USC to pay $13 million to settle lawsuit


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photo of USC Center for International and Public Affairs building
Since 2016, SCOTUS has denied to hear the case and the lower court’s decision has been affirmed. Class certification was granted to more than 30,000 participants of USC’s retirement plans by the federal district court in 2019, amplifying and uniting the plaintiffs under one cause. (Vincent Leo | Daily Trojan)

USC agreed to pay $13.05 million Thursday to settle a class-action lawsuit alleging the school mismanaged its retirement plans offered to faculty and staff, billing participants with duplicated service costs and offering higher-cost, underperforming investment choices.

The net settlement amount will be allocated and distributed to current participants of the retirement plans, authorized former participants and a beneficiary or alternate payee of such a person in the form of checks or contributions to their accounts in the plans.

The plaintiffs, nine former and current participants in the USC retirement plans, first filed a lawsuit in August 2016 accusing USC of violating the Employee Retirement Income Security Act. Passed in 1974, ERISA is designed to protect employees’ pension rights from mismanagement in retirement plans. It established enforcement provisions that protect the funds and allows participants to sue for benefits and fiduciary violations.

USC denied any misconduct or liability and sought arbitration instead of trial based on the employment agreements signed by workers — which Judge Virginia Phillips denied and saw approved on appeal.

The settlement comes as more than 20 universities across the country have faced lawsuits alleging retirement plan mismanagement since 2016.

The Ninth Circuit affirmed the lower court’s decision on Munro v. USC in 2018, and the Supreme Court declined to hear the case in 2019. In the same year, class certification was granted to more than 30,000 participants of USC’s retirement plans by the federal district court.

USC revealed discontent and argued against a class action certification on the grounds that its management of the retirement plans hasn’t affected all the participants in the same way, Law360 reported in September 2019. The University further contended that the class action should be denied because it failed to satisfy Rule 23 of the Federal Rules of Civil Procedure, which requires the questions of law to be common to the class. 

The two retirement savings plans that USC offers are the 401(a) Defined Contribution Retirement Plan and 403(b) Tax-Deferred Annuity Plan. The 401(a) plan is a lower-risk investment program that allows both employer and employee to contribute, while the 403(b) plan offers more limited investment choices and is specifically designed for employees of public schools and tax-exempt organizations.

In the settlement, USC agreed to conduct a request for proposal for recordkeeping and administrative services within 180 days of the settlement effective date.

This article will be updated with comment from the University.