MIT's Supplemental 401(k) Plan

Dear MIT faculty and staff,

I am writing to share an update on the lawsuit that was filed in 2016 concerning MIT’s Supplemental 401(k) Plan. A trial in this case was scheduled to begin next week before a judge in federal court in Boston. Although MIT believes firmly that it has managed the 401(k) Plan in careful compliance with the law and in the best interests of its participants, the continued cost and distraction of litigation are likely to be significant. In order to avoid that continued drain of MIT resources, we have reached an agreement to settle the dispute.

As I explained at the time the lawsuit was filed, a St. Louis law firm brought lawsuits against MIT as well as numerous other universities, claiming the universities allowed unreasonable expenses to be charged to their retirement plans and included what the firm claims are high-cost or poorly performing investment options. The claims concerning the investment options center on the offerings in MIT’s 401(k) plan from 2010 to 2015, before the investment lineup was redesigned in July 2015.

Over the last three years, MIT has vigorously defended the actions of the faculty and staff who have devoted their time and expertise to serve as fiduciaries of the plan. We believe that the evidence at trial would have demonstrated that the Institute carefully and prudently managed the 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 and wishes of the MIT community.

The settlement we announce today is made solely to avoid the continued costs and distraction of litigation, including a protracted trial and potential appeals that could last for years. After the details of the settlement are finalized, those of you who were participants or beneficiaries of the plan from August 2010 to the present will receive information about the administration of the settlement.

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

Sincerely,

Martin A. Schmidt
Provost