Georgetown University – Alleged Breach of Fiduciary Duties

Georgetown University Voluntary Contribution Retirement Plan & Georgetown University Voluntary Contribution Retirement Plan Subject of ERISA Class Action

On February 23, 2018, a class action complaint was filed in U.S. District Court for the District of Columbia against Georgetown University on behalf of a class of participants and beneficiaries of the Georgetown University Voluntary Contribution Retirement Plan and the Georgetown University Voluntary Contribution Retirement Plan (“Georgetown University Retirement Plan(s)” or “Retirement Plans”).

According to the class action complaint:

Eligible faculty and staff members of Georgetown University are able to participate in the [Georgetown University Retirement Plans]. The [Retirement] Plans provide a primary source of retirement income for many employees of Georgetown University. Contributions to the [Retirement] Plans are based upon deferrals of employee compensation and employer matching contributions. The ultimate retirement benefit provided to investors in the [Retirement] Plans – who in retirement plan-speak also are known as “plan participants” or just “participants” . . . depends on the performance of investment options chosen for the [Retirement] Plans by the Defendants net of fees and expenses. Participants . . . have a right to direct the investment of their accounts among the available investment choices.

The class action complaint also alleges that

. . . instead of leveraging the [Retirement] Plans’ substantial bargaining power to benefit participants and beneficiaries, Defendants failed adequately to evaluate and monitor the [Retirement] Plans’ expenses and caused the [Retirement] Plans to pay unreasonable and excessive fees for investment and administrative services.

Defendants’ first breach of duty [in this regard] was to fail to select a suitable, single service provider to provide administrative and recordkeeping services to the [Retirement] Plans in exchange for a reasonable amount of compensation.

Rather than negotiating a separate, reasonable and fixed fee for recordkeeping with a single administrative provider to the [Retirement] Plans, Defendants continuously retained three different service providers – the Teachers Insurance and Annuity Association of America and College Retirement Equities Fund (“TIAA-CREF” or “TIAA”), The Vanguard Group and/or Vanguard Fiduciary Trust Company (“Vanguard”) and Fidelity Investments (“Fidelity”). Each of these recordkeepers supplied the [Retirement] Plans with a separate menu of investment choices including mutual fund share classes that charged higher fees than (i) other less expensive investment alternatives that offered the same investment strategies or (ii) less expensive share classes of the exact same investment fund, or (iii) both.

The class action complaint against the Retirement Plans alleges that TIAA-CREF, Vanguard, and Fidelity were the “three platform providers” which created “three investing segments” for the Retirement Plans, and plan participants could only choose from, and invest in, the investment choices of one of the three investing segments.  Retirement plan participants, according to the complaint, “. . . paid asset-based fees for administrative services, which continued to increase as the value of their accounts increased through additional contributions and investment returns[,] even though no additional services were being provided to Plaintiffs as their fees went up.”

The significant volume of investment choice selections from the three investing segments (hundreds of mutual fund and annuity investment choices) “. . . indicates that Defendants failed properly to monitor and evaluate the historical performance and expense of the[] funds,” and “. . . the inclusion of many investment alternatives . . . unreasonably burdens plan participants who do not have the resources to pre-screen investment alternatives in the way Defendants do.” According to the complaint, “. . . Defendants selected and maintained investment options for the Plans that historically and consistently underperformed their benchmarks and charged excessive fees.”

The complaint provides additional evidence of the Retirement Plans’ “flawed fiduciary process,” as evidenced by “. . . approval of a TIAA loan program for [Georgetown] University employees who elected to borrow against their retirement plan savings. This program (i) required excessive collateral as security for repayment of these loans, (ii) required an illegal transfer of plan assets to TIAA as collateral for the loan repayment when no such transfer is necessary or permitted, and (iii) violated DOL rules for retirement plan participant loan programs.” (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].

Kehoe Law Firm, P.C.