Tim Tai, Photographer Editor

Yale must appear in court to face charges over the mismanagement of employee retirement funds, United States District Court Judge Alvin W. Thompson ruled last Friday.

The class action suit, Vellali et al. v. Yale University et al., represents more than 20,000 employees who claim Yale breached its fiduciary duty by failing to adequately oversee its 403(b) retirement plan, costing employees millions. Factual claims about Yale’s record-keeping fees and investment oversight remain unresolved, Thompson’s ruling declares, meaning that the plaintiffs will be seeing Yale in court.

“The defendants’ motion for summary judgment is being granted with respect to [several counts], and otherwise denied,” the motion ruling read.

Workers first filed a complaint in 2016. Following this, lawyers conducted a years-long discovery process where they took depositions, named plaintiffs and conducted expert reports. 

It was only last February that the plaintiffs filed opposition papers to Yale’s motion for summary judgment. A summary judgment, according to plaintiff attorney Jerry Schlichter, is an opportunity for a judge to prevent claims from a case from going to trial. 

Schlichter told the News that, while some claims will not go forward, “the vast bulk” of the case will. For now, all claims calling for damages will move forward, he said.

“We’ve been looking forward to a trial for more than six years, and now we will have that trial, and we believe it will be soon,” Schlichter told the News.

Schlichter said that the plaintiffs hope the court will set the trial date for as soon as possible.

The University filed a motion last year in a bid to avoid trial. Interim Vice President of Communication Karen Peart wrote in an email to the News that the University was “pleased” that the Court granted summary judgment on some of the plaintiffs’ claims.

“The money in the [retirement plan] account is each person’s money,” Schlichter said. “And so if fees are high, or investments are poor performing, it comes directly out of the pocketbook of employees and retirees.”

In their complaint, the plaintiffs wrote that employees on the plan were forced to take on “excessive” administrative and recordkeeping fees. The plaintiffs argue that such fees violated the Employee Retirement Income Security Act of 1974, or ERISA, requirement for “reasonable” fees. ERISA is a federal law that requires that retirement account managers act in  the best interests of plan participants.

The plaintiffs added that the University “failed” to offer affordable investment plans for employees, forcing them to purchase the high-price plan.

The suit also claims that Yale “allowed” the Teachers Insurance and Annuity Association of America — the organization managing Yale employees’ retirement plans — to take “highly confidential” information outside of the plan to sell services, such as wealth management, salary and insurance, said Schlichter. 

In July 2021, the U.S. Securities and Exchange Commission announced a $97 million enforcement action against the TIAA for violations in retirement rollover recommendations. Charges include inaccurate and misleading statements and a failure to adequately disclose conflicts of interest to thousands of participants in record-kept employer-sponsored retirement plans.

The TIAA did not respond to requests for comment. 

The University, on the other hand, argues that it regularly monitored the plans’ investment options, and the switch to a single record keeper reduced — not increased — expenses. 

“Yale provides excellent retirement benefits through plans that are proficiently administered in the interests of our plan participants and in full compliance with all applicable laws,” Peart wrote in an email to the News.

The plaintiffs for the case are Joseph Vellali, Nancy S. Lowers, Jan M. Taschner and James Mancini.

Evan Gorelick is Managing Editor of the Yale Daily News. He previously covered Woodbridge Hall, with a focus on the University's finances, budget and endowment. He also laid out the weekly print edition of the News as a Production and Design Editor. Originally from Woodbridge, Connecticut, he is a junior in Timothy Dwight College double-majoring in English and economics.
William Porayouw covered Woodbridge Hall for the News and previously reported on international strategy at Yale. Originally from Redlands, California, he is an economics and global affairs major in Davenport College.