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Washington University St. Louis Lawsuit

This lawsuit alleges many ERISA violations, first contending failure to leverage bargaining power ($3.8 billion, 24,000 participant 403(b) plan as of December 2015) to benefit participants and their beneficiaries, thus causing the Plan and participants to pay unreasonable and excessive fees for investment and administrative services. Further, the lawsuit contends that University selected and retained underperforming investments that charge excessive fees, with specific mention of the number of funds offered, at 35 TIAA-CREF funds and over 80 Vanguard funds, representing retail share classes that levy higher expenses rather than their institutional share class counterparts. Participants paid asset-based administrative fees that increased with the value of the participants’ accounts, despite no additional services offered. The complaint also mentions the plans’ principal capital preservation fund, the TIAA Traditional Annuity, an insurance company fixed income account that prohibited participants from transferring their account balance in this option during employment except in 10 annual installments. Participants were also unable to take a lump sum distribution from the option without a 2.5% surrender charge. University fiduciaries are also alleged to have engaged in prohibitive transactions in violation of ERISA, accepting and approving the design and administration of the TIAA loan program designed to benefit TIAA at the expense of the plan participants, requiring excessive collateral and excessive loan administration fees. Additionally, the University is alleged to have maintained an “inefficient and costly structure” by employing two recordkeepers, TIAA-CREF and Vanguard, causing duplicative and exorbitant fees.

www.plansponsor.com; June 20, 2017.