Deals and People July 10, 2023

Auto-Portability Solutions Show Signs of Growth

Principal Financial Group announced it has joined the Portability Services Network, and Millennium Trust has begun testing its own open portability network.

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Retirement savings leakage and lost 401(k) accounts have become a major loss for employees when moving from one job to the next, and as a result, new auto-portability solutions are gaining steam. 

Principal Financial Group announced last week it has joined the Portability Services Network LLC, a consortium of retirement plan service providers seeking to help workers with lower balances transfer their workplace retirement accounts when changing employers.  

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The addition of Principal means the country’s five largest recordkeepers by assets are now part of the network, with Principal joining Fidelity Investments, Empower, Vanguard and Alight Solutions, according to the latest ranking by PLANSPONSOR. After Empower joined in February, TIAA, the country’s largest 403(b) recordkeeper, joined the network in April. 

As a board member and one of seven owning members of PSN, Principal will utilize the auto-portability solution developed by Retirement Clearinghouse, according to the July 6 announcement. 

“As a retirement leader, it’s our responsibility and commitment to help create the best possible retirement outcomes for America’s workers, including making it easy for their retirement savings to move with them,” Teresa Hassara, Principal’s senior vice president for retirement and income solutions, said in a statement. “Being a part of the Portability Services Network adds another tool to the toolbox we have at Principal to support individuals on their paths to achieving financial security.” 

By automating the process, the PSN hopes workers will be able to transfer their assets into various retirement accounts such as 401(k), 401(a), 403(b) and 457 plans without unnecessary complications. This streamlined approach can reduce premature plan cash-outs and promote financial security, according to PSN. 

“[Principal’s] leadership, action, and progress to increase financial access and inclusion will help more people benefit from auto-portability—in particular people of color, lower-income workers, and women, who have higher than average cash-out rates,” Robert Johnson, chairman of PSN and Retirement Clearinghouse, said in a statement. 

PSN currently represents about 82 million workers across more than 185,000 employer-sponsored retirement plans. Principal brings an additional 11 million retirement plan participants and more than 46,000 plans to the coalition, according to the announcement. 

The network is building a recordkeeper base even as the SECURE 2.0 Act of 2022 called on the Department of Labor to create a centralized retirement account “lost and found” for American workers. The DOL has said it is looking into the best approach to create this database. 

Millennium Trust Begins Testing Open Portability Network 

Millennium Trust Company LLC, a provider of health, wealth, retirement and benefits solutions, has also begun testing its new open portability network, which is designed to connect with all types of providers who hope to avoid leakage when funds move between retirement accounts. 

The portability network was first announced in April, and Millennium Trust stated the new network “eliminates the friction and hassle of moving money within the retirement system by digitizing the transfer process.” 

The dual solution enables both automatic portability and active portability within one network, enhancing the company’s existing portability solution and allowing clients to offer auto-portability services.  

While portability always been part of Millennium Trust’s automatic rollover solution, active portability through the network will allow individuals to digitally transfer their funds “simply and quickly between retirement accounts.” Millennium Trust argues that automatic rollover solutions and active portability reduce unnecessary retirement savings leakage and improve long-term financial outcomes. 

“We’re excited to begin testing of our open portability network with several valued partners and believe that our approach of ‘one network, two solutions’ will create incredible value for the retirement industry,” said Erik Beck, Millennium Trust’s chief commercial officer, in a press release.  

Dan Laszlo, Millennium Trust’s CEO, stated in the release that the network will reduce paperwork, manual checks, phone calls and general frustration with the process of transferring retirement funds. 

The open portability network also enables auto portability as an optional add-on to its existing auto-rollover solution to help individuals who are not actively engaged with their retirement savings. The network will be ready to enable auto-portability by January 1, 2024, when auto-portability may be more widely offered thanks to SECURE 2.0 provisions, according to the press release. 

In addition, Millennium Trust plans to add recordkeepers, automatic rollover providers, other portability networks and other industry leaders interested in improving long-term financial outcomes to the network soon.  

The Retirement Clearinghouse team said in an emailed statement, however, that it does not have plans to work with Millennium Trust. 

“Portability Services Network was established to implement auto portability through recordkeepers, and in the process, PSN’s Board of Directors established requirements for entities that can be a member of the PSN Network, namely recordkeepers,” the team stated. “Millennium Trust does not meet the Board’s requirements to be a member, so there are no plans for PSN to work with Millennium Trust.” 

Benefits July 10, 2023

DOL Targets New Jersey 401(k) Plan for Concrete Companies

Concrete producer Di Ferraro Inc. failed to remit employee withholdings and loan repayments to the plan over six years, the Department of Labor alleges.

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New Jersey concrete manufacturer Di Ferraro Inc. failed to properly transfer employee withholdings for loan repayments and employer matching contributions to its retirement plan repeatedly over several years, the Department of Labor alleged in a July 7 lawsuit brought against the plan’s fiduciaries in U.S. District Court for the District of New Jersey.

The DOL, in the name of Acting Secretary of Labor Julie Su, alleged the defendants—concrete manufacturer Di Ferraro Inc.; company president Mario Ferraro Jr.; and the Crews-Farrell-Mead 401(k) Savings and Retirement Plan—committed six counts of fiduciary breach under the Employee Retirement Income Security Act for violating the fiduciary duties of exclusive purpose, prudence, loyalty, entering into prohibited transactions and engaging in self-dealing.

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“Although Di Ferraro and Ferraro [Jr.] took weekly Plan contributions from employees’ paychecks, they failed to remit all the employees’ contributions to the Plan,” the complaint states. “From January 1, 2015, to December 31, 2021, loan repayments were withheld from some employee paychecks and not properly remitted to the Plan. Additionally, on multiple occasions from January 1, 2015, through December 31, 2021, Defendants failed to send the Plan the required amount of employer matching contributions each year.”

Wayne, New Jersey-based Di Ferraro Inc. manufactures concrete products from a combination of cement and aggregate. Requests for comment to Di Ferraro were not returned.

Employees who contributed to the plan via weekly payroll deductions were promised, by Di Ferraro, that their contributions would be 100% matched up to $1,040 per year, the complaint shows.

“On multiple occasions from January 1, 2015, through December 31, 2021, Defendants failed to send the Plan the required amount of employer matching contributions each year,” the DOL explains.

The sixth claim brought by the DOL alleged co-fiduciary liability against Di Ferraro Inc. and Ferraro Jr., son of one of the company’s owners, Mario Ferraro Sr.

“As fiduciaries to the Plans, Di Ferraro and Ferraro [Jr.] are subject to liability for each of other’s breaches that they knew of but failed to remedy,” the complaint states. “Di Ferraro and Ferraro, in their position of having custody or control over the Plans and their assets, knew of and had the opportunity to prevent or remedy the conduct of each other that caused losses to the Plans.”

Di Ferraro Inc and the Hall Wilbert Company LLC are collectively owned by Ferraro and his parents, Ferraro Sr. and Ann Ferraro, the complaint shows. Ferraro Sr. and Ann Ferraro are not defendants but are parties in interest to the plan under ERISA, according to the complaint.

Di Ferraro and Hall Wilbert are affiliated concrete product manufacturing companies headquartered at the same address in Wayne, New Jersey, the complaint shows. The Crews-Farrell-Mead 401(k) Savings and Retirement Plan provides retirement plan benefit coverage for participating employees from Di Ferraro and Hall Wilbert, according to the complaint.

Although the affiliated companies are connected concrete manufacturers, Hall Wilbert is not a named defendant in the lawsuit, as the company is a party in interest to the lawsuit as an employer of participants in the plan, the DOL explains in the complaint.

In the case, Su v. Ferraro et al., the DOL is requesting that the court order Di Ferraro and Ferraro be removed as fiduciaries; appoint an independent fiduciary for the plan with plenary authority and control over the plan, including but not limited to the authority to calculate the total amount of untimely, unremitted contributions, outstanding loan repayments, missing match contributions and interest lost and/or lost opportunity earnings incurred by the plans because of their violations of ERISA; and Di Ferraro and Ferraro be ordered to restore any and all missing contributions and losses, as calculated by the independent fiduciary.

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