Compliance April 18, 2022

$7.5M Settlement Struck in Washington University ERISA Suit

The settlement agreement also spells out a variety of non-monetary requirements, including a new fiduciary training regimen for members of the university’s retirement plan administration committee. 

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A settlement agreement has been struck in the Employee Retirement Income Security Act lawsuit filed against Washington University in St. Louis in the U.S. District Court for the Eastern District of Missouri.

Though the defendants admit no wrongdoing in the settlement agreement, they have agreed to pay $7.5 million into a gross settlement account from which the funds will be distributed to class members and used to pay the plaintiffs’ sizable attorneys’ fees. The settlement agreement also includes various non-monetary stipulations to be followed by the Washington University defendants. These requirements are to be followed during a special three-year settlement period, during which the defendants agree to comply with additional settlement terms.

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One of these terms requires that defendants provide annual fiduciary training for all members of the Washington University Retirement Plan Advisory Committee. According to the settlement agreement, the defendants will also provide this training to any new RPAC members “at or around the start of their tenure” on the committee. As part of this annual training, the agreement stipulates, each voting member of the RPAC “shall acknowledge that he, she or they serve in a fiduciary capacity and understand his, her or their obligations as a fiduciary.”

The terms also require the RPAC to evaluate the plan’s investment policy statement at least annually, with input from the plan’s investment consultant, and implement any updates to the IPS that the defendants deem appropriate. Further, the plan’s fiduciaries must issue a request for proposal for plan recordkeeping services before the conclusion of the settlement period, and they must work with the plan’s current investment consultant, CAPTRUST, to monitor the plan’s investment options and administrative fees.

The case was originally filed in June 2017 against Washington University in St. Louis, alleging multiple violations of ERISA over the school’s selection and monitoring of its 403(b) plan investments. Mirroring the many other ERISA fiduciary breach lawsuits filed against major U.S. universities in recent years, the suit also challenged the prudence of the university’s selection and monitoring of plan recordkeepers and the plan’s loan program.

In this case, the original lawsuit was consolidated with a second complaint alleging that plan officials “utterly abdicated their fiduciary duties to act prudently and loyally by turning the plan over to TIAA and Vanguard Group.”

The U.S. District Court for the Eastern District of Missouri issued the initial ruling in the case, rejecting the plaintiffs’ allegations of various fiduciary breaches. However, a subsequent appellate ruling emphasized that the case was “only at the pleading stage” and that outright dismissal of the claims was inappropriate.  

“At this point, the complaint only needed to give the district court enough to infer from what is alleged that the process was flawed,” the appellate ruling stated. “It did not have to go further and directly address the actual process by which the plan was managed. Circumstantial allegations about the fiduciary’s methods based on the investment choices a plan fiduciary made can be enough. The first claim clears this pleading hurdle. It alleges that fees were too high, and that Washington University should have negotiated a better deal.”

The filing of the new settlement agreement comes in the wake of an already-influential Supreme Court ruling issued in January in the case known as Hughes v. Northwestern University. Expert attorneys say that case, which included substantially similar allegations, has reaffirmed that retirement plan fiduciaries have an obligation to continuously monitor all the investments on their menu, regardless of the menu’s size, and to remove any options that become imprudent. In other words, a plan fiduciary cannot simply offer a lot of choices and think that they have demonstrably satisfied their fiduciary duties in the eyes of a federal court.

In practice, attorneys agree, the standards set out by Hughes v. Northwestern University make summary dismissal of ERISA lawsuits less likely, opening the door for settlements intended to curtail what could otherwise be a lengthy and expensive litigation process.

Benefits April 14, 2022

2022 HSA Conference: Choosing the Best HSA Service Provider

There are several capabilities and features employers should consider when selecting a health savings account provider.  

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Plan sponsors can focus on certain essential health savings account features and capabilities when working with providers to build a program for employees.

A useful way to frame HSAs for employees is that they are both an investment product and a financial wellness tool, Michelle Costo, product director for group benefits, health savings and spending accounts at MetLife, told attendees of the 2022 HSA Conference.

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“My biggest recommendations are finding a provider and a partner that you can trust to be proactive, responsive, consultative and flexible to your unique needs as a company, because every company is different about what are the goals and what the strategy is with the benefit plan,” Costo said.

Employers can make HSAs most useful for account holders by selecting a provider that can offer a strong, robust platform, according to the panel of industry experts.

For example, the provider should offer HSA account holders a single point of contact for employee benefits, including the HSA.

Jon Fortune, director of Transamerica Workplace Products and Solutions at Transamerica Retirement Solutions, explained that single sign-on is important because it helps to simplify the process for the employer and employee alike. He said that often different employee benefits don’t interact—retirement plan participants have logins for the company’s recordkeeper while account holders have another for a flexible savings account and another for an HSA.  

“How do you keep all that straight as an [HSA] participant and a saver and a spender as well as a back-office administrator, HR professional, that’s got so many things on their plate? How do you make that an easier path to help employees to focus on education, to focus on communication?” he asked.

Another feature employers can prioritize is smart cards, which use smart technology to efficiently direct participants’ funds from the appropriate account to the appropriate kind of expense. This helps workers be sure they are using the correct buckets of money and can reduce confusion. He noted that an education gap persists for HSAs, and that account holders still mistake them for FSAs.

“The smart debit cards know which money should come out [of which account] first. That’s another key feature,” Fortune explained.

Greg Puig, vice president for benefit consulting services at Sentinel Benefits and Financial Group, added that the broker and consultant perspective on choosing a provider “often doesn’t come down to who is the cheapest provider,” he said.

He explained that an employer should examine the provider’s user interface, tech stack, and potential appeal across age groups.

He also said that employers should ask, “How easy is it to spend, does it have a smart card, does it have the ability to really appeal to those spenders and savers?”

Puig added that when an employer examines the HSA provider, another critical question is whether there is “any type of active arrangement between a health care carrier and your HSA provider—and in a lot of cases there are, and that could really help people,” he said.

That aspect is important because there is no statute of limitations on spending money from an HSA. Therefore, an account holder could incur a claim today and submit a request for reimbursement 10 years later, Puig noted.

“That’s a critical component of it,” he said. “Working with an HSA administrator that has good active feeds or a good database that allows for people to actively store their claims information in a healthy manner is critically important, because then they’re going to be able to have an ongoing file of their own claims that they can submit for reimbursement should they ever want to down the line. It’s something we’re constantly looking at, especially for those who maybe are using it more as a spending vehicle.”

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