The University of Chicago will pay $6.5 million to settle claims that it mismanaged its workers’ $3 billion retirement plans by allegedly allowing imprudent investments and excessive administrative fees.

The settlement, which was preliminarily approved May 23, would provide monetary and additional relief to at least 40,000 investors in the university’s retirement plans, according to court documents filed May 22 in the U.S. District Court for the Northern District of Illinois. In addition to the multimillion-dollar payment, the university also agreed not to increase record-keeping fees for at least three years and pledged to use its best efforts to...