Compliance February 13, 2008

ABB Excessive Fee Suit Survives Initial Challenge

February 13, 2008 (PLANSPONSOR.com) - A federal

 

judge in Missouri has cleared the way for participants in ABB

 

Inc.'s 401(k) plan to move forward with their fiduciary

 

breach lawsuit over excessive fees and revenue sharing

 

practices.

Reported by

In addition to the claims against the company, U.S. District Judge Nannette K. Laughrey of the U.S. District Court for the Western District of Missouri also ruled that the claims that the plan’s investment adviser and directed trustee breached their Employee Retirement Income Security Act (ERISA) fiduciary duties could likewise move forward.

Laughrey contended that even though ERISA does not require disclosure of revenue-sharing arrangements, ABB could still be found to have breached its fiduciary duties.

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The court rejected ABB’s argument that because it had made its required ERISA disclosures, it was fully immunized under 404(c) from any claimed fiduciary breaches. Laughrey claimed 404(c) could be raised at trial as a legal defense but was not appropriate when the court was considering a pre-trial request to throw out the case.

The court also found that the plan’s directed trustee might be liable as an ERISA fiduciary because there was evidence it directly managed the mutual funds that made up approximately half of the investment options available to plan participants. The plan’s investment adviser likewise might qualify as an ERISA fiduciary because it “indirectly” exercised discretion over plan assets by paying its affiliate, the directed trustee, to steer the plan toward mutual funds offered by the adviser, Laughrey ruled.

The court went on to reject the argument of Fidelity Trust and Fidelity Management that the participants’ lawsuit should be dismissed because they had not put forward a strong enough case to prove the fees were excessive.

“Plaintiffs have set forth specific facts that the Fidelity Defendants charged ABB per-participant fees significantly in excess of rates paid by similar plans; that the Fidelity Defendants offered investment options whose sub-asset classes ‘may create participant confusion in selecting options;’ the weighted average expense ratio was high compared to peer plans; and, that the Fidelity Defendants subsidized services provided to ABB through revenue sharing,” the court said.

Having made those findings, Laughrey turned away requests by ABB, Fidelity Trust, and Fidelity Management to throw out the suit.

According to the opinion, ABB selected Fidelity Management Trust in 1995 as the plan’s directed trustee. The trust agreement between ABB and Fidelity Trust required until 2004 that ABB get the consent of Fidelity Trust before choosing investment options for the plan and that Fidelity Trust could withhold its approval about any investment option it or its affiliates did not manage or operate.

The opinion said Fidelity Trust was paid directly based on the number of participants or transactions and also received revenue-sharing payments from investment option providers.

Participant Ronald C. Tussey, filed the suit in 2006 against ABB alleging it breached its ERISA fiduciary duties by paying excessive fees to Fidelity Trust and by failing to disclose to plan participants the revenue-sharing arrangement (See St. Louis Law Firm Files Another 401(k) Fee Suit ). 

In December, the district court certified the lawsuit as a class action (See Excessive Fee Suit Gets Class-Action Nod ).

Laughrey’s latest ruling is here .

Benefits February 12, 2008

Work-Life Balance Still Critical to Job Acceptance

February 12, 2008 (PLANSPONSOR.com) - While the size of the paycheck is still important, a new survey finds that nearly a third (29%) of US workers now consider work-life balance and flexibility to be at the top of their list when evaluating a job offer.
Reported by

A news release said the Hudson survey found that compensation finished second (23%) when workers were asked to name the primary reason they accepted their current position.

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“Money will always be important to people, but in this age of Internet powered remote access where there are so many virtual options, employees place a much higher premium on flexible work arrangements,” said Robert Morgan, co-president of Recruitment and Talent Management, Hudson, in the news release. “As the pool of qualified candidates shrinks, it seems that employers can compete more effectively for talent if they can offer work-life balance to go along with the competitive pay.”

When it comes to interviewing for jobs, the survey also found that workers are generally satisfied with how their current employer handled it, the announcement said. Three-quarters of workers rated their company’s interview process as “excellent” or “good.” Only five percent described it as “poor.”

Sixty-eight percent of workers said there was less than one month between when they applied for the position and when they began work.

On the down side, one in five (20%) workers said that the job assignment they eventually accepted did not quite match up with the job they heard about during their interview. A similar number (19%) claim that they did not meet their boss before joining the company.

“It is the company’s responsibility to make sure all candidates considered for a position understand what the job will entail. Failing to do so will create retention problems and may even have legal consequences,” Morgan warned.

According to the news release, additional survey findings include:

  • Only 26% of workers were recruited for their current job, while 66% responded that they were actively seeking a job.
  • Sixty-one percent of workers met with one to two people during the interview process. Nineteen percent met with three to four people.
  • Among workers who earn $75,000-$100,000 per year, 32% said that compensation was the primary reason they accepted their current job.

This survey is based on a national poll of 1,634 U.S. workers who have been with their company for less than five years conducted January 26-27, 2008, and was compiled by Rasmussen Reports, LLC, an independent research firm.

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