In a first, University of Chicago settles 403(b) lawsuit for $6.5 million

Observers say it's difficult to determine if this is a harbinger of the outcome in the roughly 20 outstanding lawsuits

May 24, 2018 @ 2:18 pm

By Greg Iacurci

The University of Chicago has agreed to settle a retirement-plan lawsuit for $6.5 million, becoming the first of about 20 prominent universities facing allegations over 403(b)-plan mismanagement to take such a step.

Plaintiffs filed the lawsuit, Daugherty et al v. The University of Chicago, in May 2017. They claimed the university caused its plan participants to pay excessive record-keeping and investment-management fees, depleting their retirement savings.

The university denies the allegations and contends its conduct was "proper at all times," according to a joint statement released by the defendant and plaintiffs.

The University of Chicago is just one of many higher-education institutions to be targeted for allegedly having excessive fees in their 403(b) plans, a type of defined-contribution plan for non-profits.

Jerome Schlichter, an attorney who pioneered 401(k) fee litigation, brought several lawsuits in August 2016 against universities, filing around a dozen over a matter of 10 days.

Now, there are 19 class-action cases pending in court that involve 403(b)-plan management, according to the joint statement issued in the University of Chicago case. Some, such as the University of Chicago case, have come from law firms other than Mr. Schlichter's.

A federal judge dismissed a lawsuit against the University of Pennsylvania in September 2017. While defendants in many of the other lawsuits have succeeded in getting at least some charges dropped, judges have allowed other claims to advance. New York University was the first school to challenge allegations levied against it in a court trial, closing arguments of which ended last week.

"Given that we've seen only one case dismissed, and around 20 lawsuits still in the pipeline, I think it's too early to point to a clear trend one way or the other," said Duane Thompson, senior policy analyst at fi360 Inc., a fiduciary consulting firm.

"There's no question that a lot of plan sponsors will be carefully examining the specific terms of the University of Chicago's pending agreement," he added.

Aside from the monetary settlement, the agreement includes structural changes to the university 403(b) plans. For example, the university must not increase per-participant record-keeping fees for three years, and make "reasonable best efforts" to continue trying to reduce them. The university also implemented a new investment menu in April, which included reducing the number of fund options.

A federal judge granted preliminary approval of the settlement May 23. It remains subject to final court approval.


What do you think?

View comments

Recommended for you

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

Featured video


Financial health of advisory firms is excellent. Or is it?

Deputy editor Bob Hordt and senior columnist Jeff Benjamin discuss the fact that double-digit growth in revenue and assets doesn't necessarily spell a rosy future.

Latest news & opinion

Don't be fooled by the numbers — the industry is in a dangerously vulnerable state

Last year's stock market gains helped advisers turn in solid growth in assets and revenue, but that growth could disappear in the next market downturn.

Divided we stand: How financial advisers view President Trump

InvestmentNews poll finds 49.2% approve of his performance, while 46.7% disapprove. How has that changed over the course of his presidency?

10 states with the most college student debt

Residents of these states have the most student debt when you consider their job opportunities.

Ex-Wells Fargo brokers sue for damages, claiming they lost business in wake of scandals

In a Finra arbitration complaint, two brokers allege that Wells Fargo's problems damaged their business.

Invesco to buy OppenheimerFunds

Deal brings Invesco another $246 billion in assets, as well as high-fee actively managed funds.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print