Compliance June 27, 2017

Washington University in St. Louis Faces Second 403(b) Lawsuit

The strongly worded complaint says the plan fiduciaries “utterly abdicated their fiduciary duties to act prudently and loyally” by turning the plan over to TIAA and Vanguard Group.
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Just weeks after being served with a lawsuit about allegedly excessive recordkeeping and investment fees for its 403(b) plan, Washington University in St. Louis is facing a lawsuit by another plan participant.

The strongly worded complaint says the plan fiduciaries “utterly abdicated their fiduciary duties to act prudently and loyally. Instead, they turned the plan over to the Teachers Insurance and Annuity Association of America and College Retirement Equities Fund (TIAA) and Vanguard Group Inc.” The complaint goes on to say that TIAA and Vanguard offered “scores of duplicative, expensive and underperforming” proprietary products.

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The lawsuit alleges that TIAA and Vanguard gained multiple layers of fees, but the plan and participants lost the potential growth they could have achieved if plan fiduciaries had properly discharged their duties under the Employee Retirement Income Security Act (ERISA).

The lawsuit says the plan participants were damaged because they paid higher recordkeeping fees than necessary as the plan fiduciaries had allowed TIAA and Vanguard to charge fees based on a percentage of assets rather than on the number of plan participants. In addition, the complaint says, for many funds, participants paid for the higher-cost, retail share class rather than the lower-share-class versions available to large investors such as the plan. It notes that the Washington University plan is one of the largest 403(b) plans in the country, with approximately 24,000 participants and $3.8 billion in assets.

The lawsuit also alleges that participants were offered an excessive number of duplicative funds, including poorly performing funds “bundled into the plan by TIAA and Vanguard mandates,” which enriched TIAA and Vanguard at the expense of plan participants.

The lawsuit seeks, on behalf of all participants in the plan, restoration of losses caused by the defendants’ breaches of fiduciary duties.

Benefits June 27, 2017

Employees Want Employer Help With Financial Issues

More than half indicate they wish their employer offered more resources to help them prioritize their finances and wish their employer did more to educate them about saving for retirement.
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Thirty-seven percent of Americans report feeling “not very” or “not at all” financially secure, while the majority (54%) describe themselves as “somewhat secure,” according to the MassMutual Middle America Financial Security Study.

Overall, 63% of respondents strongly or somewhat agree they are behind on preparing for retirement. More than half indicate they wish their employer offered more resources to help them prioritize their finances (52%) and wish their employer did more to educate them about saving for retirement (51%).

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Eight in 10 respondents earning less than $45,000 annually strongly or somewhat agreed they are behind on preparing for retirement compared with 54% of those earning $75,000 to $150,000 annually. In addition, 62% of those earning less than $45,000 annually want employer help prioritizing their finances, compared to 47% of those earning $75,000 to $150,000 annually.

Debt is the biggest single financial issue facing Middle America. Overall, 22% of respondents cited debt as their top financial problem with more Millennials and Generation Xers saying so, the study found. As middle Americans age, respondents reported, health care costs rise in importance, becoming the No. 1 concern for Baby Boomers.

“MassMutual’s study shows that employers may have opportunities to play a bigger role in helping their employees strengthen their finances, including deploying more educational resources on retirement savings and money management, benefits to help employees manage both short- and long-term financial challenges, and promoting the link between financial wellness and overall wellness,” says Teresa Hassara, leader of Workplace Solutions at MassMutual.

The internet-based research was conducted on behalf of MassMutual by Greenwald & Associates and polled 1,010 working Americans ages 25 to 65 who had annual household incomes of between $35,000 and $150,000 and participated in making household financial decisions. The study report can be found here.

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