Brown University has reached a $3.5 million settlement in a lawsuit alleging the school mismanaged its retirement plan and cost employees millions of dollars in savings.
Around two dozen prominent colleges and universities have been sued since 2016 for allegedly causing employees to pay excessive fees for investment management, record keeping and administration in their 403(b) plans, a type of defined-contribution plan for nonprofit organizations.
Brown joins a handful of other schools, such as Duke University and the University of Chicago, that have settled these claims.
Plaintiffs in the Brown case, Short et al v. Brown University, filed suit in July 2017, claiming the school breached its fiduciary duties to the Deferred Vesting Retirement Plan and the Legacy Retirement Plan, which have combined assets of more than $1 billion and roughly 6,300 participants.
The plans overpaid record-keeping fees to TIAA and Fidelity Investments, and they contained "duplicative, expensive and underperforming" investment options, plaintiffs claimed. They also contained too many investment options, plaintiffs said — each plan had more than 200 funds, all managed by either TIAA or Fidelity.
Brown's settlement, which still needs court approval, also contains nonmonetary relief, such as using best efforts to further reduce record-keeping fees over a period of three years and conducting a search for an independent investment adviser, according to a document filed Monday in Rhode Island district court.
"We are fully confident that our retirement plans are in compliance with all applicable laws, including the Employee Retirement Income Security Act," Brown spokesman Brian Clark wrote in an email. "In considering the prospect of years of costly litigation to vigorously defend this case, the University determined that the most prudent course of action was settlement."
Results of 403(b) lawsuits, which are being filed amid the burgeoning amount of litigation targeting 401(k) plans, have been mixed to date. The University of Chicago settled its case for $6.5 million in May, and Duke settled for $10.7 million in January. Last month, Vanderbilt University agreed to a settlement, details of which have not yet been finalized.
Lawsuits filed against the University of Pennsylvania, Northwestern University, Washington University in St. Louis and Georgetown University were dismissed pre-trial, and New York University won its case after a trial hearing.