Compliance March 26, 2015

Ameriprise Financial Settles ERISA Fee Litigation

Ameriprise will pay $27.5 million to settle a 401(k) excessive fee lawsuit.
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Ameriprise Financial has agreed to settle a closely watched Employee Retirement Income Security Act (ERISA) suit, Krueger v. Ameriprise Financial, for $27.5 million in plan reimbursements and remedies.

The settlement also includes non-monetary benefits for 401(k) plan employees, according to plaintiffs’ attorney Jerry Schlichter, managing partner of the St. Louis-based firm Schlichter Bogard and Denton. He says the non-monetary relief obtained, in addition to the financial terms, “not only significantly benefits Ameriprise’s employees and retirees but also sets a standard for best practices for plan sponsors.”

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A joint motion for approval of the settlement was filed by the parties in the court of Judge Susan Richard Nelson of the U.S. District Court for the District of Minnesota, who must approve the settlement. 

In a complaint originally filed on September 28, 2011, the plaintiffs alleged that Ameriprise failed to ensure that the recordkeeping and management fees and expenses paid out of the assets in its defined contribution 401(k) plan were reasonable. They alleged that the plan’s fiduciaries breached their duties of prudence and loyalty in selecting and retaining proprietary investment options. Further, it was alleged they engaged in prohibited transactions by receiving compensation from the plan as a result of those decisions in order to benefit its subsidiary Columbia Management Investment Advisers, LLC. 

Ameriprise denied all of the allegations, contended that the fees were reasonable and contended it complied in all respects with the law and did not commit any fiduciary breaches. In the settlement, Ameriprise has agreed to terms designed to strengthen and add value to its 401(k) plan as part of the non-monetary relief, Schlichter says. The settlement period will be three years during which the Minnesota court will retain jurisdiction. 

In a statement to PLANSPONSOR, Ameriprise said: “We have a strong 401(k) plan that is administered for the sole interests of participants. The settlement does not require any changes to our plan, which will maintain the existing broad and competitive selection of investment options and features. The plan has always included funds we manage, as well as funds from other companies and a brokerage window that offers participants additional choice.”

According to the Schlichter announcement, within one year of the effective settlement date, Ameriprise has agreed to conduct a request for proposal (RFP) competitive bidding process for recordkeeping and investment consulting services.  Second, Ameriprise will refrain from receiving compensation for administrative services provided to the plan other than reimbursement of direct expenses from the plan as permitted by ERISA. Third, Ameriprise will pay fees to the plan recordkeeper on a flat fee or per-participant basis. 

Finally, Ameriprise will provide participant statements that comply with all applicable Department of Labor participant disclosure regulations that include a disclosure of all plan expenses paid by the participant (directly or through investment options); a list of all transaction fees paid by the participant; benchmarks for each fund; and statements, in dollar terms, of the money paid by the participant in administrative recordkeeping costs and for each investment option. Ameriprise will also consider the use of collective investment trusts or separately managed accounts and will seek the lowest cost of participation for any collective trusts used. 

Moving forward the plan’s fiduciary committee for investment selection will not include any member who is an executive of Columbia Management Investment Advisers, LLC or its investment management affiliates. 

An estimated 24,000 current and former Ameriprise employees will benefit from the settlement, Schlichter says.

Benefits March 26, 2015

Employees Leaving Wellness Incentives on the Table

Getting employees to take full advantage of incentive-based health improvement programs can be a challenge.
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Employers will spend an average of $693 per employee on wellness-based incentives in 2015, up from $594 in 2014 and $430 five years ago, according to the latest survey about wellness programs from Fidelity Investments and the National Business Group on Health (NBGH).

Many employees aren’t taking full advantage of these programs and earning all of their incentives. Fewer than half (47%) of employees earned their full incentive amount in 2014, while 26% earned a partial amount. Together, this translates into millions of dollars of unclaimed incentives.

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“The next challenge for companies is to continue to find ways to increase participation in these programs and encourage employees to earn the full incentive amount available to them, which will contribute to their financial well-being as well as their physical health,” says Robert Kennedy, Health and Welfare practice leader with Fidelity’s Benefits Consulting business in Boston.

“It starts with design and using data to be sure programs are relevant and match the needs of employees,” Kennedy tells PLANSPONSOR.

He says incentives will get some employees engaged in the programs, but beyond that, communications play a strong role. “Communications should set the context for employees—explaining why the employer is offering the programs and what it hopes to accomplish.”

Kennedy suggests frequent, short reminders about how to take advantage of incentives, using a variety of channels—emails, the employer’s intranet site or employee meetings. Short messages should contain a click-through for more detail for those employees who want it. Timing of messages is also important. For example, Kennedy says, if the employer offers a program in which employees can earn incentives quarterly, reminders should be sent well before the end of each quarter.

The programs should be easy to access, easy to use and fun for employees, according to Kennedy. He suggests individual activity challenges or team challenges. He adds that employers should gather feedback along the way from program participants as well as those not participating. This can provide success stories to share or suggestions for changes to programs.

“We’re seeing these programs start with the goals of improving health and managing cost trends, but increasingly they are becoming part of employers’ value propositions,” Kennedy says. “So incorporating communications about incentive-based health improvement programs in meetings about other key messages—such as employee town halls—can help create a culture of improving health.”

The Fidelity/NBGH survey found that, of the 79% of employers that offer health improvement programs, larger companies, with more than 20,000 employees, are spending the most on these programs; the per-employee average climbed to $878, up from $717 in 2014. The average for companies with between 5,000 and 20,000 workers rose to $661, up from $493 in 2014.

While employers are increasingly using incentives—such as cash, gift cards, reduced health care premiums or a contribution to a health care account—to encourage employees to participate, the use of disincentives among employers for not participating in these plans is decreasing.

The three most popular incentive-based health improvement programs for 2015 are biometric screenings (72% of employers plan to offer this program), health risk assessments (70%), and physical activity programs (54%). Among the top three, only 6% plan to use disincentives for not taking a health risk assessment, and 5% will use disincentives for not getting a biometric screening—down from 11% and 12%, respectively. No employers plan to use disincentives for not participating in physical activity programs, although 17% of employers continue to attach disincentives for not participating in smoking cessation programs.

The survey is the latest in a series Fidelity and NBGH have conducted since 2009.

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