Boston College Retirement Plans High Costs, Low Returns ERISA Class Action

Boston College has two retirement plans, the Boston College 401(k) Retirement Plan I and the Boston College 401(k) Retirement Plan II. The complaint for this class action alleges that those responsible for the plans—the Trustees of Boston College and the Plan Investment Committee—have breach their fiduciary duties and mismanaged the plans in a way that “has cost participants millions of dollars,” through poorly-performing and high-cost investments.

The class for this action is all persons who were participants in or beneficiaries of the plans at any time between June 10, 2016 and the date of judgment in this case.

The trustees and committee breached their fiduciary duties in two ways, the complaint claims: They did not exercise prudence in managing the plans, and they each failed to monitor other fiduciaries.

The plans are large ones, with assets of $1.1 billion at the end of 2020, putting them in the top 0.4% of 401(k) plans. Their size should have given them significant bargaining power in the market for plan services, but the complaint alleges that the trustees and committee did not use their bargaining power to reduce expenses or gain better investment options.

For Plan I, the trustee and custodian for most investments is Teachers Insurance and Annuity and College Retirement Equities Fund (TIAA); TIAA also acts as the plan’s recordkeeper. For Plan II, Fidelity Management Trust Company is trustee and custodian for most of the investments; another Fidelity company is the recordkeeper. The investment options for the plans are mostly TIAA or Fidelity funds, with few other options.

Fiduciaries have the responsibilities of loyalty and prudence to the plans. Among other things, they are responsible to monitor investments and remove any that are imprudent.

The complaint says that a revenue-sharing arrangement resulted in above-market fees for recordkeeping and administration, with the revenue sharing obscuring the fees. In fact, both plans paid both direct and indirect (revenue sharing) recordkeeping fees, but for some reason, Plan II’s direct compensation was more than seven times higher than Plan I’s.

The complaint refers to consulting group NEPC’s 2021 survey of plans which, it says, showed that recordkeeping plans of a similar size paid $40 to $55 per participant. The complaint claims that Plan II paid nearly $125 per participant in direct compensation alone. Because of vagueness in the records, the complaint claims, it was unable to figure the comparable cost for Plan I.

Plan investment options also had high investment management fees, the complaint claims, and the fiduciaries failed to prudently select and monitor them. The complaint alleges, “These failures wasted the Plans’ assets and harmed each participant’s ability to obtain a secure retirement through a combination of high fees and low performance.” Also, the complaint claims that the investment options have high expense ratios.

Finally, the complaint claims that those responsible for the plans “ignored multiple red flags about TIAA and Fidelity, including court decisions concluding that specific investments in the Plans were imprudent.”

Article Type: Lawsuit
Topic: Employment
Tags: Breach of Fiduciary Duty, ERISA, Employment Violations, Retirement Plans