Columbia Accused of Retirement Boondoggle

MANHATTAN (CN) - Columbia University is turning what should have been the golden period of its employees lives into "a retirement nightmare," one woman claims in a federal class action, mirroring recent complaints against other prominent schools.

Filing suit anonymously Tuesday, Jane Doe hopes to represent the 27,000 current and former participants in the two plans Columbia offers: a retirement plan for university officers and the Columbia University Voluntary Retirement Savings Plan.

With billions of dollars of assets at stake, Columbia should "have tremendous bargaining power to demand low-cost administrative and investment management services," according to the complaint.

But Doe, a participant in the plans since 2014, says Columbia fumbled the play.

"Instead of leveraging the bargaining power of both plans, Columbia University caused the plans to pay unreasonable and greatly excessive fees for recordkeeping, administrative, and investment services," the complaint states.

"Instead of using its sophistication to identify and select high-quality investments that benefited participants and beneficiaries, Columbia University selected and retained expensive and poor-performing investment options that consistently and historically underperformed their benchmarks and similar funds.

This from a school that "counts 13 students and teachers who have won the Nobel Prize in Economics," Doe says.

Doe notes that she is one of thousands of Columbia University employees who invest hundreds of millions of dollars in the plans every year, expecting that "the world-renowned institution had constructed a stellar retirement portfolio that offered superior investment options and world-class investment management."

"Instead, Columbia University saddled each of their 27,000 participants with an overall sub-standard plan, loaded with $4.6 billion of investment options that were primarily poor to mediocre performers," the complaint states.

Doe says the result is that participants like her have suffered "hundreds of millions of dollars of staggering losses to retirement savings."

The complaint echoes federal class actions filed across the country last week against the Massachusetts Institute of Technology, Yale University and New York University.

Columbia declined to comment on pending litigation but offered a defense of its retirement plans anyway.

"Columbia is proud of the retirement benefits offered to its faculty and staff and takes its responsibility as a fiduciary seriously," the Morningside Heights school said in a statement.

The class suing Columbia seeks $100 million in damages, alleging violations of the Employee Retirement Income Security Act.

Doe rakes Columbia over the coals in particular for its investment of nearly $1 billion in plan assets in TIAA-CREF Stock Account R3, an asset she says "ranked in the bottom quartile for the past 3, 5, and 10 years for like investments according to Morningstar."

"The TIAA-CREF Stock Account was so imprudent that in 2012 AonHewitt, a solutions expert in pension plan administration, recommended to its clients that they remove this fund from their retirement plans," the complaint continues.

Class counsel David Sanford, of the Washington, D.C., firm Sanford Heisler, noted in a statement that "Columbia was on notice that TIAA-CREF was a deficient investment."

"It wasn't merely that TIAA-CREF performed poorly in a single year or two," Sanford said. "In fact, the TIAA-CREF Stock Account has been poor for many years compared to both available lower-cost index funds and the index benchmark."

Citing Morningstar data, the lawsuit says the TIAA-CREF Stock Account underperformed by approximately 19 percent.

On a $1 billion investment, such underperformance amounts to almost $200 million dollars in losses to retirement savings.

Doe says Columbia's two plans earned constitute "jumbo plans" because strong enrollment puts them among the top 1 percent of all defined contribution plans in the United States.

"For a leading university that touts its business skill and acumen, the more than 27,000 current and former Columbia University employees who participated in the Plans deserved better," the complaint states.

Similar lawsuits are cropping up across the country. To date, the list of defendants includes the University of Southern California, Cornell University, Northwestern University, Johns Hopkins University, Emory University, the University of Pennsylvania, Vanderbilt University and Fordham University.

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