Sponsors of 403(b) retirement plans, such as universities and hospitals, are facing a new potential for class action lawsuits.
Similar to 401(k) plans offered by for-profit companies, 403(b) accounts allow eligible employees to defer money from their paychecks for retirement. For the most part, the two types of plans work the same way.
Johns Hopkins University, University of Southern California, Vanderbilt University and Yale University, among others, have been hit with suits alleging breach of fiduciary duty under Employee Retirement Income Security Act of 1974 (ERISA) due to excessive administration fees and failure to replace certain 403(b) funds.
These initial lawsuits could be a sign of things to come as litigation over fees that engulfed the 401(k) market appears to be spreading to 403(b) plans, according to legal experts.
The lawsuits allege the plans and participants suffered millions of dollars of losses in retirement savings and seek damages to bolster the plan accounts.
According to experts, having an in-depth understanding of the fiduciary obligations with respect to an ERISA-covered 403(b) plan is vital.
University and hospital sponsors of 403(b) plans should review the plans terms to ensure they understand who has been allocated fiduciary responsibility.
Keep reading about excessive fee litigation here.
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