Recently, a class action lawsuit was filed in United States District Court for the Western District of New York against the University of Rochester seeking to protect the retirement savings of more than 36,000 employees who are participants in the University of Rochester’s Retirement Program.
The University of Rochester, according to the class action complaint, has a fiduciary duty to ensure that the school’s federally-regulated retirement plan does not charge excessive fees. Allegedly, over the past six years, University of Rochester plan participants have paid approximately $72 million in “grossly excessive” recordkeeping, distribution, and mortality risk fees – fees which, allegedly, are “close to ten times what they should be.”
The complaint against the University of Rochester was brought by a Plaintiff who has been paying more than $500 in service fees a year to TIAA, when “a reasonable fee for administrative services is no more than $50 per year.” There is, according to the complaint, “absolutely no legitimate basis why Plaintiff should be paying TIAA more than $500 per year for its services.”
According to the class action complaint:
All retirement plans require administrative services. The University [of Rochester] contracted with TIAA to provide administrative services for its Plan. TIAA pockets the bulk of the excessive fees. The reason why TIAA has been able to extract such grossly excessive fees is because TIAA’s fees are tethered not to any actual services it provides to the Plan, but rather, to a percentage of assets in the Plan. As the assets in the Plan increase, so too increase the fees that TIAA pockets from the Plan and its participants. One commentator likened this fee arrangement to hiring a plumber to fix a leaky gasket, but paying the plumber not on actual work provided but based on the amount of water that flows through the pipe. (Emphasis added)
The class action complaint states that the action against the University of Rochester
. . . is similar (but narrower in scope) to 18 separate lawsuits pending in federal district courts around the country. In each of [the] other lawsuits . . . plaintiffs allege a university defendant breached ERISA fiduciary duties by allowing TIAA to collect excessive fees from the university’s retirement plan. It appears TIAA exploited its rich heritage of being a non-profit low-cost financial service provider and duped universities into excessive fee arrangements. But now university plan participants are fighting back and demanding TIAA reduce its fees. It appears TIAA is willing to meaningfully reduce its fees if universities will just ask. By way of example, shortly after the University of Chicago was sued, it announced to its plan participants that it renegotiated TIAA’s fees, and successfully reduced fees on an annual basis by several million dollars. (Emphasis added)
Further, rather than “leveraging the Plan’s tremendous bargaining power to benefit Plan participants,” the University of Rochester, allegedly, “failed to adequately take proper measures to understand the real cost to Plan participants for TIAA’s services, to properly inform participants of the fees they were paying to TIAA as required by law, and most importantly, to act prudently with such information. As a result, Plan participants pay excessive fees for TIAA’s services.” (Emphasis added)
401(k), 403(b), Employee Stock Ownership & Other Retirement Plan Participants
If you believe your retirement plan investments have suffered losses due to imprudent investments, breaches of fiduciary duty, misrepresentations, excessive, unreasonable or undisclosed retirement plan fees or other corporate wrongdoing by retirement plan administrators and managers, please contact Kehoe Law Firm, P.C. by completing the form above on the right or sending an e-mail to [email protected].