The U.S. District Court for the District of Columbia threw out a class-action lawsuit against the university regarding a possible violation of the Employee Retirement Income Security Act of 1974.
The opinion on Jan. 8, signed by Judge Rosemary Collyer, states that “if a cat were a dog, it would bark. If a retirement plan were not based on long-term investments in its annuities, its assets would be more immediately accessed by plan participants. These two truisms can be summarized: cats don’t bark and annuities don’t pay out immediately.”
The original lawsuit, which was filed by former university workers in February 2018, states that the university had improperly selected certain types of retirement investment options, which led to high administrative fees. Furthermore, the workers allege that those actions violated the university’s fiduciary duties to the plan’s participants.
Currently, the university offers two retirement plans for faculty and staff: the Defined Contribution Plan and the Voluntary Contribution Plan.
The Defined Contribution Plan promises participants funds when they retire, and those funds are acquired through “the amounts contributed to that account and the investment performance of those contributions,” according to the opinion.
Moreover, the opinion declares that 10 percent of an employee’s annual salary is contributed to the Defined Contribution Plan, whereas employees can choose to contribute up to 3 percent to the Voluntary Plan.
With the Defined Contribution Plan, the university contributes “an amount equal to 5% of each Participant’s salary into his account.” Additionally, employees can personally decide how to invest their funds across “a wide array of investment options, according to individual choice.”
The lawsuit was thrown out based on the claim that the employees did not show that their finances had sustained an injury; the memorandum opinion states that the employees named in the lawsuit had not attempted to withdraw the funds from both plans, which would have resulted in financial injury to the employees.
This lawsuit is one of many filed against other American universities since 2016. Similar lawsuits against New York University, Northwestern University, the University of Pennsylvania, and Washington University in St. Louis have been dismissed, while other lawsuits against the University of Chicago and Duke University settled outside of court, with the University of Chicago paying as much as $6.5 million.
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