University Employees Sue Yale, MIT And NYU Over Retirement Plan Fees
DAVID GREENE, HOST:
Several of the nation's most prestigious universities were sued yesterday by their own employees. MIT, Yale and NYU are facing class-action lawsuits over their retirement plans. Here's NPR's Chris Arnold.
CHRIS ARNOLD, BYLINE: The lawsuits allege that the schools allow financial firms to charge university employees excessively high fees in their retirement accounts.
JEROME SCHLICHTER: Some cases - they're paying two and three times what they should be paying.
ARNOLD: Jerome Schlichter is the lead attorney in the class action cases. He says under federal law...
SCHLICHTER: Duty of the universities is to make sure that fees are reasonable. And we contend they are not doing that. And fees are much higher than they should be for these multibillion dollar plans.
ARNOLD: Schlichter is saying here that when an employer has billions of dollars of their workers' money pooled together in a retirement plan, it can leverage a better deal from mutual funds and Wall Street investment firms and get lower fees. And that, he says, makes a big difference for workers trying to save for retirement. He says a fee that might seem small to a worker - say, around 1 percent - can eat up tens of thousands of dollars in a worker's retirement account over 35 years.
SCHLICHTER: Employees are paying the price. So this is a big deal, as far as the opportunity to build meaningful retirement assets.
ARNOLD: Schlichter is actually a very well-known lawyer in the world of retirement plans. In recent years, he's forced a series of big for-profit companies to negotiate lower fees for their workers. He sued and won settlements from Lockheed Martin, Cigna, General Dynamics and other firms. Last year, he won a unanimous decision from the Supreme Court, which ruled that companies had an ongoing duty to monitor investment options and remove, quote, "imprudent ones." Now he's turning his sights on universities.
SCHLICHTER: There may be other universities that have claims brought against them.
ARNOLD: Yale and MIT are not commenting on the pending litigation. Both schools last year made changes that lowered fees in their workers' retirement plans. An NYU spokesman says the school takes seriously the welfare of faculty and employees and will litigate the case vigorously. Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.