Princeton settles DC lawsuit for $5.8 million

Princeton University is settling a class-action lawsuit over the school’s 403(b) plans for $5.8 million, according to court records filed July 28.

The agreement ends the three-year-old case, in which plaintiffs alleged the school breached its fiduciary duties of loyalty and prudence. The retirement plans carried exceptionally high administrative charges and included restrictive, poorly performing and expensive investment options, the plaintiffs stated in the 2017 complaint.

The school tentatively reached a settlement with the plaintiffs in April, though the terms were not finalized or disclosed at the time. The case was one of many lawsuits under the Employee Retirement Income Security Act aimed at elite colleges and universities. That wave of lawsuits followed a massive volume of Erisa litigation against 401(k) sponsors a few years earlier, a trend that continues today.

Princeton’s defined-contribution plans represented more than $2 billion in assets among more than 24,000 participants in 2018.

Along with the monetary component of the settlement, the university agreed to work to reduce the plan’s record-keeping fees, which the plaintiffs stated were more than $300 per year per participant. The school also agreed to issue a request for proposals for administrative services and third-party investment consulting. Further, the defendant agreed to review the TIAA collateralized loan program in the plan, as well as several TIAA investments that were central to the lawsuit.

The case is one of several that have focused on the TIAA Traditional Annuity, which the plaintiffs contend is highly restrictive. That product included a surrender charge of 2.5% for lump-sum payments, which could only be made within 120 days of leaving employment at Princeton, according to the complaint. Under normal circumstances, payments from the annuity are made over 10 years, via annual installments, the plaintiffs stated.

The plaintiffs are represented in the lawsuit by Berger Montague and Schneider Wallace Cottrell Konecky Wotkyns, which have been active in class-action retirement plan litigation over the past several years.

Princeton is represented by law firm Jackson Lewis.