The University of Chicago has agreed to pay $6.5 million to settle a class action alleging that it failed its fiduciary duty to employees in ways that forced them to pay excessive fees in their retirement plan, Investment News reported.
A St. Louis law firm has brought similar lawsuits against 19 major universities in the last two years, and Chicago is the first institution to have settled one of them. The complaints center around 403(b) defined-contribution retirement savings plans that are similar to the better-known 401(k) but are available for nonprofit institutions.
Generally, the suits allege that universities offered employees too many investment options in their retirement plans, which can confuse employees and also result in higher fees. Arguments also include that universities did not swap out expensive and poor-performing investments for better options and that higher-fee retail-class funds were available instead of a menu made up of only less expensive institutional funds.
In a memo recommending the settlement, the plaintiffs in the Chicago case called it "fair, reasonable, adequate, and in the best interests of Class members," providing a "substantial and immediate benefit to them in the form of a multi-million dollar cash payment." After legal fees, the settlement funds will be distributed to people who participated in the pension plan from May 2011 through this month.
A statement released by the university and the plaintiffs Thursday said that Chicago denies allegations that the plaintiffs paid excessive fees and insists that its conduct was proper.