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Retirement Industry People Moves

Plansponsor.com - Fri, 07/19/2019 - 11:16
Art by Subin YangTIAA Hires Chief Customer OfficerSanjay Gupta has started at TIAA as chief customer officer of TIAA Financial Solutions. Gupta will report to Lori Dickerson Fouché, chief executive officer, TIAA Financial Solutions.In this newly created position, Gupta will lead the strategic development, execution and measurement of a comprehensive approach to simplify the customer experience for TIAA’s 15,000 institutional and 5 million individual customers, including overseeing marketing and communications for the company.“Sanjay’s deep expertise will accelerate our efforts to grow our business in service to our customers,” says Fouché. “His extensive experience launching and building brands and digital and mobile platforms, along with his focus on execution excellence will enable us to engage those we serve in a highly personalized, customized way to help them build confidence and meet their financial goals.”Prior to joining TIAA, Gupta served as executive vice president of Marketing, Innovation and Corporate Relations at Allstate where he led advertising, public relations, e-commerce and drove product and service innovation. He also previously served as chief marketing officer of Ally Financial where he drove revenue growth by establishing a new brand, creating new products and promoting the company using innovative marketing. Previously, he held several roles at Bank of America.Gupta holds a bachelor’s degree in electronics engineering from the University of Mumbai and a master’s in business administration from The University of Texas at Austin. He will be based at TIAA’s New York headquarters.Northern Trust Announces COO for Global Foreign ExchangeMarisa Kurk has been named chief operating officer of Northern Trust’s Global Foreign Exchange (GFX) business.Based in Chicago, Kurk will drive the day-to-day enablement of GFX business strategy and operations, capitalizing on strategic technology and product capabilities gained through acquisitions and partnerships. She brings more than 15 years of industry experience in FX operating and strategic risk management frameworks, including the management of legal and regulatory risks, as well as market best practices, controls and client servicing. Prior to joining Northern Trust, Kurk served as COO of Belvedere Trading, LLC and COO and senior managing director of Currency Management at Mesirow Financial.“Marisa brings excellent industry experience to Northern Trust and will accelerate the execution of our FX strategy and delivery of innovative solutions to clients,” says John Turney, head of Global Foreign Exchange at Northern Trust. “Marisa is a key leader to help drive our investment in technology and continued focus on the client experience across our FX platform.”The acquisition of BEx LLC in 2018 enhanced Northern Trust’s platform for algorithmic FX trading, global liquidity aggregation and transparency in execution and pricing to institutional clients worldwide. A partnership with Lumint Corporation, also announced in 2018, delivers currency management solutions with advanced portfolio, share class and look-through hedging services, complemented by transparency and analytical tools.CapAcuity Merges with Executive Benefits FirmCapAcuity, LLC and Westport Strategies, LLC (Westport) have signed a definitive agreement to merge their operations.“We are very excited to have the Westport team join forces with us,” says CapAcuity CEO Peter Cahall. “They are one of the preeminent firms in the executive benefits marketplace, with over $2.5 billion in assets under management. Their staff, systems, technology, and client base will be important assets to our combined business.”“Combining our companies is a significant event for the marketplace and for our clients,” says Westport Managing Director Don Harrington. “CapAcuity has become a leader in executive benefits by identifying and responding to the trends that are fundamentally changing our business—new tax laws, reduced investment product costs, and greater demand for transparency. And they are addressing these trends with cutting-edge solutions that materially benefit plan sponsors and their bottom lines.”The two companies have complementary service offerings. Both companies work exclusively in the executive benefit marketplace, with expertise in funding and hedging, tax optimization, and asset management. “Importantly, CapAcuity and Westport share the same values of objectivity, transparency, and high-touch client service,” Cahall says.CapAcuity Chief Operating Officer Bryant Kirk notes that “like CapAcuity, Westport’s professionals have decades of experience and expertise. They have built proprietary systems for evaluating and delivering cost-effective funding solutions and asset-liability management. Plan sponsors, consultants and advisers trust Westport, which is why they have built a large and loyal client base.” Kirk emphasized that Westport’s Albany and Boston-based teams will not change and will provide seamless continuity of services to their clients.“By leveraging CapAcuity’s innovations and thought leadership, we’ll be able to offer our clients a broader suite of services, and drive efficiencies for even more companies,” says Westport Managing Director Scott Seibel. Pryor Cashman Welcomes Seventh Lateral Partner  Shane Stroud has joined law firm Pryor Cashman to co-lead its Executive Compensation, Employee Retirement Income Security Act and Employee Benefits Group. With nearly two decades of experience, Stroud joins as a partner, having previously been with Hughes Hubbard & Reed. He will be resident to the firm’s New York office.Stroud is the seventh new lateral partner to join Pryor Cashman since February.Specializing in all aspects of employee benefits and executive compensation (EBEC), Stroud represents both executives and employers—particularly in the media + entertainment, professional services and pharmaceutical industries—in negotiating and drafting executive employment and severance agreements, as well as advising on EBEC issues related to major mergers and acquisitions, spin-offs, IPOs, private equity and leveraged buyout transactions.“With businesses merging and reorganizing at historic rates, our clients are looking to us for sophisticated guidance on complex executive employment, compensation and ERISA matters. As one of the foremost attorneys in this field, Shane will bolster our Group’s already recognized capabilities while serving as a strategic adviser both to employers and high-level talent,” said Ronald Shechtman, Pryor Cashman’s managing partner.Stroud also regularly advises clients on the design and drafting of equity-based and incentive compensation plans and the implementation and design of qualified and non-qualified employee benefit plans (including health and welfare plans, 401(k) plans, employee stock ownership plans and supplemental executive retirement plans). Stroud received his J.D., magna cum laude, from Tulane Law School, where he was a member of the Order of the Coif, and his bachelor’s degree from the University of New Orleans.Arthur J. Gallagher & Co. Acquires DPI Benefits  Arthur J. Gallagher & Co. acquired Kansas-based Darrell Phillips, Inc., dba DPI Benefits.Operating since 2008, DPI Benefits is an independent benefits broker and consultant offering qualified retirement plans and group benefits to hospitals and other businesses throughout the state of Kansas. Darrell Phillips and his associates will continue to operate from their current location under the direction of Jerry Roberts, head of Gallagher’s Heartland region employee benefits consulting and brokerage division, and Jeff Leonard, National Financial and Retirement Services practice leader.“DPI Benefits is a highly specialized benefits consultant with solid client relationships that offers strong cross-selling opportunities with Gallagher’s other brokerage operations,” says J. Patrick Gallagher, Jr., Chairman, president and CEO. “I am very pleased to welcome Darrell and his associates to Gallagher.”Sentinel Benefits Brings in Sales Consultant for Health Team  Sentinel Benefits & Financial Group has added Joni Worrell to the Health & Welfare team as a sales consultant. She will be working out of Ohio to expand Sentinel’s Health & Welfare service offerings into the Midwest region, along with Tennessee, Pennsylvania and other areas. Prior to her hiring at Sentinel, Worrell worked as a relationship development manager at BusinessPlans Inc. in Miamisburg, Ohio. Worrell brings over 20 years of experience in the benefits services industry, along with nearly 10 years of COBRA administration. “We are so excited to have Joni join our team,” says Scott Riordan, vice president, Health & Welfare Services. “She not only brings her experience and expertise in this field, but also a passion for our industry and a desire to help both employers and participants alike. We’re ecstatic about everything she brings to the table.”  The post Retirement Industry People Moves appeared first on PLANSPONSOR.
Categories: Industry News

Financial Difficulties Keep Employees From Retirement Preparedness

Plansponsor.com - Fri, 07/19/2019 - 09:17
Cash flow and debt challenges continue to plague employees, inhibiting their ability to save sufficiently, PwC found in a survey. Fewer employees feel their compensation is keeping up with their cost of living.PwC says these findings should prompt employers to revisit their financial wellness programs to ensure that they are addressing the challenges their employees are facing and motivating them to make improvements to their overall financial well-being and retirement readiness.Asked what is causing them stress, 59% said financial matters and/or challenges. Only 15% said their job; 12%, relationships; and 10%, health concerns.Forty-nine percent said they find it difficult to meet household expenses on time each month. Eighty-two percent expect to be working during retirement (50% part-time and 32% full-time). A mere 18% are not planning on working in retirement.Fifty-seven percent of workers would like to make their own financial decisions but have someone validate those decisions. Thirty-one percent want specific advice. A mere 12% do not want any help.These findings indicate that plan sponsors need to revisit their financial wellness programs, Kent Allison, a partner and national leader of PwC’s Employee Education and Wellness Practice, tells PLANSPONSOR. First off, many of these “financial wellness” programs are simply retirement planning programs that have been renamed, Allison says. They need to holistically cover all of the financial challenges an individual might be facing, not just retirement savings, he adds.The financial wellness program should be part of a company’s other wellness benefits. Because these various benefits and tools are offered by various providers, they exist in silos. What employers should do is offer these benefits on a single website or digital platform and direct workers to the various benefits based on whatever challenges or needs they have, he says.“It’s our experience that the most effective financial wellness programs are positioned as part of the broader company wellness initiative,” Allison says. “For example, those that are integrated with an existing health wellness program seem to have higher engagement rates and more measurable results.” And like rewards that are sometimes offered in health wellness programs, employers should consider doing the same for their financial wellness programs, to drive positive behaviors, he says.The website and digital platform should also be supported with coaches to whom workers can reach out, he adds. In general, employers need to espouse an overall “culture of well-being,” he maintains.The post Financial Difficulties Keep Employees From Retirement Preparedness appeared first on PLANSPONSOR.
Categories: Industry News

GoalPath Offers Defined Outcome System

Plansponsor.com - Fri, 07/19/2019 - 08:47
GoalPath, a registered investment adviser (RIA) that acts as a fiduciary, has rolled out a suite of financial planning, financial wellness and asset allocation tools for retirement plan advisers and sponsors.“Employers today want to help their employees retire on time by adding low-cost, custom ‘do-it-for-me’ investment options, easing stress through financial wellness programs and gathering data to make smarter plan decisions,” says Marko Ungashick, chief executive officer of GoalPath. “The challenge is that they’ve been forced to address all these issues in silos, negotiating fees and services with multiple providers. We believe GoalPath will enable retirement plan sponsors to help their employees achieve their savings and spending goals in one easy-to-use, low-cost solution tailored to each individual’s unique situation.”The program offers target-date funds that consider not just a participant’s age but other data, and it emphasizes retirement income over account balances. Vern Cushenbery, chief investment officer at GoalPath says the porfolios do this by systematically investing and accumulating “slices of retirement income” to generate a stream of inflation-adjusted annual income throughout retirement for each individual.“By seeking to manage the relevant risks,” Cushenbery says, “We aim to increase clarity for investors as they plan for retirement, and to enable the delivery of meaningful information to help participants and plan sponsors better assess retirement readiness.”For more information, contact Cushenbery at vern@goalpathsolutions.com or 913-647-8373.The post GoalPath Offers Defined Outcome System appeared first on PLANSPONSOR.
Categories: Industry News

Trump to Nominate Son of Late Antonin Scalia as Labor Secretary

Plansponsor.com - Fri, 07/19/2019 - 08:29
President Donald Trump tweeted that he plans to nominate Eugene Scalia, son of late Assistant Supreme Court Justice Antonin Scalia, for the position of Secretary of the Department of Labor (DOL). According to news reports, in a meeting yesterday, Trump offered Scalia the job and he accepted. Labor Secretary Alexander Acosta resigned last week following controversy over his role in financier Jeffrey Epstein’s plea deal for crimes committed when Acosta was a U.S. attorney in Florida. Scalia is currently a partner in the Washington, D.C., office of the law firm Gibson, Dunn & Crutcher. However, he was previously solicitor of the DOL, a job he filled by a recess appointment used by then President George W. Bush because he was not confirmed by the Senate, which at the time was controlled by Democrats. He may likely face confirmation issues again. According to news reports, Senate Minority Leader Chuck Schumer, D-New York, said, “President Trump has again chosen someone who has proven to put corporate interests over those of worker rights. Workers and union members who believed candidate Trump when he campaigned as pro-worker should feel betrayed.” If confirmed as DOL Secretary, the fate of the department’s fiduciary rule is in question. The DOL has said a new rule could be issued by the end of the year. However, Scalia was part of the team that defended the Chamber of Commerce in its lawsuit against the previous DOL fiduciary rule. That rule was vacated by the 5th U.S. Circuit Court of Appeals. American Securities Association (ASA) CEO Chris Iacovella released the following statement: “Eugene Scalia is a highly accomplished attorney with a great deal of experience navigating the intersection of Washington, American businesses, and the impact of regulation on consumers and Main Street investors. He is a fantastic pick to serve as the next Labor Secretary. ASA looks forward to working with him to ensure the DOL harmonizes its rule with the SEC’s Regulation Best Interest Rule. We urge the Senate to move his confirmation process forward as swiftly as possible.”The post Trump to Nominate Son of Late Antonin Scalia as Labor Secretary appeared first on PLANSPONSOR.
Categories: Industry News

Court Rules for SunTrust Defense on Fiduciaries’ ‘Actual Knowledge’ Question

Plansponsor.com - Thu, 07/18/2019 - 12:14
The U.S. District Court for the Northern District of Georgia’s Atlanta Division has ruled once again in an Employee Retirement Income Security Act (ERISA) lawsuit filed against SunTrust Bank.The underlying lawsuit alleges that SunTrust Bank’s 401(k) plan engaged in corporate self-dealing at the expense of plan participants. The lead plaintiff suggests that plan officials violated their fiduciary duties of loyalty and prudence by selecting a series of proprietary funds (referred to as the STI Classic Funds) that were more expensive and performed worse than other funds they could have included in the plan—and by repeatedly failing to remove or replace the funds.In 2014, the 11th U.S. Circuit Court of Appeals previously ruled in this matter. Although the 11th U.S. Circuit Court of Appeals disagreed with the District Court’s initial dismissal of certain claims based on ERISA’s three-year statute of limitations, it found all the claims were nonetheless time-barred by ERISA six-year statute of limitations.The latest ruling out of the Georgia District Court comes on the defendants’ motion for summary judgment on Count VIII of the plaintiffs’ second amended consolidated class action complaint. In its ruling, the District Court grants summary judgement on behalf of the defense.Case documents show Count VIII alleges certain defendants “were aware that their predecessor fiduciaries had breached their duties in selecting funds and thus breached their own duties by failing to take adequate steps to remedy, within the class period, their predecessors’ breaches in selecting the funds at issue.”Though it ultimately sides with the defense, the text of the decision goes into significant detail regarding the lack of detail included in committee meeting minutes with respect to genuine deliberation over the investment menu during the class period. The text of the decision also recounts substantial details from the depositions of numerous individual fiduciary defendants.In its analysis of the facts and legal standards applying in this case, the District Court states that “the issue on this motion for summary judgment is a narrow one.” It concerns simply concerns the predecessor fiduciaries’ initial selection process for the affiliated funds and whether the successor fiduciary defendants may be held liable for failing to remedy those allegedly imprudent selections.To make this determination, the District Court first considers whether the successor fiduciary defendants needed actual knowledge of their predecessors’ imprudent selections for liability to attach, or whether constructive knowledge is sufficient. Then, the District Court determines whether plaintiffs have sufficiently demonstrated the successor fiduciary defendants had the requisite state of mind regarding their predecessors’ selection process.“Defendants argue that, for them to be held liable for breaches by the predecessor fiduciaries, they need to have had actual knowledge of the predecessor fiduciaries’ breaches,” the decision explains. “Defendants further argue plaintiffs produced no evidence of actual knowledge by the successor fiduciaries; thus, Count VIII must fail. In response, plaintiffs contend they need only produce evidence that the successor fiduciary defendants had constructive knowledge of or were willfully blind to their predecessors’ breaches. Plaintiffs further submit that summary judgment is generally inappropriate where a party’s state of mind is at issue, as is the case here, because of the critical role of the fact-finder in assessing and weighing such evidence.”At the core of the plaintiffs’ argument is the theory that Count VIII involves successor fiduciary liability, which they argue is separate and distinct from co-fiduciary liability. Thus, they argue, Count VIII “arises under ERISA’s general fiduciary duty provisions, 29 U.S.C. § 1104, as applied through 29 U.S.C. § 1109.” Furthermore, plaintiffs argue Section 1105 cannot apply, as defendants argue, because “predecessor and successor fiduciaries are not ‘co-fiduciaries’ because they are not fiduciaries at the same time and do not act jointly to manage the plan.”In ruling for the defense on this complex set of issues, the District Court states that none of the cases cited by plaintiffs use the “constructive knowledge language” the plaintiffs rely on in their arguments. Moreover, the decision states, the cases do not appear to otherwise suggest constructive knowledge is the appropriate standard to apply in this matter.Plaintiffs argue that, viewed collectively, summary judgement is inappropriate here because there exists a genuine issue of material fact as to whether defendants should have known of the alleged fund selection breaches. The District Court disagrees.“First, the Court agrees with defendants that plaintiffs’ alleged showing of constructive knowledge assumes defendants had a duty to scour past meeting minutes and interrogate benefits plan committee members for any indication of prior breaches,” the decision explains. “Plaintiffs fail to cite any case justifying such a stringent obligation for defendants, however, and the availability of meeting minutes to defendants does not give them constructive knowledge of everything therein. Moreover, as defendants suggest, there is nothing inherently improper about the inclusion of proprietary funds in the plan.”This means that, even if the affiliated funds were underperforming during the defendants’ tenure, that would not necessarily spur one to view their original selection as inherently suspect.“Thus, the mere fact that the plan included the affiliated funds—and defendants were aware of that fact—is not sufficient to charge them with constructive knowledge of their predecessors’ alleged improper selection process,” the decision concludes. “In short, plaintiffs have failed to adduce evidence that defendants had actual knowledge of their predecessors’ breach; defendants thus cannot be liable for failing to remedy the allegedly imprudent selection process for the affiliated funds.”The full text of the opinion is available here.The post Court Rules for SunTrust Defense on Fiduciaries’ ‘Actual Knowledge’ Question appeared first on PLANSPONSOR.
Categories: Industry News

Investment Product and Service Launches

Plansponsor.com - Thu, 07/18/2019 - 11:37
Art by Jackson EpsteinFidelity Adds Lower Expense Ratio Mutual FundsFidelity Investments has expanded its index fund offering with the launch of five new mutual funds.As is the case with Fidelity’s 53 existing stock and bond index funds and 11 sector exchange-traded funds (ETFs), the new funds have lower expense ratios than their comparable funds at Vanguard. The five new funds are available to individual investors, third-party financial advisers (TPAs) and workplace retirement plans.“Fidelity’s goal is to provide exceptional value, simplicity, and choice for our customers,” says Colby Penzone, senior vice president of Investment Product at Fidelity. “We saw an opportunity to further expand our robust index fund lineup and bring our expertise into these areas of the market. Our scale and diversification put Fidelity in a unique position to help clients reach their financial goals.” The new funds include: Fidelity Mid Cap Growth Index Fund; Fidelity Mid Cap Value Index Fund; Fidelity Small Cap Growth Index Fund; Fidelity Small Cap Value Index Fund; and Fidelity Municipal Bond Index Fund.Vanguard Introduces Global Stock FundVanguard has filed a preliminary registration with the U.S. Securities and Exchange Commission (SEC) for Vanguard International Core Stock Fund. The new actively managed fund will be managed by Wellington Management Company LLP (Wellington Management) and is expected to be available to investors in the fourth quarter of 2019.Vanguard International Core Stock Fund will offer broad equity exposure to both developed and emerging non-U.S. markets, blending growth and value styles and diversifying across a range of sectors. The fund will seek to provide long-term capital appreciation and hold approximately 60 to 100 stocks, with no individual positions representing greater than 5% of the portfolio. It is expected to have moderate overweight or underweight allocations to sectors and regions relative to the MSCI ACWI ex USA Index.Wellington Management is said to employ a multi-disciplinary approach that identifies potential high-return opportunities by leveraging the full breadth and depth of Wellington Management’s global resources, including: Global Industry Analyst research; positions held by Wellington Management’s investment boutique teams; investment ideas from Wellington Management’s quantitative research teams; macro-economic research; and environmental, social and governance (ESG) research emphasizing governance practices. The estimated expense ratios for Vanguard International Core Stock Fund will be 0.35% for Admiral Shares and 0.45% for Investor Shares, both considerably lower than the asset-weighted average expense ratio of 0.75% for the industry’s foreign large-blend fund category.The post Investment Product and Service Launches appeared first on PLANSPONSOR.
Categories: Industry News

S&P Finds Most Not-for-Profit Hospitals Manage Pensions Well

Plansponsor.com - Thu, 07/18/2019 - 11:16
The U.S. not-for-profit health care sector has benefited from an increase in the median funded status of its pension plans in fiscal 2018—increasing from 80.6% to 85%, according to S&P Global Ratings.S&P says this boost is primarily due to an increase in the discount rate used to measure pension liabilities, which reduced those liabilities. The discount rate is based on a conservative municipal bond rate, and S&P views the 2018 increase as being within reasonable volatility expectations, so it says it doesn’t consider it to be a fundamental change in the funded status of the plans.In the near term, S&P Global Ratings believes a higher funded status should mean lower statutory minimum contributions to defined benefit (DB) pension plans, which could help overall financial profiles because operating performance in the health care sector remains under stress. However, the bond rate may be volatile from year to year, the projected benefit obligation for many plans remains large, and many plans have updated assumptions such as mortality to more accurately recognize longer lifespans and higher benefits to be paid out. Therefore, the advantages to organizations’ financial profiles from lower statutory minimum contributions may not fully materialize.S&P notes that many not-for-profit issuers continue to focus on de-risking strategies that lower pension funding risks, including increasing annual contributions to improve the funded status with less dependence on volatile markets, closing current plans to new participants, freezing plans, and in some cases, terminating plans altogether.According to S&P’s analysis, most hospitals and health systems have managed their pension burdens well, with no credit implications. However, it believes that even without a direct negative credit impact, in some circumstances, a high funding burden has inhibited improvement in credit quality. Furthermore, not all hospitals’ pension funding improved in 2018, and for providers already struggling with thin income statements and balance sheets, underfunded pension plans could contribute to credit stress.In general, S&P says, it considers fully funded plans (plans funded at 100% or more) or the absence of a DB plan as positive factors in its assessment of an organization’s financial profile. Conversely, it views DB plans that are considerably underfunded, or expected to be underfunded in the near- to mid-term, as risks to the financial profile.Whether the average funded status will remain at the current level or improve depends on a number of factors, including market returns, discount and bond rate trends, other actuarial assumptions, and benefit design changes, according to the S&P Global Ratings report. S&P notes that many hospitals and health systems are moving to mitigate risks through more conservative asset allocation strategies, while others are focusing on reducing liabilities by making benefit design changes. Still, some are reluctant to change or curtail DB plans that have long been a part of their benefits packages and that they see as a powerful recruitment and retention tool.The post S&P Finds Most Not-for-Profit Hospitals Manage Pensions Well appeared first on PLANSPONSOR.
Categories: Industry News

Yale Sued Over Wellness Program ‘Penalty’

Plansponsor.com - Thu, 07/18/2019 - 09:53
Employees of Yale University have filed a class action lawsuit on behalf of all current and former employees of Yale who are or were required to participate in Yale’s Health Expectation Program (HEP) or pay a fine adding up to $1,300 annually between January 1, 2017 and present. While incentives to participate in wellness programs may encourage participant by employees who want to participate, these incentives are also a “penalty” for those who do not. According to the complaint, the penalty for non-participation in the program is among the highest in the country among large employers, coming in at $25 per week, or $1,300 per year. The lawsuit contends that in New Haven, Connecticut, where Yale is located, $1,300 is equivalent to nearly five and half weeks’ worth of food, four months of utility costs, nearly a months’ worth of housing, or a month’s worth of childcare. The lawsuit accuses Yale of not only slashing employees’ expected income, but violating their civil rights. It notes that the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) prohibit employers from extracting medical or genetic information from employees unless that information is provided voluntarily. The lawsuit goes on to say the $1,300 penalty makes the HEP anything but voluntary. It cites one employee who is a member of one of the unions at Yale that is subject to the HEP, as saying Yale is “forcing” union members to do “something they don’t want to do” and “financially penalizing them if [they] don’t do it.” Another union member explains that he would prefer not to participate but “can’t throw away $25 [per week] to keep [his] information private.” “The weekly penalty imposed by Yale has a coercive effect on its employees, forcing them to either pay a fine to protect their civil rights or participate in a wellness program against their will. That is a violation of the ADA and GINA,” the complaint says. In 2016, the Equal Employment Opportunity Commission (EEOC) issued final regulations governing employee wellness programs’ compliance with the ADA and GINA. The final ADA rule stated that wellness programs that are part of a group health plan and that ask questions about employees’ health or include medical examinations may offer incentives of up to 30% of the total cost of self-only coverage. The final GINA rule said the value of the maximum incentive attributable to a spouse’s participation may not exceed 30% of the total cost of self-only coverage, the same incentive allowed for the employee. The AARP, in 2017, filed a lawsuit alleging that the EEOC’s final wellness program rules are arbitrary, capricious, an abuse of discretion, and not in accordance with law. The AARP asked that the rules be invalidated. In 2018, the U.S. District Court for the District of Columbia vacated the incentive portions of the wellness program rules. However, the judge issued a stay on his decision until January 1, 2019. According to his opinion, the court “will also hold EEOC to its intended deadline of August 2018 for the issuance of a notice of proposed rulemaking.” On December 20, 2018, consistent with the court’s order, the EEOC withdrew the “incentive” portions of the 2016 rules.The post Yale Sued Over Wellness Program ‘Penalty’ appeared first on PLANSPONSOR.
Categories: Industry News

Even With No CBA, Withdrawing Employer May Have to Pay Multiemployer Plan

Plansponsor.com - Wed, 07/17/2019 - 13:03
A federal appeals court has reinstated a lawsuit against an employer that was a member of a multiemployer plan and withdrew from the plan when its collective bargaining agreement (CBA) expired.The 4th U.S. Circuit Court of Appeals disagreed with a District Court’s dismissal of the lawsuit which was filed by the plan when Four-C-Aire refused to pay an exit contribution after withdrawing from the plan. The exit contribution was required by the Sheet Metal Workers’ National Pension Fund trust documents. Four-C-Aire’s withdrawal liability was reduced to zero under the “de minimis reduction,” an exception under the Employee Retirement Income Security Act (ERISA) which reduces or eliminates withdrawal liability when the amount would be relatively small (less than $150,000).The appellate court noted that under Section 515 of ERISA, a multiemployer plan can enforce, as written, the contribution requirements found in the controlling documents.According to the court opinion, Four-C-Aire signed onto a CBA to remain in effect until April 30, 2016, that required Four-C-Aire to contribute to the fund and “incorporated by reference” the fund’s trust documents. The CBA also bound Four-C-Aire to abide by the terms and conditions of the trust documents, “including any amendments thereto and policies and procedures adopted by the [Fund’s] Board[] of Trustees.Under Article V, Section 6(a) of the trust documents, Four-C-Aire was required to pay an exit contribution to the fund when three criteria were met: (1) it ceased to have an obligation to contribute to the fund, and (2) as a result of the cessation of its obligation to contribute, it had an event of withdrawal under Title IV of ERISA, but (3) did not have to pay a statutorily-mandated withdrawal liability. While the CBA was in effect, the trust documents were amended to state that the employer’s obligation to pay an exit contribution is independent of the employer’s CBA and continues to apply after the termination of the CBA, notwithstanding any language to the contrary in the CBA.The fund demanded an exit contribution of $97,601.01, which it claimed to be the amount required by the trust documents based on Four-C-Aire’s contribution history.Because Four-C-Aire signed the CBA and, thereby, agreed to be bound by the trust documents, the trust documents provided that a participating employer would be obligated to pay an exit contribution under certain circumstances, the amendment additionally stated that the obligation would survive the expiration of the CBA, and Four-C-Aire failed to pay the exit contribution despite the occurrence of events requiring such a contribution, the court found that the fund has set forth a viable claim.The case was remanded to the District Court for further proceedings.The post Even With No CBA, Withdrawing Employer May Have to Pay Multiemployer Plan appeared first on PLANSPONSOR.
Categories: Industry News

Additional Preventive Care Benefits Permitted for HDHPs

Plansponsor.com - Wed, 07/17/2019 - 11:14
The IRS has issued Notice 2019-45, which expands the list of preventive care benefits permitted to be provided by a high deductible health plan (HDHP) under section 223(c)(2) of the Internal Revenue Code without a deductible, or with a deductible below the applicable minimum deductible (self-only or family) for an HDHP. On June 24, President Donald Trump issued Executive Order 13877, “Improving Price and Quality Transparency in American Healthcare to Put Patients First,” including, among other things, an order that the Secretary of Treasury, to the extent consistent with law, issue guidance to expand the ability of patients to select HDHPs that can be used alongside a health savings account (HSA), and that cover low-cost preventive care, before the deductible, that helps maintain health status for individuals with chronic conditions. In prior guidance the Treasury Department and the IRS have stated that preventive care generally does not include any service or benefit intended to treat an existing illness, injury, or condition. However, the agencies say they are aware that the cost barriers for care have resulted in some individuals who are diagnosed with certain chronic conditions failing to seek or utilize effective and necessary care that would prevent exacerbation of the chronic condition. Failure to address these chronic conditions has been demonstrated to lead to consequences, such as amputation, blindness, heart attacks and strokes that require considerably more extensive medical intervention. The Treasury Department and the IRS, in consultation with the Department of Health and Human Services (HHS), have determined that certain medical care services received and items purchased, including prescription drugs, for certain chronic conditions should be classified as preventive care for someone with that chronic condition. The agencies note that each medical service or item, when prescribed for an individual with the related chronic condition, evidences the following characteristics:The service or item is low-cost;There is medical evidence supporting high cost efficiency (a large expected impact) of preventing exacerbation of the chronic condition or the development of a secondary condition; andThere is a strong likelihood, documented by clinical evidence, that with respect to the class of individuals prescribed the item or service, the specific service or use of the item will prevent the exacerbation of the chronic condition or the development of a secondary condition that requires significantly higher-cost treatments. The specific medical care services or items are listed in the Appendix attached to Notice 2019-45.The post Additional Preventive Care Benefits Permitted for HDHPs appeared first on PLANSPONSOR.
Categories: Industry News

Strategies to Lower Employer Health Benefit Costs Already Exist

Plansponsor.com - Wed, 07/17/2019 - 10:47
With all the news about soaring health care costs, one may be surprised to learn that while insurance premiums and prices for common procedures for insured people continue to increase, cash or negotiated self-pay prices for many procedures vary little from year to year.This is exactly what a team of journalists found as documented in the book “The CEO’s Guide to Restoring the American Dream,” authored by Seattle-based Dave Chase, co-founder of Health Rosetta, which promotes reform for the U.S. health care system. According to the book, a “cash price” is what a provider charges an individual who is either paying directly, using a check or credit card, or is covered by an employer or union that pays immediately under a direct contract that bypasses the insurance claims process.“Insured individuals who ask for cash prices pay less than other insured individuals. For example, in San Francisco, Castro Valley Open MRI charges $475 cash for a lower back MRI. An insured individual who asked for a cash price for the same MRI at a different care provider knocked a $1,850 bill down to $580. A different insured individual was initially charged $5,667 for the same MRI at a third care provider. Their insurer paid $2,367, and the individual was asked to pay $1,114.54, a total of $3,471.54 to the third care provider for the same $475 MRI,” the book says.Insurance premiums and non-cash prices go up for several reasons, including the following:Contracts between providers and carriers can include things like automatic escalator clauses, which stipulate that payment rates automatically increase each year.Third parties taking a cut, small or large, of every transaction. For example, a good size hospital probably has multiple vice presidents for strategic planning, business-office workers, pricing consultants and people to make revenue-cycle management projections—just as the insurance company does. Benefits brokers are pitching themselves as buyers’ agents but compensated as sellers’ agents, leading to conflicts of interest.Fixing the Problem of High Health CostsIn an article in Forbes in 2015, Chase said the problem of higher health costs can be fixed with current resources and no new legislation. He said employers and benefits brokers or consultants should keep in mind the three goals of enhancing patient experiences, improving population health and reducing costs. Chase explains that enhancing the patient experience improves health, which leads to lower costs.He tells PLANSPONSOR there are two main components to improve benefits and lower costs. For one, employers should remove preferred provider organization (PPO) networks. Employers are paying two- to four-times as much as they should and they share this cost with participants. Typically, PPO networks are paying two- to five-times Medicare rates for procedures.Chase says employers can save money by negotiating direct contracts with medical and pharmaceutical providers. He cites one case study in which the employer in the course of two years signed 4,000 direct contracts with many providers. These contracts say, “We’ll pay Medicare rates and agree to pay on a timely basis.” Hospitals are willing to take less money than a PPO would pay because they can collect more dollars timely since costs are cheaper, according to Chase. He says the employer now is spending so much less on health care and there’s no cost-sharing with employees, which, of course, employees like.The other main component to this cost saving strategy is to use value-based care, according to Chase. UBS Wealth Management’s 2017 Corporate Health Report explained that increasingly, payers are linking the price paid for treatment to health outcomes, rather than simply paying for the volume of services provided. By changing the provider payment model, payers hope to reduce waste and duplication, spread clinical and operational best-practice, and ultimately achieve higher quality patient outcomes for a better price. “While value-based care (VBC) is not yet pervasive, its influence will be among the key elements to control health care costs over the coming years amid increased longevity, in our view,” UBS said. Providers, namely hospitals and large regional health care systems, are increasingly being asked by payers to accept at-risk reimbursement, where payment is heavily influenced by the quality and outcome of patient care, UBS said.Chase gives an example that value-based care means a patient going to a primary care physician about lower back pain will not be just given a pill or an unnecessary surgery for which there is no evidence of success. He will instead get treatment proven to work, which will improve his health.Chase says for one mid-sized hotelier with about 5,000 employees that has implemented these components, its per employee cost for health care is less than half the national average. And, in the more than 20 years since it has changed its approach, it has saved over $200 million. The company uses money saved to pay for employee and dependent college education.Changing the Broker ModelJust as individual’s use of stock brokers has gone the way of the dinosaur, and investment advisers are more mainstream, there is an ongoing move away from traditional benefits brokers to benefits consultants. Chase recommends plan sponsors get away from traditional brokers and utilize benefits advisers/consultants.Health Rosetta accredits benefit professionals that design health plans that meet “The Triple Aim” and otherwise participate in the effort to reduce health professional burnout and dissatisfaction. Consultants must also disclose all revenue in a form provided by the firm. Chase says his firm looked at broker payment models and found up to 17 undisclosed revenue streams.“We train, educate and accredit benefit consultants who put in these benefit plans,” Chase says.Health Rosetta also published on its website a plan sponsor Bill of Rights, a benefits consultant Code of Conduct and company disclosures for benefits consultants.The post Strategies to Lower Employer Health Benefit Costs Already Exist appeared first on PLANSPONSOR.
Categories: Industry News

Small Business Employees Benefiting From Enhanced DC Plan Design

Plansponsor.com - Wed, 07/17/2019 - 08:32
Small business plan participants are benefiting from enhanced retirement plan features, including professionally managed allocations, which have led to increased plan participation and optimized portfolio construction, according to Vanguard’s “How America Saves: Small Business Edition.”Like participants in larger plans, participants in smaller plans have reduced their trading and withdrawal activities.In 2018, two-thirds of plans recordkept by Vanguard were invested in a professionally managed allocation, with 61% of all participants invested in a single target-date fund (TDF). Among new plan entrants, 75% were invested in a single TDF.In 2018, 19% of participants held broadly diversified portfolios, with only 3% had no allocation to equities. At the other end of the spectrum, 7% had all of their money invested in equities.Vanguard also found that among the plans using automatic enrollment, the participation rate was 82%. Among plans without this feature, the figure is 54%. Additionally, among participants earning less than $30,000 a year, the participation rate was more than double in plans with automatic enrollment than in plans that rely on participants to enroll on their own.Only 7% of participants initiated one or more portfolio trades in 2018. Among plans recordkept by Vanguard, 85% permit plan withdrawals among people 59-1/2 or older, but less than 1% of participants used the feature in 2018.“Positive participant behaviors coupled with the increased use of professionally managed accounts is making a difference in the retirement readiness of small business 401(k) participants,” says Jean Young, author of the report and senior research associate at the Vanguard Center for Investor Research. “The increased use of the features and tools available points to the continued commitment by plan sponsors to further drive these improved outcomes.”The post Small Business Employees Benefiting From Enhanced DC Plan Design appeared first on PLANSPONSOR.
Categories: Industry News

Some Help for Women’s Retirement Savings Gap May Be Coming

Plansponsor.com - Tue, 07/16/2019 - 12:36
In Goldman Sachs Asset Management’s (GSAM)’s latest issue of Defined Contribution Viewpoints, “With Challenges Come Opportunities,” Mike Moran, GSAM’s senior pension strategist, notes that the retirement savings gap for many Americans is significant, but even more so for women.Among the reasons Moran cites for this are: women make up approximately 46% of the total labor force but make up 69% of low-wage workers; women make up two-thirds of caregivers in the U.S. and are more likely to leave the workforce or reduce their hours to take on caregiving responsibilities; and women make up 64% of all part-time workers in the U.S., and only 36% of part-time workers have access to a workplace retirement plan. Moran also cites the gender pay gap, and citing a 2016 AARP survey, he says caregivers could lose up to $324,000 in reduced salaries and retirement benefits over their lifetime.A study from Merrill Lynch in partnership with Age Wave found 70% of women surveyed contend that the financial services industry has traditionally catered to men. Financial planning models have defaulted to men’s salaries, career paths, family roles, life spans and preferences. As an example, the study report says, retirement calculators do not allow for planned or unplanned breaks from the workforce—breaks taken more frequently by women—to raise children or care for aging family members.The study estimates that women will have earned a cumulative $1,055,000 less than men who have stayed continuously in the workforce, due to the accumulated lifelong pay gap and workforce interruptions. Moran also notes in the GSAM document that gaps in employment and low earnings are directly tied to what an individual receives in Social Security benefits. If an individual has years of no earnings or low earnings, the amount they may receive from Social Security may be lower than if they had worked steadily.Women in the study also reported a lack of confidence in investing and a desire for more education. The study report suggests women also need more education about longevity, as women, in general, live longer than men.In GSAM’s Defined Contribution Viewpoints, Moran says the Secure Act’s proposed rule to expand retirement plan eligibility to part-time workers could help women achieve their savings goals, as well as auto-IRA programs, which have been implemented by many states, and proposals to increase the minimum wage.He suggests targeted education for women, which would include:Defining potential retirement savings gap;Providing guidance on saving earlier in their career and the savings impact of gaps in employment;Discussing longevity risk and living longer in retirement;Promoting early engagement in financial planning; andIllustrating how Social Security is calculated.Among other things, Moran also suggests women be provided with investment advice services as well as financial planning or wellness tools that include, for example, guidance on budgeting and debt management.The post Some Help for Women’s Retirement Savings Gap May Be Coming appeared first on PLANSPONSOR.
Categories: Industry News

401(k) Investors’ Move to Fixed Income Continues in June

Plansponsor.com - Tue, 07/16/2019 - 11:50
For the 17th straight month, 401(k) investor trades have favored fixed income over equities, according to the Alight Solutions 401(k) Index. In June, 17 of 20 trading days favored fixed income. While investors may still have a fear of the markets since the steep correction in December in spite of good equity returns, Alight Solutions suggests they are moving to fixed income in part to preserve their gains. Trading inflows mainly went to bond (40% or $180 million), stable value (38% or $174 million) and money market (16% or $74 million) funds.  Outflows were primarily from large U.S. equity (48%) or $217 million), company stock (31% or $142 million) and small U.S. equity (15% or $67 million) funds. Still, average asset allocation in equities increased from 67% in May to 67.7% in June, but new contributions in equities decreased from 67.9% in May to 67.7% in June. Alight Solutions says the steady stream of trades in one direction made for the heaviest quarter of net trading since the third quarter of 2016. In the second quarter, 53 out of 63 trading days had net trading dollars moving from equities to fixed income. Net transfers for the quarter were 0.61% of balances. More than half (55%) of trading inflows went to bond funds during the quarter, with 23% going to stable value funds and 14% going to money market funds.The post 401(k) Investors’ Move to Fixed Income Continues in June appeared first on PLANSPONSOR.
Categories: Industry News

GWU Lawsuit Over Two Retirement Plans Dismissed

Plansponsor.com - Tue, 07/16/2019 - 09:27
U.S. District Court Judge John D. Bates of the U.S. District Court for the District of Columbia has dismissed a lawsuit alleging fiduciary breaches by George Washington University (GWU), finding the plaintiff had previously waived her right to file such a suit.GWU argued that Melissa Stanley lacks standing to sue because she signed a general release of claims against the university. Stanley responded that her claims fall into an express exclusion in the general release preserving claims for vested benefits under her retirement plan. The court found that Stanley released her fiduciary breach claims against GWU under the terms of the release.According to the court opinion, in 2016, for reasons unrelated to the present suit, Stanley entered a confidential settlement agreement with the university in return for valuable consideration.The agreement states in part: “Ms. Stanley, on behalf of herself and anyone who might claim through her, hereby forever releases . . . the George Washington University . . . from any and all claims . . . of any nature whatsoever . . . (collectively, “Claims”), which Ms. Stanley has or may have or which may hereafter accrue or which may be asserted by another on her behalf, arising prior to her execution of this Agreement. This release includes, without limitation . . . Claims for violation of any federal . . . statute . . . including but not limited to Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Family Medical Leave Act, the D.C. Family and Medical Leave Act, the Genetic Information Nondiscrimination Act of 2008, and the D.C. Human Rights Act. It is expressly understood that this is a GENERAL RELEASE, and is intended to release claims to the fullest extent permitted by law. Excluded from this General Release is an action by Ms. Stanley to enforce the terms of this Agreement, claims for vested benefits under employee benefit plans, claims that arise after Ms. Stanley signs this Agreement, any right Ms. Stanley has to file a charge with a government agency (although she releases and waives, and agrees not to seek or accept, any monetary payment or other individual relief in connection with any such charge) and any other claim which cannot be released by private agreement as a matter of law.”Approximately two years after entering the Agreement, Stanley brought a putative class action against GWU under Employee Retirement Income Security Act (ERISA) Sections 502(a)(2) and (a)(3). The complaint alleges that GW breached its fiduciary duties to participants by: causing participants to pay unreasonable recordkeeping and administrative fees; imprudently offering unreasonably expensive and underperforming investment options; imprudently obtaining services from investment funds that required the university to offer participants the funds’ proprietary investment products; and improperly retaining multiple recordkeepers to administer the plans when prudent fiduciaries would have used only one recordkeeper.GWU moved to dismiss, arguing that Stanley lacks standing because she has released her claims under the terms of the settlement agreement. In opposition, Stanley contended her claims fall into the exclusion in the release preserving “claims for vested benefits under employee benefit plans.” The court previously ordered both parties to submit supplemental briefing on this and other standing questions.Bates cited case law that says, “Where the language [of a release] is clear and unambiguous, its plain language is relied upon in determining the parties’ intention,” and “the effect of the release can be determined as a matter of law.”GWU argued that the broad language releasing all claims alleging violations of “any federal . . . statute” plainly covers Stanley’s fiduciary breach claims under ERISA Sections 502(a)(2) and (a)(3). And it argued the exclusion in the release preserving “claims for vested benefits under employee benefit plans” does not apply because that language refers to Section 502(a)(1)(B) claims for vested benefits arising under the terms of the ERISA-governed plans—claims that Stanley concedes she does not bring. Stanley responded first that the clause generally releasing federal claims does not cover ERISA claims because it does not expressly mention ERISA. In addition, she said the carve-out for “claims for vested benefits” plainly preserves fiduciary breach claims brought under ERISA sections 502(a)(2) and (a)(3).But, Bates found that Stanley has released her claims under the agreement and thus lacks standing to sue. As an initial matter, he says, Stanley’s ERISA claims plainly fall within the language releasing “any and all claims” “for violation of any federal . . . statute.” And in the very next clause, the release goes on to say that “[i]t is expressly understood that this is a GENERAL RELEASE, and is intended to release claims to the fullest extent permitted by law.” Bates says, “The law is clear that a broad and unambiguous release need not list every conceivable cause of action that might come within its terms.”Bates also ruled that the exclusion in the agreement cannot be read as expansively as Stanley suggested. By its terms, the release carves out only claims for benefits “under employee benefit plans.” Bates points out that the common legal usage of the term “under” is pursuant to, in accordance with, or as authorized or provided by, citing the 1999 case of Davis ex rel. LaShonda D. v. Monroe Cty. Bd. of Educ. Also, quoting 43 Words and Phrases 149–152 (1969), Bates says cases have defined the term “under” as “indicating subjection, guidance or control, and meaning ‘by authority of,’” or “‘by and through the authority of’.” Understood in the context of ERISA, “claims . . . under employee benefit plans” plainly refer to contractual, or “plan-based,” claims of the kind that typically are brought pursuant to ERISA Section 502(a)(1)(B), Bates says. “Indeed, in at least two cases involving similar general releases, a carve-out for claims ‘under the plan’ was interpreted as saving contractual, but not fiduciary breach, claims,” Bates wrote in his opinion.Because Stanley’s fiduciary breach claims concededly arise under rights conferred by ERISA, not “under [her] employee benefit plans,” Bates continues, they fall outside the plain language of the exclusion in the General Release.Bates granted GWU’s motion to dismiss the complaint for lack of subject matter jurisdiction.The post GWU Lawsuit Over Two Retirement Plans Dismissed appeared first on PLANSPONSOR.
Categories: Industry News

Good Returns Move State Pension Funded Status Higher in Q2

Plansponsor.com - Mon, 07/15/2019 - 11:45
The aggregate funded ratio for U.S. state pension plans increased by 1.4 percentage points during the second quarter of 2019 ending at 73%, according to Wilshire Consulting. The quarterly change in funding resulted from a 2.6% increase in asset values partially offset by a 0.7% increase in liability values. The aggregate funded ratio is estimated to have increased 6.8 percentage points year-to-date and 1.5 percentage points for the trailing 12 months. Wilshire says this increase in funded ratio was driven by the estimated 7.5% return on assets and contributions. It notes that, if not for contributions, it estimates that the funded ratio would be 3.1% lower at 69.9%. The aggregate figures represent an estimate of the combined assets and liabilities of state pension plans included in Wilshire’s 2019 state funding study. The Funded Ratio is based on liabilities, service cost, benefit payments and contributions in-line with Wilshire’s 2019 state funding study. The assumed asset allocation is 29% in U.S. Equity, 18% in Non-U.S. Equity, 10% in Private Equity, 24% in Core Fixed Income, 6% in High-Yield Bonds and 13% in Real Assets.The post Good Returns Move State Pension Funded Status Higher in Q2 appeared first on PLANSPONSOR.
Categories: Industry News

Sponsors Want More Financial Wellness Offerings from Advisers

Plansponsor.com - Mon, 07/15/2019 - 10:42
Defined contribution (DC) retirement plan sponsors would like to see broader financial wellness topics addressed in participant education, according to a survey by Voya Investment Management, titled, “Survey of the Retirement Landscape: Challenges and Opportunities for DC-Focused Advisors.”In line with this, sponsors are less optimistic than advisers about their participants’ retirement readiness.“We found that the issue of retirement readiness is more of an issue for plan sponsors and is often an area where they could do more to address the topic with participants,” says Michael DeFeo, managing director and head of retirement and investment only at Voya Investment Management. “On the other hand, advisers are more optimistic, perhaps because they have been able to convince their sponsor clients of how important this is and have provided them with the tools for these conversations. Plan compliance remains a top concern for both advisers and sponsors, but a number of new issues emerged that weren’t on the radar of advisers or sponsors in the past, such as cybersecurity, which will only grow in importance.”Sponsors are also less tuned in than advisers when it comes to providing help to caregivers of people with special needs. Advisers are more than twice as likely than sponsors to say this is highly important. Sponsors are also less likely to view a higher percentage of participants as caregivers.“When you consider that, according to the U.S. Census Bureau, one in five workers has a disability, or one in six workers serve as a caregiver to an individual with a disability, you can see how important this is,” DeFeo says.The survey also found that sponsors are looking for expert guidance on a broader array of issues, including alternative plan design, cybersecurity, financial wellness and special needs caregivers. Sponsors are also behind the curve on using risk-assessment tools to gauge the suitability of investments, and need advisers’ help on this.The use of target-date funds (TDFs) rose significantly among larger plans, with nearly 60% offering them and one-third that do not offer them now would like to offer them in the future.Sponsors say the biggest challenge they face is increasing plan participation. They are also focused on fees, matches, investments and performance.Sponsors rank market volatility as their fifth biggest concern, though advisers rank it as 10th. Sponsors said fiduciary/compliance issues are their fourth biggest issue, but advisers thought it was their first. However, sponsors and advisers agree on the importance of educating plan participants.Voya’s findings are based on an online survey of 307 sponsors and 204 advisers conducted last December. Brookmark Research Practical Perspectives assisted with the development, execution and analysis of the survey.The post Sponsors Want More Financial Wellness Offerings from Advisers appeared first on PLANSPONSOR.
Categories: Industry News

Adidas Sued Over Excessive Fees for 401(k) Participants

Plansponsor.com - Mon, 07/15/2019 - 09:03
Participants in the Adidas Group 401(k) Savings and Retirement Plan have filed a proposed class action lawsuit against Adidas America over the plan’s administrative and investment fees.According to the complaint, for every year between 2013 and 2017, the administrative fees charged to plan participants were greater than a minimum of approximately 75% of its comparator fees when fees are calculated as cost per participant. And for every year between 2013 and 2017 but two, the administrative fees charged to plan participants were greater than 80% of its comparator fees when fees are calculated as a percent of total assets.The complaint includes tabular depictions of the Adidas plan’s fees calculated as cost per 401(k) plan participant/beneficiary and as a percentage of the total plan’s assets when compared to a representative group of plans with a participant count from 5,000 to 9,999 and plans with a total value of plan assets greater than $500 million. It shows the total difference from 2013 to 2017 between Adidas’ fees and the average of its comparators based on total number of participants is $6,242,659. The total difference from 2013 to 2017 between Adidas’ fees and the average of its comparators based on plan asset size is $6,078,234.The lawsuit contends that the plaintiffs had no knowledge of how the fees charged to and paid by Adidas plan participants compared to market norms.The participants also allege the Adidas plan’s fees were also excessive when compared with other comparable mutual funds not offered by the plan. A chart in the complaint shows the 3-year return of investments offered by the Adidas plan compared to 3-year returns of comparable investments.“By selecting and retaining the Plan’s excessive cost investments while failing to adequately investigate the use of superior lower-cost mutual funds from other fund companies that were readily available to the Plan or foregoing those alternatives without any prudent reason for doing so, Adidas caused Plan participants to lose millions of dollars of their retirement savings through excessive fees,” the lawsuit alleges.The lawsuit suggests that prudent fiduciaries exercising control over administration of a plan and the selection and monitoring of designated investment alternatives will minimize plan expenses by hiring low-cost service providers and by curating a menu of low-cost investment options.It argues that the funds chosen by Adidas from which plan participants may elect to invest are actively managed, which in significant measure results in the higher administrative fees. The plaintiffs suggest Adidas could have offered passively managed funds as an alternative to plan participants, which would have resulted in significantly lower administrative fees yet generated comparable returns.They claim that it is understood in the investment community that passively managed investment options should either be used or, at a minimum, thoroughly analyzed and considered in efficient markets such as large capitalization U.S. stocks. The lawsuit contends this is because it is difficult and either unheard of, or extremely unlikely, to find actively managed mutual funds that outperform a passive index, net of fees, particularly on a consistent basis.“To the extent fund managers show any sustainable ability to beat the market, the outperformance is nearly always dwarfed by mutual fund expenses. Accordingly, investment fees are of paramount importance to prudent investment selection, and a prudent investor will not select higher-cost actively managed funds unless there has been a documented process leading to the realistic conclusion that the fund is likely to be that extremely rare exception, if one even exists, that will outperform its benchmark over time, net of investment expenses,” the complaint states.The participants allege Adidas’ decision-making, monitoring and soliciting bids from investment funds was deficient in that it resulted in almost no passively managed funds options for plan participants, resulting in inappropriately high administrative plan fees.The post Adidas Sued Over Excessive Fees for 401(k) Participants appeared first on PLANSPONSOR.
Categories: Industry News

Retirement Industry People Moves

Plansponsor.com - Fri, 07/12/2019 - 12:31
Art by Subin YangQMA Announces Chief Business OfficerQMA has named Linda Gibson to the newly created role of chief business officer, the latest step in the firm’s continued global expansion. QMA is the quantitative equity and global multi-asset specialist of PGIM, the $1.2 trillion global investment management business of Prudential Financial, Inc.Gibson will work closely with QMA’s chairman and CEO, Andrew Dyson, to advance QMA’s strategy including the provision of customized global solutions across the risk-return spectrum to clients, while leveraging the full scale of PGIM. Gibson will be based out of QMA’s headquarters in Newark, New Jersey, and oversee finance, business planning and management, competitive intelligence, project management, human resources (HR), operational risk and cross-functional initiatives.“Linda brings a wealth of knowledge to QMA with her nearly 30 years of experience across all aspects of operating a large global company in the asset management industry,” says Dyson. “Her hire is proof that QMA’s innovative, client-focused culture continues to attract top-notch talent to complement our existing management team.”“I’m thrilled to join QMA at such a pivotal time for the firm,” says Gibson. “I’m looking forward to working with the team to drive the strategy to the next level as we solidify QMA as a leading global player across the full range of quantitative strategies.”Gibson joins QMA with nearly 30 years of investment management and financial services business experience, including 18 years at BrightSphere Investment Group, a public multi-boutique asset manager. Her roles there spanned a wide range of front and back office executive functions, including management of legal, compliance, operations, global business development and human resources. As part of Old Mutual’s executive team, Gibson led several high-profile initiatives such as transforming affiliates through product development, product line extension and lift-outs; creating a global, centralized distribution team; and developing strategy to take the company public.Gibson has a variety of board experience, including serving at the chairman and board level for investment firms, trust vehicles and UCITS Funds within Old Mutual. She has also held several officer-level positions on multiple mutual funds. Gibson holds a law degree from Boston University School of Law and a bachelor’s degree in mathematics from Bates College.Nationwide Appoints Leaders to Financial Services BusinessJohn Carter has been named as the president and chief operating officer-elect of Nationwide’s financial services business lines, effective immediately. Carter succeeds Kirt Walker, who will become Nationwide’s next chief executive officer in October. Reporting to Walker, Carter will oversee the company’s retirement plans, life insurance (individual, business and corporate-owned), annuities and mutual funds business operations.“John brings more than 30 years of financial services industry experience to this role,” says Walker. “Throughout his career, he has demonstrated outstanding leadership, both in terms of results and people. John is a strong advocate for the retirement security of America’s workers—helping them prepare for and live in retirement. We look forward to achieving continued success under his guidance.”Carter joined Nationwide Financial in 2005 as president of the Nationwide Financial Sales and Distribution organization, responsible for leading sales of private-sector retirement plans, life insurance, annuities and mutual funds. In 2013, he was named president of Nationwide’s retirement plans business.Prior to joining Nationwide, he held executive positions in financial services at Prudential Financial, UBS and the former Kidder Peabody.“Nationwide benefits from a strong bench of executive leaders,” says retiring CEO Steve Rasmussen. “Kirt and John will work together to facilitate a smooth transition and maintain the strong growth momentum we’ve built over the past several years. We look forward to achieving continued success under John’s leadership, building on Nationwide’s mutual heritage, financial strength and culture of caring.”Carter is a graduate of the University of Missouri where he earned a bachelor’s degree in business administration and finance.Former Financial Services CEO Joins Custodia’s Advisory CouncilCustodia Financial has appointed Roger Ochs, previous CEO of HD Vest, to its Strategic Advisory Council (SAC). In his role on the SAC, Ochs will provide guidance and subject matter expertise on corporate matters, capital markets, and corporate governance.In addition to serving on the SAC, Roger is a member of the board of eSecLending, a provider of securities financing, collateral and liquidity services; chairman of the Board for Door, Inc., a residential real estate brokerage firm; a member of Parthenon Capital’s Industry Advisor Council; and a member of Securities Industry Financial Markets Association’s (SIFMA) Advisors Council. He is also a member of the Texas and Dallas bar associations.“Roger brings a unique perspective to our Strategic Advisory Council,” says Tod Ruble, CEO of Custodia Financial. “First, he’s a true entrepreneur. His experiences growing HD Vest from a smaller firm into a nationally-recognized, technology-driven organization couldn’t be more relevant to Custodia. In addition, he knows the accounting and audit world, and an important benefit of [Retirement Loan Eraser] RLE is mitigating audit risk.”“Loan defaults represent not just a retirement security and plan fiduciary problem, but also a significant audit risk, particularly given recent IRS changes to plan sponsor reporting. I see Retirement Loan Eraser as a win-win for employees and the companies they work for,” says Ochs.The post Retirement Industry People Moves appeared first on PLANSPONSOR.
Categories: Industry News

Legislative Proposals Could Help Retirement Income Adequacy: EBRI

Plansponsor.com - Fri, 07/12/2019 - 11:34
Since 2003, the Employee Benefit Research Institute (EBRI) has used its Retirement Security Projection Model (RSPM) to evaluate retirement income adequacy on a national basis. EBRI’s use of RSPM typically is confined to analysis of the current retirement system. The EBRI Retirement Savings Shortfalls (RSS) give the size of the deficits that households are simulated to generate in retirement.Recently, EBRI used its model to simulate the effect on retirement income adequacy from certain legislative proposals, including:Requiring retirement plans for all but the smallest employers,Covering part-time employees,Introducing auto portability,Providing the option of guaranteed income for life from 401(k) and 403(b) plans,Allowing open multiple employer plans (MEPs), andModifying required minimum distributions.Requiring retirement plans for all but the smallest employersIn one scenario, EBRI assumes all employers are required to offer defined contribution (DC) plans, except those with fewer than 10 employees. Its analysis assumes all new plans would be auto-IRAs with a 6% default contribution rate that escalates by 1% per year until it reaches 10% of pay. Based on experience observed from OregonSaves, a 30% opt-out is assumed for all new eligibles.  As expected, the youngest age cohort (35 to 39) would have the largest benefit—a 15.2% decrease in retirement deficit—since they would be exposed to the enhanced coverage for a longer period of time. Those in the 40 to 44 age cohort are simulated to have a 12.4% reduction in deficit, and those ages 45 to 49 are simulated to have a 10.3% reduction in deficit. Cohorts older than 50 are also simulated to have reductions in retirement deficits; however, the reductions are less than 10%.Changing the scenario to have a cap on auto-escalation of 15%, the youngest cohort is simulated to have a 17% reduction in retirement deficit. Those in the 40 to 44 age cohort are simulated to have a 14.2% reduction in deficit, while those ages 45 to 49 are simulated to have an 11.7% reduction in deficit. Again cohorts older than 50 are simulated to have a reduction in retirement deficit less than 10%.Covering part-time employeesUsing its assumptions but including coverage of part-time employees, EBRI found the youngest cohort is simulated to have a 17.3% reduction in retirement deficit. Those in the 40 to 44 age cohort are simulated to have a 14.5% reduction in deficit, while those ages 45 to 49 are simulated to have an 11.9% reduction in deficit. Cohorts older than 50 are simulated to have reductions in retirement deficits that are less than 10%.Introducing auto portabilityEBRI explains that auto portability is designed to retain DC assets within the retirement system and reduce “leakage” from cashouts upon employment termination. When auto portability is in place, the youngest cohort is simulated to have a 27.1% reduction in retirement deficit, while those in the 40 to 44 age cohort are simulated to have a 23.5% reduction in deficit. Those 45 to 49 are simulated to have a 19.8% reduction in deficit, and those in the 50 to 54 age cohort are simulated to have a 14.7% reduction in deficit. Those ages 55 to 59 are simulated to have a 10.3% reduction in deficit. Cohorts older than 60 are also simulated to have reductions in retirement deficits; however, the reductions are less than 10%.Providing the option of guaranteed income for life from 401(k) and 403(b) plansEBRI found that having half of all 401(k) or 403(b) plan distributions taken in the form of guaranteed income for life at age 65 actual increases the retirement deficit for those who die prior to age 85. Those who die five years into retirement (by age 70) are projected to have a $74 average increase. The average increase in deficits for those who die between 70 and 75 is $876. The increase gradually scales down to $617 for those who die between ages 75 and 80 and to $532 for those who die between ages 80 and 85.For those who die after age 85, however, the purchase of a single premium immediate annuity with 50% of the 401(k) or 403(b) account balance provides reductions in average retirement deficits. For those who die between ages 85 and 90, the average retirement deficit decreases by $1,014. The reductions in average retirement deficits increase substantially for those who die at later ages: $1,831 for those who die between 90 and 95, $3,140 for those who die between 95 and 100, and $4,027 for those who die after age 100. Overall, the impact of using 50% of the 401(k) or 403(b) balance to buy a single premium immediate annuity at age 65 is to decrease retirement deficits by $985.Allowing open multiple employer plans (MEPs)The potential impact of open MEPs on retirement income adequacy is heavily dependent upon plan sponsor adoption of such retirement vehicles, EBRI concedes. Rather than make assumptions about adoption, EBRI models a scenario in which all workers currently ages 35 to 39 benefit from the availability of an open MEP for all years during which they might not be eligible for another type of employer-sponsored retirement plan. Workers are divided into four quartiles according to their lack of eligibility. For example, those in the lowest “lack of eligibility” quartile are workers who are eligible for an employer-sponsored retirement plan for all future years in their working career as well as those who lack only a few years of eligibility. The percentage reduction in retirement deficits from the introduction of open MEPs for these individuals is de minimis (3.5%), EBRI says. However, the second quartile is simulated to have an 11.7% reduction in retirement deficit from open MEPs, while the third quartile is simulated to have a 23.2% reduction. Individuals in the highest quartile (where the most lack eligibility) are simulated to have a 26.7% reduction in average retirement deficit.Modifying required minimum distributions It has been proposed to raise the age for taking required minimum distributions (RMDs) from 70 ½ to 72. EBRI found an ad hoc increase in life expectancy of 5% with no increase in the age provides relatively small decreases in IRA distributions—0.2% for total balances and 0.3% for non-Roth balances.However, when the 5% increase in life expectancy is combined with a one-year increase in the RMD starting age, to 71 ½, the decreases in IRA distributions are 2.7% (total) and 3.2% (non-Roth). In a scenario in which the RMD age is increased to 72 ½, EBRI found the decreases in IRA distributions are 5.3% (total) and 6.5% (non-Roth). EBRI also provides an analysis in which the ad hoc increase in life expectancy is 10%.“By quantifying the impact of potential changes, EBRI allows plan sponsors, providers and policymakers to better understand their ramifications. This, in turn, can lead to better decision-making that affects the lives of millions of American workers,” EBRI concludes in its Issue Brief about the research.The post Legislative Proposals Could Help Retirement Income Adequacy: EBRI appeared first on PLANSPONSOR.
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