PLANSPONSOR - July - August 2023 - 2

It's a Tough Job
INSIGHTS
PUBLISHER: Alison Cooke Mintzer
alison.mintzer@issmediasolutions.com
R
ecently, a class action lawsuit against Yale University's
multibillion dollar 403(b) retirement plan was decided
by a jury in Connecticut.
This was one of the few cases set to be heard by a jury (while
I know there are other cases with potential for a jury trial, I
believe they're still at the motion stage), as typically these cases
proceed as bench trials-i.e., they are presented to, and decided
by, a judge. When it was first determined this would be heard by
a jury, I recall people opining as to whether this would be good or bad for the sponsor-
would a jury understand the nuances of managing retirement plans? Would the jury be
tainted by angry employees acting out against their employer through the case?
The jury was asked to decide on four counts and in relation to three defendants:
Yale University; Michel Peel, former vice president of human resources and administration
at Yale; and the school's retirement plan fiduciary committee.
On one of the counts, whether the defendants breached their fiduciary duty of
prudence to participants by allowing unreasonable recordkeeping and administrative
fees to be charged to participants in the plan, the jury found in favor of the plaintiffs.
However, according to the verdict, the jury determined that a fiduciary following a
prudent process could have made the same decisions in relation to fees. In light of that,
the jury found that such plan mismanagement was not proven to cause harm or losses
to the plan participants, meaning there were no damages.
What's more, Yale was found not liable of breaching fiduciary duties on the three
other claims, regarding: failing to properly monitor plan investments, having funds in
expensive share classes and offering a TIAA traditional annuity. Overall, a definite win
for the Yale plan and fiduciaries.
When the verdict first came in, there was discussion, among our editorial team,
and in the industry in general about: How could the fiduciaries be found to have
breached a fiduciary duty but not have to pay any damages?
What I thought was interesting about that part of the decision, is, yes, the committee
should have done more reviewing or maybe didn't go back to an administrator when it
should have, but it was significant what the jury said-that even a committee reviewing
regularly may have made the same decision about the costs for the plan.
While we in the industry often know what best practices are, I think this jury
verdict is a refreshing recognition of what a tough job plan sponsors have. And, while
it is a study group of one case and one decision, I appreciate the jury finding, because
I agree with it. The reality is, in many of these participant lawsuits, when we look back
at what " could have been, " it's impossible to know exactly what would have happened to
the plan had a decision been made differently.
Even if a committee and fiduciaries follow all best practices, things may not turn
out as they expect. In this case, the jury reinforced this, noting that, even if the sponsor
had done everything right, fiduciaries still could have ended up here. Because they
didn't do everything right, the jury told them they should have done better. But it
couldn't determine what the other outcome might have been, so it denied damages.
The world of employer-sponsored plans is often under the spotlight-mainstream
media has many instances of negative stories about potential mismanagement of plans,
unreasonable costs and more. Yet, we need to take the victories where we can-and this
recognition that you all have a tough job and are doing your best for your employees and
participants is one worth taking. -Alison Cooke Mintzer, Publisher
2 PLANSPONSOR.COM July - August 2023
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