A class action lawsuit alleging Northwestern violated federal law in its retirement plan is back at the U.S. District Court for the Northern District of Illinois after the Supreme Court remanded the case in 2022.
Initially filed in 2016 by law firm Schlichter Bogard, the suit alleged that the University’s retirement and voluntary plan included excessive or imprudent fees options, financially harming participants.
“We allege that Northwestern failed in its duty to its employees and retirees to only allow reasonable fees to be charged in the retirement plan,” Jerry Schlichter, the firm’s founding and co-managing partner, said.
The plaintiffs allege that NU prevented participants from being able to grow their retirement savings with investments in options with reasonable fees. Such options were not available to participants and thus the University did not satisfy its obligations as fiduciary, the suit alleged.
After the Court of Appeals for the Seventh Circuit dismissed the lawsuit in March 2020, the Supreme Court unanimously ruled in favor of the plaintiffs in January 2022, reinstating the lawsuit.
“Now the case won’t be dismissed,” Schlichter said. “It will proceed, and the only way it will end is either with a settlement out of court or with a trial.”
Traditionally, Schlichter said, retirement plans were available in the form of pensions. Since then, he said the private sector has replaced pensions with 401(k) plans or the “non-profit equivalent” 403(b) plan, which NU uses.
Schlichter said employees put in a certain amount of money, and the University matches a certain percentage of the employee’s income.
In a pension plan, if the stock market went down or fees were high, the employer would make up the difference and still give the retiree their payment, Schlichter said.
However, he said with the 403(b) plan, once NU puts its money into the account, the risk shifts to the employee. If the stock market goes down or fees are high, the remaining money comes out of the employee’s retirement assets, he said.
Schlichter noted that these losses accumulate every day.
“The fees are unreasonably high,” Schlichter said. “That means their employees have a reduced retirement or may not be able to retire when they thought they could or with the lifestyle in retirement that they were hoping for or expecting.”
The University declined to comment on pending litigation.
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