Administration January 15, 2025

How Recordkeepers Are Supporting Participants Impacted by LA Fires

Firms with clients in the Los Angeles area are providing relief for those who may need to tap into their retirement savings.

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As wildfires continue to rage across Los Angeles and Ventura Counties in Southern California, several recordkeeping firms are offering support to retirement plan participants impacted by the disaster.

The fires have killed at least 25 people and have swept through more than 40,000 acres in Greater Los Angeles, destroying more than 12,300 structures. Firefighters are still working to contain the blazes.

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Among several recordkeepers that has taken responsive action, Empower announced on Tuesday that it is temporarily waiving distribution and mailing fees in an effort to support the financial needs of individuals impacted by the wildfires. One of Empower’s largest retirement plan clients is Los Angeles County.

Additionally, Empower’s call center representatives are available to assist with expediting transactions for customers and to help guide decisionmaking.

The Empower fee suspension is limited to those who reside in Los Angeles County, which the Federal Emergency Management Agency declared as a disaster zone earlier this week. The fee waiver will remain in place until further notice, depending on circumstances.

In addition to the fee waiver, Empower last week provided financial support to the American Red Cross, including matching donations made to the agency by any Empower associate. A spokesperson for Empower said the firm did a similar fee suspension on a smaller scale during past disasters, most recently with flood victims in the Southeast.

“It has been a very tough time for California residents living in harm’s way as wildfires ravage parts of Los Angeles County, and we want to do what we can to assist those who need our help,” said Edmund F. Murphy III, president and CEO of Empower, in a statement.

A spokesperson at TIAA said that, in response to the fires, the firm has streamlined the hardship withdrawal request process for participants in the disaster zone. TIAA is also waiving fees for loans sought by affected participants. The spokesperson added that participants can speak directly with a representative to discuss their options based on their individual circumstances.

All of TIAA’s offices in and around Los Angeles are closed until further notice. Associates across the firm are also able to support relief and have their donations matched by TIAA through its Disaster Relief Program.

Principal is currently working with plan sponsor customers in the area to assist in their relief efforts and with programs that can support employees who have been affected. The firm is tracking requests for assistance through its contact center to determine what additional actions might be helpful for individuals who need quick access to their retirement savings.

T. Rowe Price, Fidelity Investments and Alight Solutions did not provide specific information about relief efforts. Vanguard, John Hancock and Ascensus did not immediately respond to requests for comment.

The Internal Revenue Service last week announced relief measures to help retirement plan participants affected by the fires.

Compliance January 15, 2025

Bechtel Managed Account QDIA Lawsuit Dismissed

The complaint accused the engineering and construction firm of defaulting participants into a high-fee option that provided no benefits compared with a target-date fund.

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A federal judge in Virginia dismissed for a second time a lawsuit filed against Bechtel Global Corp., its board of directors and its trust and thrift plan committee alleging the company defaulted plan participants into a managed account that did not justify the associated fees.

U.S. District Judge Anthony Trenga granted the dismissal on January 10, stating that plaintiff Debra Hanigan’s second amended complaint failed to allege a “meaningful benchmark” to support her excessive fee claim.

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In Hanigan v. Bechtel Global, Hanigan originally argued in May 2024 that without participant engagement, the managed account did not produce results worth the additional fees, particularly when target-date funds could have produced similar results at a lower cost.

According to her complaint, as of February 2024, approximately 63% of Bechtel’s plan participants were enrolled in the managed account, called the Professional Management Program, and it was the qualified default investment alternative for the 401(k) plan. From 2018 to 2023, the managed account participants paid an average of approximately $940 per year in investment, administrative and recordkeeping fees. Approximately 65% of participants do not provide any personalized information to influence the asset allocation within the managed account.

The managed accounts were run by Edelman Financial Engines as provided by recordkeeper Empower.

Hanigan also argued that using the managed account as the QDIA for the plan “significantly and imprudently” increased the administrative fees paid to the recordkeeper from participants when compared with defaulting them into TDFs.

Trenga had previously dismissed the suit in October 2024 for similar reasons, but the judge allowed an opportunity to amend the suit to address the plaintiff’s failure to provide meaningful benchmarks.

However, Trenga’s recent decision found that Hanigan’s claim that the asset allocation models for the managed account were comparable to a TDF option was neither factual nor plausible. He stated that the managed account engages in a level of asset allocation and management that are not present in a TDF and that Hanigan failed to demonstrate that the asset allocation and investment management of a TDF and a managed account are similar.

Trenga further ruled that the fact that some participants did not provide personalized information for the managed account does not change this analysis.

Additionally, because Hanigan did not plausibly allege another breach of fiduciary duty, her claim alleging a failure to monitor was also dismissed.

The plaintiff was represented by law firms Fitzerald Hanna & Sullivan PLLC and Walcheske & Luzi LLC, and Bechtel was represented by Goodwin Procter LLP.

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