Yale is being sued by six of its employees who claim the University charged them excessive fees on their retirement savings.
On Aug. 9, three groups of plaintiffs filed separate suits against three major universities: Yale, the Massachusetts Institute of Technology and New York University. The plaintiffs — all represented by well-known retirement plan lawyer Jerome Schlichter, based in Missouri — allege these universities offered employees needlessly expensive, poorly performing retirement plans with unduly high fees for administering the plans.
Yale, in response, has said it provides robust and competitive retirement packages for all employees.
“We believe these allegations are without merit and, working with our legal team, we will be responding to these allegations and intend to oppose this suit vigorously,” Vice President for Human Resources and Administration Michael Peel wrote in an Aug. 11 email to all faculty and managerial and professional staff, which a Yale spokesperson provided to the News.
The three cases focus on retirement plans which differ from the more common 401(k) plans offered by many employers. Yale, along with other public schools, nonprofits and hospitals, offer what is called a 403(b) plan.
The six plaintiffs in the class-action suit against Yale work across the University and include web developers, facilities and maintenance workers and library staff.
They claim Yale’s retirement plan — which in June 2014 held $3.6 billion in assets and had over 16,000 participants — had a bloated administrative system which led to excessive fees for employees. The suit, filed in the Federal District Court of Connecticut, alleged Yale paid multiple record-keepers, had investments which were too similar and performed poorly and used high-cost funds rather than low-cost ones. More cost-effective plans have been on the market since 2010, the suit contends.
“[Yale’s] plan participants could have and should have been paying far less for the same investment since that time,” the complaint said. Representatives from Schlichter’s law firm could not be reached for comment Tuesday. Representatives for Locals 34 and Local 35, Yale’s pink- and blue-collar unions, also did not return repeated requests for comment.
Peel, who is named in the complaint as the main overseer of Yale’s retirement plans, said Yale’s plan has never been criticized in this fashion before.
“Yale faculty and staff members have both pension benefits and retiree medical benefits that rank among the most generous in the nation, not only in higher education but in all industries,” he told the News. “Yale’s plans have long been praised for the unique level of financial security they provide to long-service faculty and staff, as well as for the range of investment options that participants get to choose from,” Peel said.
He added that Yale’s Retirement Plan Fiduciary Committee regularly reviews the performance and costs of Yale’s plan.
In April 2015, Yale streamlined its retirement services by switching to a single provider named TIAA, and also eliminated some higher-cost investments. By switching to a single record-keeper, Peel said, Yale reduced administrative costs. Furthermore, Yale said it has retained good retirement benefits even as programs have become more costly across the market.
The fees on Yale’s 403(b) packages are less than 1 percent of the total package and have some of the lowest fees on the market, Peel added.
But the lawsuit claims Yale has not done enough and that fees for items like “administrative expense” and “mortality and expense risk” remained high.
The lawyer representing the plaintiffs in Yale’s case is a big name in the world of retirement-plan litigation. In the last year alone, Schlichter has represented workers in more than 20 lawsuits against employers.
NYU has also promised to challenge the case vigorously, and an MIT spokesperson told The New York Times that the university does not comment on pending litigation.