Colleges and Universities Face Class Action Lawsuits Over Retirement Plan Operations

The recent class action lawsuits filed against nonprofit universities over the operation of their retirement plans serve as a wake-up call for colleges and universities across the country. These lawsuits highlight the importance of proper oversight and administration of 403(b) retirement plans, as well as the potential risks and liabilities that fiduciaries face if they fail to meet their obligations under ERISA.

One of the key issues raised in these lawsuits is the excessive number of investment options offered to participants in the plans. While choice is generally seen as a positive feature of retirement plans, offering too many options can actually be detrimental to participants. It can lead to confusion, decision paralysis, and higher fees due to the need to maintain a larger number of investment options. Fiduciaries should carefully review the investment options in their plans and consider whether they are truly serving the best interests of participants.

Another issue raised in the lawsuits is the use of multiple record-keepers, which can result in higher record-keeping fees. Consolidating record-keeping services with a single provider can help reduce costs and streamline plan administration. Fiduciaries should also be mindful of the fees associated with the investment options in the plan and ensure that participants are not being charged excessive fees for underperforming funds.

These lawsuits underscore the need for colleges and universities to take a proactive approach to managing their retirement plans. Fiduciaries should regularly review and monitor the investment options in their plans, negotiate with vendors to reduce fees, and seek out professional advice to ensure that the plan is being managed in the best interests of participants. By taking these steps, colleges and universities can help protect themselves from potential litigation and ensure that their employees are able to retire with financial security.

In conclusion, the recent class action lawsuits targeting colleges and universities over their retirement plans should serve as a warning to all higher education institutions. Proper oversight and administration of 403(b) plans are essential to protect fiduciaries from potential liabilities and ensure that participants are able to achieve their retirement goals. By taking proactive steps to review and improve their retirement plans, colleges and universities can help safeguard the financial futures of their employees and avoid costly legal battles in the future.