Another set of private retirement plan by managers has been targeted recently by class action litigations. The alleged managers this time are a slew of prestigious universities such as the New York University, Yale University and Massachusetts Institute of Technology, all of which have been accused of not overseeing the retirement plans of their employees appropriately.
The hot shot lawyer Jerome Schlichter has sued these universities for failing in responsibly administering the 401(k) plans for their employees. The lawsuits have shaken the entire industry of private retirement plans in a good way. The evolution of how the employees managed their retirement plans has been drastic over the years, and brings in a lot of confusion over how to deal with it.
How the retirement plans have changed over the years?
In the yesteryears, the employer was supposed to be responsible for the pension investment of his workers, as a part of their retirement benefits. However, as time changed and the pension system gave way in the wake of defined contribution savings plan, it became increasingly confusing for the employees to understand their responsibilities. According to this new scheme, it was the employee’s duty to make suitable investments of his choice for creating his retirement fund pool. This left us with the question whether the employer was still required to fulfill any fiduciary duty towards his employees or not. The ambiguity of this new scheme left us with more questions than we could find the answers for, and paved the way for these lawsuits.
What is the subject of the lawsuit filed against the universities?
According to Schlichter, the defendant universities have been accused of failing to exercise their fiduciary duty of getting the best deals for their employees. The improper intervention of the universities led the employees to pay highly unreasonable and exorbitant fees for investment, administrative and record keeping services. He further puts an allegation on the employer which states that due to his inadequate intervention, the employees were driven towards investment plans which had a history of underperforming and charging hefty fees.
Schlichter demands that the court emphasizes on the grave responsibility which the 401(k) and 403(k) sponsors are obliged to have towards their plan participants. He further states that the employer cannot just shove any investment brochure in front of their workers and ask them to choose from the list. Instead, it is the employer’s duty to select the best possible deals for their employees depending upon the return and fees associated with them.