addition to the Wheel, she researches and tutors.