USC faces federal lawsuit over ‘excessive’ retirement plan fees

A lawsuit filed this week against USC claims that university officials failed to prevent more than 28,000 employees from overpaying for third-party retirement investment and administrative services, “resulting in millions of dollars in excessive recordkeeping fees each year.”

The federal class action follows similar lawsuits brought against eight other schools in recent weeks, including the Massachusetts Institute of Technology, Yale, Johns Hopkins, Emory and Duke universities. The complaints were all filed by Schlichter, Bogard & Denton, a national law firm based in St. Louis with a proven track record in excessive fee 401(k) litigation on behalf of corporate employees.

The suit against USC, like the other cases, alleges that the university allowed retirement plan participants to pay unreasonable — sometimes “duplicative” — administrative and investment management fees. University officials also “failed to prudently consider or offer lower-cost investment alternatives that were available” and instead chose to keep a large number of more expensive, historically underperforming investment options, the law firm alleged in a statement.

The structure, the lawsuit states, was “inefficient and costly.” Instead of using one outside provider — known in the business as a “recordkeeper” — to administer the retirement plans, USC used four until March 2016 and then reduced that number to three.

“By selecting a single recordkeeper, plan sponsors can enhance their purchasing power and negotiate lower, transparent investment fees for participants,” the lawsuit states.

USC also failed to control recordkeeping costs as the assets of its two main retirement plans grew from $2.7 billion at the end of 2009 to $4.6 billion five years later, according to the lawsuit.

The lawsuit, filed Wednesday in Los Angeles, is seeking unspecified damages.

Carol Mauch Amir, USC’s general counsel and a senior vice president, said the university takes issue with the allegations.

“The university takes its responsibilities to help our plan participants secure a strong retirement very seriously,” she said in a statement. “We will vigorously defend the university against this lawsuit.”

rosanna.xia@latimes.com

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