When you’re trying to build toward financial security in retirement, complexity is the enemy.
That message came through loud and clear in an opinion delivered last month by the U.S. Supreme Court in a case brought by employees against Northwestern University. The plaintiffs alleged that the university’s retirement plan had too many investment choices and excessively high fees.
Retirement plan sponsors have a fiduciary duty to monitor and control plan costs. Northwestern operates a 403(b) plan – a sibling of 401(k)s used by public schools and universities, nonprofits and churches. At the time in question, the Northwestern plan had more than 400 investment choices, and the high court ruled that offering workers a broad range of choices did not shield employers from claims that some of the funds on the menu were imprudent selections because of their high fees. The high court disagreed with a lower court ruling, and sent it back for further consideration.
A Northwestern spokesperson expressed disappointment with the ruling, and denied that the university had violated its fiduciary duty.
But no matter how the case is resolved, it serves as a reminder of the complexity of many of the retirement systems we have built in the United States, and the increasing burden we put on the individual to navigate a myriad of choices.
Learn more in my latest Reuters column.