Products June 20, 2024

Product & Service Launches

State Street Global Advisors launches IncomeWise solution; BlackRock expands active ETF platform with 2 ETFs; Vanguard reopens actively managed funds to all investors; and more.

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State Street Global Advisors Launches IncomeWise Solution

State Street Global Advisors, the asset management business of State Street Corp., has introduced the latest iteration of its target-date funds offering IncomeWise. This solution aims to redefine retirement planning by integrating lifetime income features into a target date fund. 

IncomeWise is a traditional index-based TDF that allows participants to convert their savings into lifelong income. Participants can choose to transform a portion of their IncomeWise savings into a lifetime income stream that begins in later years through the purchase of a qualified longevity annuity contract.

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Meanwhile, the participant’s remaining savings can support early retirement spending needs through a managed drawdown strategy, designed to complement the future QLAC payments. 

“State Street’s Global Retirement Reality Report consistently indicates that the majority of respondents seek flexible access to their savings early in retirement, alongside a defined income stream later in life,” Brendan Curran, U.S. head of defined contribution at State Street Global Advisors, said in a statement. “In response, our commingled IncomeWise solution offers participants the option for both early-stage and later-stage income sources, allowing participants to customize their drawdowns in retirement, for a balance between flexibility and security.”

BlackRock Expands Active ETF Platform With 2 ETFs

BlackRock announced the launch of the BlackRock Long-Term U.S. Equity ETF and the BlackRock High Yield ETF. According to BlackRock, these solutions will offer tax efficiency and alpha in the convenience of an ETF.

BlackRock has a track record of delivering alpha, with 93% and 79% of BlackRock’s actively managed taxable fixed income and fundamental equity AUM, respectively, outperforming the benchmark or peer median over the past five years.

“To generate compelling returns in public equities, we believe a long-term approach is required,” Alister Hibbert, head of BlackRock’s strategic equity team, said in a statement. “True business value is unlocked over years, not quarters; and companies that can deliver high returns over time are often undervalued by the market today. A high-conviction strategy like [BlackRock Long-Term U.S. Equity ETF] is essential to helping investors capture this significant alpha opportunity.”

BlackRock has nearly doubled its number of active ETFs in the past year, managing $25 billion in assets under management across 40 active ETFs in the U.S.

Vanguard Reopens 2 Actively Managed Funds to All Investors

Vanguard is reopening two actively managed stock mutual funds. On Tuesday, the firm announced that it would reopen its Primecap and Primecap Core, which have been closed off to new investors since 2004 and 2009, respectively. A third Primecap fund, Capital Opportunity, was also closed in 2004 and remains closed.

The two large-cap growth funds have reopened without restriction to all investors and will be available for all new accounts. Primecap had assets of $76.1 billion at the end of May, while Primecap Core had assets of $13.2 billion.

Vanguard routinely closes funds to new investors when it is in the best interest of shareholders, according to a spokesperson for the firm. One thing that the firm evaluates when doing so is whether the size of a fund could impact a manager’s ability to effectively generate alpha for investors.

“After careful consideration of the funds’ current investment capacity, Vanguard has determined that the funds have sufficient capacity to reopen to new accounts and additional purchases without limit,” the spokesperson said.

TIFIN Give and AssetMark Announce New Collaboration

TIFIN Give, a philanthropy platform serving families, employees and other cause-based communities, announced a strategic relationship with AssetMark, a wealth management platform provider.

TIFIN Give’s fund technology will be integrated into the AssetMark platform, providing a way for financial advisers and their clients to manage and optimize charitable contributions. AssetMark’s advisers will have access to tools that facilitate more effective philanthropic and tax planning across multiple generations of their clients and their families.

AssetMark clients will also have access to TIFIN Give’s donor-advised fund technology, which simplifies the process of setting up, managing and distributing charitable donations.

“We are excited to partner with AssetMark, a leader in the wealth management industry, to bring TIFIN Give’s digital-first donor-advised fund technology to their valued clients,” said Paul Lussow, CEO of TIFIN Give, said in a statement. “This relationship represents a significant step toward our shared mission of making philanthropy more accessible and impactful.”

Compliance June 20, 2024

Kohler Agrees to Settle ERISA Lawsuit Against DB Plan

Kohler Co., the Kohler Co. Pension Plan and pension plan beneficiary plaintiffs request the court’s approval of the settlement.

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Kohler Co. has reached a $2.45 million preliminary settlement with a proposed class of vested Kohler Co. Pension Plan participants to resolve a lawsuit that had claimed their benefits were shortchanged. 

The named vested participant plaintiffs in the litigation are Danny Holloway, James Kohlhagen, Jeffrey Leffin and Keith Pfister.  The lawsuit is Holloway et al v. Kohler Co et al. The case was heard in U.S. District Court for the Eastern District of Wisconsin Milwaukee.

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They claimed Kohler’s pension plan shortchanged participants through the use of outdated mortality tables in violation of the Employee Retirement Income Security Act.

Their attorneys argue that the proposed settlement merits court approval because the agreement is fair, reasonable and adequate.

“The settlement will increase the amount that class members receive in their monthly pension checks—a benefit that will continue for the rest of their lives and the lives of their beneficiaries,” argued plaintiff’s attorneys, in the unopposed motion seeking preliminary approval of the settlement.  

Complainants this week requested the court approve the settlement; preliminarily certify the settlement class; approve the proposed form and method of notice to the class; and schedule a hearing for the court to consider final approval of the settlement.

The Kohler Co. Pension Plan held about $1.726 billion in assets under administration for 21,945 participants, as of December 2021. Kohler Co.’s plan records indicate the settlement will apply to approximately 500 class members.

In exchange for the increase to their monthly benefits, plaintiffs and each class members “shall be deemed to forever release and discharge [Kohler Co. and Kohler Co. Pension Plan] from any and all claims arising on or before the preliminary approval date that were brought, or could have been brought, arising out of, or relating to, the provisions of the plan applicable in the calculation of the class member’s benefit,” states the motion for order of preliminary approval of class settlement.

The proposed class of complainants alleged Kohler’s pension calculated their joint survivor annuity benefits—and those of other class members—using outdated mortality and interest rate assumptions that caused their monthly benefit to be less than an “actuarially equivalent” amount, according to the original complaint. 

“The present values of class members’ JSA benefits were less than the present values of the [single life annuity’s] they could have selected,” wrote attorneys for the accusers. “Plaintiffs allege the present values of the two benefit types would have been equal had defendants used mortality and interest rate assumptions that were reasonable as of the date Class Members began to receive their benefits.”

Settlement Terms

The $2.45 million net settlement amount is less any amounts the court awards as attorney’s fees. Expenses and a case contribution award will be divided among class members in proportion to the total value of their past and future pension benefits payments.

Per the settlement terms, the proposed class is a non-opt-out class.

The class is defined as applying to all participants and spouse beneficiaries entitled to benefits under the Kohler Co. Pension Plan who began receiving either a joint and survivor annuity, qualified optional survivor annuity, or qualified preretirement survivor annuity, on or after September 19, 2017 but before January 1, 2021, whose benefits had a present value that was less than the present value of the SLA they were offered using the applicable Treasury Assumptions as of each participant’s benefit commencement date.

Excluded from the class are defendants and any individuals who are subsequently to be determined to be fiduciaries of the plan.

Within 60 days after final approval of the settlement, Kohler will amend the plan to provide that each class member is entitled to an increased monthly payment as of July 21, 2024.

Monthly benefit increases except for deceased class members will be calculated as follows:

  • The monthly benefit increase is the settlement percentage multiplied by the sum of the adjusted past benefit and the current monthly benefit.
  • The settlement percentage is calculated by dividing the net settlement amount by the sum of the past benefit amounts of all deceased class members, the present value as of August 1, 2024, of the adjusted past benefits for all class members and/or associated participants (other than deceased class members), and the present value of all future benefit payments owed to class members (before the increase contemplated by this Agreement) as of August 1, 2024.

Class members will begin receiving an increased benefit by the first day of the first calendar month that is at least 120 days after the final approval of the settlement.  

Under the settlement, attorneys request an award of $730,000—up to 30% of the present value of in the settlement—in attorney’s fees and expenses and intend to request a case contribution award to each plaintiff of up $2,500 to each member, subject to court approval.  

Weighing approval of a settlement, federal courts operate under a standard: measuring costs, risks and delay of trial and appeal against the effectiveness of a proposed method of distributing a remedy to complainants.

 

Case History

The initial complaint was filed before U.S. District Court for the Eastern District of Wisconsin Milwaukee, in September 2023. The active complaint was filed in January.

The proposed class is represented by attorneys with law firm Siri & Glimstad LLP; Izard Kindall & Raabe LLP; and Motley Rice LLC. Kohler Co. is represented by attorneys with law firm Alston & Bird LLP and Reinhart Boerner Van Deuren SC.

Representatives of attorneys for Kohler did not respond to a request for comment nor did representatives of attorneys for the proposed class of plaintiffs. Kohler did not respond to a request for comment.

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