Pennsylvania residents may want to keep an eye on a lawsuit that was recently filed in Washington D.C. against Georgetown University for the latest in fiduciary standards relating to employee benefit programs. The lawsuit was filed in federal court under the Employee Retirement and Income Security Act (ERISA), and it alleges the university failed to properly protect the retirement assets of invested plan beneficiaries.
Under federal law, officials charged with managerial responsibilities related to investment accounts must make prudent decisions and not be frivolous with other people's money. The Georgetown lawsuit concerns administration fees related to the management of 403(b) retirement plans. These plans are structured similarly to 401(k) plans but are tied to tax-exempt organizations like schools and other non-profit organizations. Specifically, the lawsuit claims that Georgetown officials wasted assets by employing multiple plan administrators that offered identical services at different price points. The language of the lawsuit closely resembles that of other similar suits filed against other large universities regarding the management of retirement plans.
Georgetown administrators made funds from TIAA, Fidelity and Vanguard available for investors. Each plan offered a menu of options, some of which were allegedly almost identical but charged higher administration fees. Under the theory advanced by the lawsuit, investors, therefore, paid higher fees than they should have if the funds had been managed more carefully and with better stewardship of investor resources. The plaintiffs of the Georgetown suit also allege that a TIAA loan program required excessive collateral and illegal transfers of plan assets to TIAA for collateral in further breach of fiduciary duties.
Employee benefit programs are critical for retirement security but often constructed in ways that make understanding them difficult for the average worker. Confusing language and procedures make it more challenging for investors to know when their money is being properly managed. Consulting with a qualified employment law attorney who is versed in benefit plans can provide someone with valuable insight and guidance when it comes to the responsibilities of employers and plan administrators.
Source: MyMoneyDesign, 'What's the Difference Between a 403(b) vs 401(k)?," MMD, 8-6-17