Editor's Note: This story has been updated with additional comment from USC.
A federal class action filed Wednesday against USC claims the university breached its fiduciary duty to faculty and staff who participate in retirement fund programs through the school.
The lawsuit claims more than 28,000 employees have been swindled out of millions because USC overpaid for fees and services associated with outside financial advisers who administered the plans. The university’s two main retirement vehicles were worth nearly $4.5 billion as of Dec. 31, 2014, according to the complaint filed in Los Angeles federal court.
“The inefficient and costly structure maintained by Defendants has caused Plan participants to pay and continue to pay duplicative, excessive, and unreasonable fees for recordkeeping and administrative services,” the complaint reads.
The suit was filed by Jerome Schlichter of St. Louis-based Schlichter, Bogard & Denton. Schlichter has spent a decade going after 401(k) retirement funds on behalf of corporate employees. It appears, however, Schlichter has turned his eye toward academia. Last week, his firm filed class actions against Yale University, New York University, and the Massachusetts Institute of Technology alleging similar malfeasance at those schools.
"The university takes its responsibilities to help our plan participants secure a strong retirement very seriously." Carol Mauch Amir, USC's general counsel said in a statement. "We will vigorously defend the university against this lawsuit."
The backbone of the suit deals with the number of investment options available to participants as well the number of outside institutions, such as TIAA-CREF, who run these options. The complaint alleges that instead of using a single outside institution, known in the industry as a “recordkeeper,” and a streamlined number of investment options, USC employed four recordkeepers until March (it has since slimmed down to three) and had more than 340 plan options.
This led to a massive increase in fees for participants, according to the suit.
“Each Plan paid up to $130 per participant per year from 2010 to 2014, which is well over 300% higher than a reasonable fee for these services, resulting in millions of dollars in excessive recordkeeping fees each year,” the complaint reads.
The suit is currently seeking unspecified damages to be proven at trial.
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