Magazine article University Business

Avoiding Retirement Plan Risk

Magazine article University Business

Avoiding Retirement Plan Risk

Article excerpt

Higher ed has become the latest target of retirement plan fee litigation. One firm in particular has filed class-action suits against dozens of universities, alleging breaches of ERISA fiduciary duties.

The tactic has been used for years in business, says Eric Paley of legal consultants Nixon Peabody (http://www. nixonpeabody.com). When Midwest law firm Schlichter Bogard & Denton found it profitable to attack the retirement plan industry in 2006, its attorneys filed multiple suits against 18 of the largest U.S. corporations. The practice, known in the industry as "The Schlichter Blitzkrieg," does occasionally bear fruit. Over the years the firm has won more than $200 million in legal fees.

In August, Schlichter turned its attention to higher ed. A wave of litigation has swept Duke, Penn, Emory, Johns Hopkins and Northwestern, among others. Several copycat suits have also been launched. "On the whole, the allegations they're raising now at colleges and universities are roughly the same--that these plans failed to abide by ERISA responsibilities, resulting in record-keepers charging excessive fees and prudent investment options to plan participants resulting in harm to participants," Paley says.

In a September webinar, he and colleague Christian Hancey outlined the rapidly changing litigation landscape, and the importance of making the entire leadership team aware of the potential risk. …

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