Benefits & Executive Compensation News

NYU 401(k) Fee Case Likely to Get Class Status

Feb. 8, 2018, 2:16 PM

New York University is preparing for trial in a case challenging the fees and investments of its retirement plans as a federal judge announced her intentions to grant class treatment to the university workers.

The “early indication” of the court’s intention to grant class status was given so the parties could benefit as they prepare for trial, which is scheduled for April 16, Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York said Feb. 7 in a one-page order. She said that a full opinion would follow shortly.

NYU is one of more than a dozen prominent colleges to be hit in recent years with proposed class actions challenging their retirement plans. So far, the University of Pennsylvania is the only school to defeat one of these cases outright, with judges allowing similar challenges to proceed against the University of Chicago, Cornell, Columbia, Duke, Emory, Johns Hopkins, Princeton, and Vanderbilt.

Forrest’s indication to grant class status would be the first ruling of this kind in one of these cases. The lawsuit alleges NYU’s retirement plans, which hold over $8.2 billion in assets combined, offered high-fee, poorly performing investment options and paid excessive administrative fees to multiple record-keepers.

In December, the workers moved to certify a class of at least 19,000 staff and faculty members who have been plan participants since August 2010. One month later, NYU opposed class certification.

Forrest’s latest order comes four months after the university workers filed a second lawsuit to include 21 individuals as defendants. In August, a federal judge dismissed some of the claims against NYU but allowed claims attacking the plans’ record-keeping fees and actively managed funds to move forward.

As to the record-keeping fees’ claim, the workers allege that NYU’s failure to prudently monitor and control these excessive administrative fees caused losses to the plans in excess of $43 million. They also allege that as a result of NYU’s deficient process for monitoring investments, it retained options that charged significantly higher fees and consistently underperformed over long periods compared to prudent alternative options available to the plans.

The parties didn’t immediately respond to Bloomberg Law’s request for comments.

Schlichter Bogard & Denton LLP represents the class. DLA Piper US LLP represents NYU.

The case is Sacerdote v. N.Y. Univ., S.D.N.Y., No. 1:16-cv-06284-KBF, order notifying parties on class certification status 2/7/18.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bloomberglaw.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com

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