Wake Forest University Retirement Plan Lawsuit Will Proceed

A federal judge has allowed an Employee Retirement Income Security Act lawsuit to procced.

The lawsuit against the Wake Forest University Baptist Medical Center, the board of directors of the University Baptist Medical Center, the retirement benefit committee and 30 unnamed individuals survived the defendants’ motion to dismiss, according to the order from District Court Judge William Lindsay Osteen, Jr., of the U.S. District Court for the Middle District of North Carolina.

“This court finds Plaintiffs should be afforded an opportunity to conduct discovery” as to whether participants were harmed because of high-cost mutual funds, Osteen Jr. wrote.

Defendants previously alleged—in the original and amended complaint—that the 403(b) university plan was mismanaged by plan fiduciaries because it was filled with excessive-fee investments, that the plan fiduciaries misused revenue sharing to pay for administrative expenses and that they failed to conduct periodic bids to the market to ensure that the recordkeeping and administrative costs remained competitive.

The defendants had sought to dismiss plaintiffs’ claims on the grounds of failure to state a claim and failure to state a claim upon which relief can be granted, according to the judge’s order.

The original complaint was filed in 2021 before the same court.

The plaintiffs are former plan participants, according to court documents. The plaintiffs have alleged that because of the size of the Wake Forest University Medical Center 403(b) plan in 2019—$1.8 billion in retirement plan assets for 19,000 participants—the plan qualifies as a “jumbo” plan and as such plan fiduciaries should have been able to secure lower-fee arrangements with service providers.

Plaintiffs alleged that many of the mutual funds in the Wake Forest Baptist Medical Center 403(b) Retirement Savings plan were more expensive than comparable funds common to similarly sized plans with more than $1 billion of assets. For example, the defendants stated that the plan’s investment expense ratios for funds were up to 280%, in one case, and 273%, in another—higher than median expense ratios for funds in the same investment category.

TIAA is the plan’s recordkeeper and Capital Group’s American Funds provided target-date investments for the 403(b) plan.

A request for comment to the Wake Forest University Baptist Medical Center was not returned.