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The Massachusetts Institute of Technology has reached a principled agreement to settle a lawsuit alleging that MIT, one of the nation's most prestigious universities, harmed workers in its retirement plan by entering into an inappropriate relationship with the financial firm Fidelity Investments.
Just a few days before the trial began, MIT and the plaintiffs said in a filing with the court that they had reached the agreement and are asking the court for 45 days for the details to be finalized and prepared for consideration by that court.
The lawsuit alleged that MIT opposed the advice of its own consultants and allowed Fidelity to package the university's pension plan with high tax investments that ended up costing tens of millions of dollars. In return, the lawsuit said, MIT utilized millions of dollars in gifts from Fidelity.
MIT and Fidelity have stated that the claims have no merit.
The lawsuit said that Fidelity executives took MIT officials on lavish excursions, including an NBA Finals game. Court documents show that in 2015, when the university considered other alternatives, an MIT dean sent the email to the head of a MIT committee overseeing the plan: "If we do not switch to Vanguard or TIAA Cref, I would expect something big and good coming to MIT, ”according to court records.
Jerry Schlichter, the plaintiff's attorney, said that shortly thereafter, "Fidelity donated $ 5 million to MIT."
In a lawsuit, MIT said the dean wrote that the email "never had any trust responsibility for the plan."
In a letter to faculty and staff on Thursday, MIT Provost Martin Schmidt wrote: "Although MIT firmly believes it has adhered to the 401 (k) Plan with strict compliance with the law and for the best for participants, the cost and distraction of litigation is likely to be significant. To avoid the continued drain of MIT resources, we have reached agreement to settle the dispute. "
Schlichter has made a career of suing pension plans for large corporations and universities, claiming that they charge high fees and hurt workers. He is suing to try to force companies and universities to offer better plans. It has given him the nickname "401 (k) Lone Ranger."
Given that the history, provided that the settlement agreement is consistent and approved by the court, it may include agreements from the university to change the way it manages the pension scheme.
In his letter, MIT's Schmidt says: "We are proud of the pension benefits offered to our employees and the processes in place to oversee these benefits. MIT is unique among our peers when it comes to offering employees both a supplemental plan of 401 (k), with an MIT contribution that corresponds to the first 5% of an employee's salary, and a traditional defined benefit pension plan, paid in full by the institute . " Fidelity, an economic supporter of NPR, is not named in the case. The company has said that the allegations in the lawsuit "are entirely fictitious and totally irresponsible."
Experts say lawsuits like this have made large companies and universities much more aware of their legal duty to protect workers' interests in retirement accounts. They say it has helped reduce the fees paid by employees in pension plans at the largest companies. But they say that many smaller organizations still have very high fees and poor investment options.