University Lawsuits: Will You Be Sued Next?

There has been a recent flurry of university lawsuits because of issues with educational institutions’ retirement plans. Yale, MIT, NYU, Duke, Columbia, Emory, Vanderbilt, John Hopkins and Penn are just some of the universities being sued for allegedly not acting in the best interest of their employees.

The common issues these lawsuits share include: offering too many funds and potentially confusing participants, offering expensive funds that underperform compared to their lower cost peers, and using multiple record-keepers and therefore missing the opportunity to leverage lower costs. We often encounter these types of issues on university retirement plans, however, schools are now being sued for record amounts of money. For example, the lawsuit against Columbia University claims $100 million in damages.

If there is even the slightest chance that your retirement plan has these or similar issues, you should have it checked by a 3(38) fiduciary, such as Twelve Points Retirement Advisors. Our team helps plan sponsors identify problems, provide solutions and avoid hefty potential liabilities.

Time again we talk with plan sponsors about their retirement plans, and they assure us that their current advisor is doing a great job and that they are all set. However, once we delve into their plan, we often find many fineable problems that may engender a lawsuit and must be fixed. We can assume the above-mentioned universities believed they, too, were in good shape — but now they are facing massive lawsuits.

What’s more, if their plan advisor happened not to be a 3(38) fiduciary, that advisor had the ability to walk away without having to assume any liability for problems they most likely created. This is why Twelve Points continually stresses the importance of having a 3(38) fiduciary and a retirement plan specialist as an advisor.

The key thing to know is that a 3(38) fiduciary removes the plan sponsor’s liability for investment decisions. In contrast, a 3(21) fiduciary or an advisor who is not a fiduciary at all either shares liability with the plan sponsor or assumes absolutely no liability. That’s why the financial services industry is veering more towards 3(38) fiduciaries. Since only 5% of advisors are 3(38) fiduciaries, this differentiates Twelve Points from other retirement advisors. As a 3(38) fiduciary and retirement plan specialist, we have the familiarity to detect potential issues, assist in plan design and help employees properly prepare for retirement.

Over 25,000 financial advisors in the U.S. work on retirement plans, however, fewer than 1% actually specialize in retirement planning. Choosing to work with a 3(38) fiduciary can truly impact the success of your retirement plan.