A number of top universities have been hit with lawsuits alleging their 403(b) pension plans fail to meet ERISA standards.
Duke, Johns Hopkins University, and nearly a dozen other institutions are facing litigation over their 403(b) plans. 403(b) plans are common university pension plans offered to employees for retirement purposes. University pension plan members at these institutions allege that the administrators are charging excessive fees and failing to provide lower-priced shares in recent lawsuits.
The plaintiffs say the administrators of the university pension plans breached their fiduciary duties to plan members. The universities are also accused of failing to update plans and follow best practices.
“Many contracts still contain archaic provisions that assign all contractual rights to participants, even in ERISA plans where the fiduciary is supposed to control actions on behalf of participants and beneficiaries,” one expert told Pensions & Investments in an article over the slew of ERISA lawsuits hitting top rated universities. “It is these limitations that need to be solved prior to being able to look at finding cost efficiencies.”
The lawsuits allege that the university pension plans failed to follow IRS guidance to become more efficient by consolidating record keeping and making choices easier for plan participants.
“Multiple record keepers do make administration very difficult, creating compliance vulnerability,” noted the expert interviewed by Pensions & Investments. “A significant vulnerability is with plan sponsors that tend to keep adding new investment options and rarely — if ever — eliminate anything.”
The complexity of the 403(b) offerings is a problem for university pension plan participants as well, say the lawsuits. Duke University, according to the ERISA lawsuit, has more than 400 investment options. Other institutions offer 177 to 440 investment options, say the lawsuits.
The lawsuits also allege that the university pension plans charge excessive fees and use expensive and confusing annuities.
PROTECTION UNDER ERISA
The Employee Retirement Income Security Act of 1974 (ERISA) was enacted to protect peoples’ retirement income. The law mandates regulatory standards for disability insurance, life insurance, and health plans as well. ERISA-protected benefits including 403(b) university pension plans must meet ERISA regulatory standards, including, minimum standards for participation, vesting, funding and benefit accrual. Plan participants must also be provided information about their benefits.
Additionally, the plan fiduciaries or those who administer ERISA pension plans are subject to a number of rules that protect plan participants.
A code of conduct for fiduciaries must be provided and enforced. Additionally, the plan administrators must act in the best interested of the pension plan participants.
Plan participants must also be provided the right to hold fiduciaries accountable and can file a lawsuit against fiduciaries if they violate ERISA rules.
If you are concerned about the protection of your retirement income, contact the experienced ERISA attorneys at Bradley/Grombacher.
Note: Bradley/Grombacher is not representing the plaintiff in this lawsuit.