MIT's Supplemental 401(k) Plan

September 07, 2016

Dear MIT faculty and staff,

As we return to the start of a new academic year, I am writing to share information about a lawsuit filed against MIT last month.

You may have seen recent media reports about this and several other class-action lawsuits filed against universities, claiming problems with the administration of retirement benefit plans. The lawsuit filed against MIT also names as defendants the faculty and staff who serve as members of our 401(k) oversight committee.

The lawsuits have been filed by a St. Louis law firm that has sued numerous large employers for allowing what it claims are unreasonable expenses to be charged to their institutional retirement plans, and for retaining what it claims are high-cost and poorly performing investment options in their plans. In addition to MIT, this firm is suing Yale University, New York University, the University of Pennsylvania, Duke University, Johns Hopkins University, Vanderbilt University, Columbia University, Cornell University, the University of Southern California, and Emory University.

The lawsuits against all of the universities are similar. The one against MIT relates principally to MIT's 401(k) plan from 2010 to 2015. The lawsuit alleges that MIT did not act reasonably in overseeing the plan because it offered too many investment options prior to July 2015, some with higher costs that underperformed lower-cost options. It also makes allegations that MIT's long-term engagement of Fidelity Investments to provide administrative and recordkeeping services for its plan is suspect because of ties Fidelity and its founding family, the Johnsons, have to MIT.

MIT intends to vigorously defend against the claims asserted in this lawsuit. The Institute carefully and prudently reviews and monitors 401(k) investment options in accordance with the requirements of the law. The MIT faculty and staff who volunteer their time to serve as members of the 401(k) oversight committee have overseen the supplemental 401(k) plan in a manner consistent with the best interests of plan participants and beneficiaries, drawing on the advice of experts in the field and striving to meet the needs of our community.

MIT is unique among our peers in offering employees both a supplemental 401(k) plan, with a MIT contribution match of up to 5 percent of an employee's pay, and a traditional defined-benefit pension plan, paid in full by the Institute. We are proud of the retirement benefits offered to our employees, and the processes in place to oversee those benefits.

Sincerely,

Martin Schmidt
Provost