Washington University in St. Louis joins other colleges that have prevailed in court.
Washington University in St. Louis has won the dismissal of a lawsuit alleging it caused employees participating in the school's 403(b) plan to pay excessive fees for record keeping and investment management.
Judge Ronnie L. White, who oversaw the case in the U.S. District Court for the Eastern District of Missouri, dismissed the lawsuit with prejudice, meaning it can't be brought back at the district-court level.
Attorneys for the plaintiffs in the lawsuit, Davis et al v. Washington University in St. Louis, didn't respond to a request for comment on whether they plan to appeal the decision.
The loss for plaintiffs builds on other recent defeats in cases involving university 403(b) plans, which are available to employees of public schools and tax-exempt organizations.
About 20 lawsuits involving the 403(b) plans of higher-education institutions have been filed to date, beginning in August 2016. They follow on a surge in the number of excessive-fee cases filed against 401(k) plan sponsors in recent years.
Plaintiffs seem to have had less success with 403(b) litigation, however. The University of Pennsylvania and Northwestern University, similar to Washington University, obtained complete dismissals before going to trial. In July, New York University defeated plaintiffs after a trial hearing. Plaintiffs were able to secure a $6.5 million settlement from The University of Chicago in May.
"The common thread among the 403(b) dismissals is that plaintiffs must make a stronger case to survive, and that courts are reluctant to allow them to use 20/20 hindsight as a basis for liability," said Jason Roberts, CEO of the Pension Resource Institute, a compliance consulting firm. "ERISA doesn't require plan sponsors to be perfect, just prudent."
The Washington University lawsuit, which was filed in June 2017, alleged that the university violated its fiduciary duty to the plan by causing participants to overpay for record keeping and administration and investment management, as well as failing to address fund underperformance.
Mr. White didn't agree with plaintiffs' argument.
"Plaintiffs start with the false premise that just because the Plan's fees could have been lower that necessarily Defendants' breached their fiduciary duties," the judge wrote. "Plaintiffs fail to allege that the process of choosing the investment options was flawed, other than a mere inference of fiduciary wrongdoing. These allegations are insufficient to allege a breach of fiduciary duties based upon excessive fees."
Judge White also disagreed with the notion of mandating caps to record-keeping fees or use of a single record keeper as opposed to multiple.
