MIT, Yale sued over retirement fund fees
Jerome Schlichter, a lawyer who has taken on retirement plan fees across the country, on Tuesday filed lawsuits against the Massachusetts Institute of Technology and other schools, alleging that they have failed to protect employees from tens of millions of dollars in excess costs.
Schlichter, based in St. Louis, has had success with such lawsuits in the private sector, suing the likes of technology giant Oracle Corp. of Redwood City, Calif., and Boston-based Fidelity Investments for allowing workers to be overcharged on 401(k) fees.
Now he’s taking the fight to the nonprofit sector, with class-action lawsuits filed against MIT, Yale University, and New York University. Together, the institutions’ contributory retirement plans cover some 60,000 current and former employees.
“These are the first cases in the university space,’’ Schlichter said in an interview. Over the past decade, his firm has filed 20 lawsuits against private employers, alleging that they have not done their job keeping costs in retirement plans as low as possible for their workers.
MIT’s plan had $3.6 billion in assets at the end of 2014 and 18,268 participants, according to one lawsuit, filed in federal court in Boston. Until last year, it had offered employees 340 mutual funds and other investment options, a large number compared with many plans.
More than half the fund offerings were also managed by Fidelity, and carried higher costs than, for instance, passively managed index funds.
A year ago, MIT eliminated hundreds of mutual funds provided under the plan, narrowing the lineup to 37 investment options, according to the lawsuit.
As firms that manage money and administer retirement accounts for employers have incentives to maximize fees, Schlichter said, the employers “have the ultimate fiduciary duty” to their workers.
Fidelity has been the recordkeeper at MIT since 1999, with many of its own funds in the plan, Schlichter alleged. The university has not put the contract out to bid over those years, he said.
An MIT spokeswoman declined to comment. A spokesman for Fidelity, which had just learned of the lawsuit, had no immediate comment.