Yale to appear in court over alleged administrative failure to prudently monitor retirement plans
Ahead of a class action retirement lawsuit which will take place in May, documents filed by the case’s plaintiffs suggest that Yale had knowledge of high recordkeeping fees and did not have sufficient oversight over plan fees and investments.
Tim Tai, Photography Editor
This May, Yale will appear in court over the alleged mismanagement of employee retirement funds, plaintiff attorney Jerry Schlichter told the News.
In the Vellali et al. v. Yale University et al. class action lawsuit representing more than 20,000 employees which was originally filed in 2016, the plaintiffs — who include retired Yale employees Joseph Vellali, Nancy S. Lowers, Jan M. Taschner and James Mancini — claim that the University caused participants in its staff retirement plan “to suffer significant losses of retirement savings” and failed to properly monitor the plan’s fees and investment, according to one court document.
According to Schlichter, the court ruled last year that the case against the University this spring will be a jury trial. Yale sought to appeal the case for a trial by jury this month, but the court denied its motion on March 17. The News reviewed evidence submitted to the court by the plaintiffs — including emails between administrators, contracts and depositions — which they say suggest that the University did not sufficiently monitor retirement investments and fees or offer reasonable fees.
University spokesperson and Interim Vice President for Communications Karen Peart declined to comment on this story.
“It took 5 years to convince leadership we needed a committee [to oversee the retirement plan],” Hugh Penney, senior director of compensation and benefits at Yale at the time, wrote in a 2014 email to a fellow Yale employee that was collected by the plaintiffs. “Now we’re fixing record keeping. Next, it’s investment advice and fund lineup.”
Last October, several motions against the University under the lawsuit were dismissed under summary judgment, but district court judge Alvin W. Thompson LAW ’78 ruled that Yale would still be required to go to court under unresolved claims.
One unresolved claim argues that employees took on excessive administrative and recordkeeping fees, which the plaintiffs say violated the terms for reasonable fee requirements offered by the Employee Retirement Income Security Act of 1974.
In a deposition transcript obtained by the News, Vanguard representative Margaret Rux admitted to having been in conversation about reducing the retirement plan’s recordkeeping fees in 2011, but these concerns were not met with action at least two years later. The Vanguard and TIAA financial firms were the University’s recordkeepers for the Yale retirement plan until the University terminated their relationship with the former in 2015.
“From internal notes that I reviewed, it appears there was a discussion around Vanguard looking to generate $500,000 in recordkeeping revenue from this relationship,” Rux said in the deposition.
Rux added that at least one Yale administrator was involved in the discussion to reduce the recordkeeping fees that Vanguard charged the University.
In 2013, Yale administrators suggested consolidating the University’s retirement plan management under the two firms to a single vendor, which plaintiffs claim would have reduced recordkeeping fees. But one email at this time suggests that the reasoning for doing so would be to “take the pressure off” the Human Resources department and did not mention the reduction of recordkeeping fees for plan participants. It took two more years before the University consolidated its recordkeeping services, when Yale terminated their relationship with Vanguard in 2015 and claimed TIAA-CREF as its sole vendor.
In addition to this evidence, emails reviewed by the News revealed discussions between administrative staff suggesting that the University did not sufficiently monitor these investments and fees.
In one email, Sylvia Bedard, Yale’s director of benefits, raised concerns over how the University relies on its vendors to help keep Yale compliant on retirement plan regulations.
“I’m not sure that’s a sustainable approach,” Bedard wrote.
One administrator from Brown University had asked Yale leaders in 2010 whether they believed that hiring a third party advisor to assist the University in overseeing retirement plans was a good idea.
“Come on now, this is higher ed,” Penney wrote in an email. “We’re still talking about how to go about doing it.”
Based on evidence presented in court, district court judge Thompson agreed with the plaintiffs’ claims that there was solid evidence that Yale had offered high fees for their retirement plans and possibly breached its responsibility to properly monitor investments.
The case is being tried in the U.S. District Court for the District of Connecticut.