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Thu Jan 27, 2022, 08:51 AM

 

Supreme Court Rules for Northwestern Employees in Retirement-Plan Case

https://www.wsj.com/articles/supreme-court-rules-for-northwestern-employees-in-retirement-plan-case-11643047401?utm_campaign=hrb&utm_medium=newsletter&utm_source=morning_brew

WASHINGTON—The Supreme Court said Monday that employers must regularly review their retirement offerings, unanimously ruling for Northwestern University employees who argued the school’s defined-contribution plan offered a confusing number of expensive investment options.

In the Northwestern case several current and former employees claim that the university mismanaged their retirement accounts by exposing them to funds that charged excessive management and record-keeping fees. The case now returns to the lower courts for a fresh look under Monday’s decision.

Among other claims, they argued that Northwestern offered mutual funds and annuities in their “retail” versions of funds, which carried higher fees than otherwise identical share classes available to certain large investors. They also alleged that the high number of investment options caused confusion and poor decisions by plan participants.

The Employee Retirement Income Security Act of 1974 requires plan fiduciaries to act with care, skill, prudence, and diligence. Federal courts in Illinois dismissed the case, finding no breach of fiduciary duty because low-fee funds were available within the hundreds of options the university provided through its retirement plans.

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I am 90% on board with this. I cannot agree enough that it is the responsibility for the University of offer low fee investment vehicles in their 401k.

I am concerned about the criticism of too many choices, however. Adults need to take responsibility for themselves and additional options are generally a benefit. That said, the retirement plan should provide no cost assistance to those employees uncomfortable with choosing their own retirement options.

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Reply Supreme Court Rules for Northwestern Employees in Retirement-Plan Case (Original post)
cinematicdiversions Jan 2022 OP
JT45242 Jan 2022 #1

Response to cinematicdiversions (Original post)

Thu Jan 27, 2022, 09:34 AM

1. Not buying too many choices...

It is not hard to check on the options. You can look up online the ratings, the fees, and compare.

If you qualify for the 403b (equivalent if a 401k but used in nonprofit companies and schools) at northwestern, you should be able to look at a webpage and decide.

Surprised they didn't just use tiaa-cref which has many low cost mutual funds to choose from. And if they included the cheap and the expensive, then shame on the employees for not doing their own work.

Every 4-6 months, I check the mutual funds I'm in my 403b and make sure they are still at least 3 star (average for their class) morning star rated. Shift out of low performance funds and into more 4 star and above funds.

I am pro worker, but antistupid, this seems like the workers didn't research their choices.

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