ERIC Joins Amicus Brief Defending Yale University

The ERISA Industry Committee joined a coalition brief filed March 18 in the U.S. 2nd Circuit Court of Appeals, defending the $5.5 billion Yale University retirement plan and arguing that a district court ruling should be upheld. ERIC was joined by business advocate U.S. Chamber of Commerce and the American Benefits Council in filing the brief in the case Vellali et al v. Yale University et al, originally filed in 2016.

A jury in Connecticut federal district court last year found in Yale’s favor in the class action lawsuit brought against Yale’s 403(b) retirement plan, ruling the school mismanaged the plan but caused no losses to plan participants.

The amicus brief argues the underlying district court decision correctly ruled that disproving loss causation requires defendants to show that a prudent fiduciary “could have” made the same decisions.

The amicus brief filed by ERIC and its allies argues:

• Congress established a flexible prudence standard for ERISA fiduciaries because of the breadth of decisions that fiduciaries must make in the face of market uncertainty;
• The case is one of dozens brought in recent years against university plans and part of a broader trend of litigation against plan fiduciaries that are costly to defend and do not actually benefit plan participants; and
• Relaxing ERISA plaintiffs’ burdens of proof would hurt plans and participants alike.

“ERIC urges the U.S. Court of Appeals to recognize the flexibility and discretion that plan sponsors and fiduciaries are afforded by the Employee Retirement Income Security Act of 1974,” said Tom Christina, executive director of the ERIC Legal Center, in a statement. “If the wrong legal standard is adopted in cases targeting plan sponsors, large employers, like our member companies, would face higher costs, more litigation, and extortionate and baseless settlement demands that would threaten the quality of benefits offered to workers and retirees.”

The case alleged Yale University; a former vice president of human resources and administration; and the retirement plan fiduciary committee 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 the plaintiffs did not prove that the plan suffered any losses or that there were any damages, and a fiduciary following a prudent process could have made the same decisions as to recordkeeping and administrative fees as the defendants, according to the verdict.

The plaintiffs, represented by law firm Schlichter, Bogard & Denton, filed an appeal with the 2nd Circuit.

Washington, D.C.-based ERIC is a national advocacy organization representing large employers which provide health, retirement, paid leave and other benefits to their nationwide workforces. A request for further comment from ERIC representatives was not returned.