Compliance March 2, 2011

Court Gives Final Approval to Settlement of 401(k) Fee Case

March 2, 2011 (PLANSPONSOR.com) – A U.S. District Court judge has granted final approval of an $18.5-million settlement in an excessive 401(k) fee suit.
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The agreement ends proceedings in Kanawai v. Bechtel Corp., N.D. Cal., No. C 06-05566 CRB, in which two former Bechtel employees alleged the company violated its Employee Retirement Income Security Act (ERISA) fiduciary responsibilities by not using its size to get lower fees from vendors. 

Under the settlement agreement announced in October (see Bechtel Settles 401(k) Fee Case for $18.5M), Bechtel agreed for a three-year period to: 

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  • not use any of its own affiliates to act as the investment manager for the 401(k) plan, 
  • greatly enhance the disclosures it makes about investment and recordkeeping fees, 
  • not offer any retail mutual fund as an investment option and prohibit all of the plan’s separate account investment managers from investing in retail mutual funds, 
  • not use plan asset-based pricing for recordkeeping service fees, and 
  • conduct a competitive bidding process for recordkeeping services when the plan’s current contract with J.P. Morgan Retirement Plan Services expires, which is scheduled to occur no later than 2012. 

 

U.S. District Judge Charles R. Breyer of the U.S. District Court for the Northern District of California also approved a fee award of 30% of the net settlement fund (not to exceed $4,859,872.33) to class counsel, Schlichter Bogard & Denton, LLP, in addition to costs in the amount of $1,571,102.56. Each named plaintiff was awarded a $7,500 incentive award.  

In 2008, Breyer ruled that Bechtel did not engage in a prohibited transaction under ERISA with a “party in interest” barred under 406(a) or involving self-dealing in violation of 406(b) because the investment manager payments were not funded out of plan assets for most of the period in question (see Case Sensitive:”Outside” Interests).
Deals and People March 1, 2011

CalPERS Names New Chief Risk Officer

March 1, 2011 (PLANSPONSOR.com) – The nation’s largest public pension plan now has a Chief Risk Officer.

 

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The position is a new one at the California Public Employees’ Retirement System (CalPERS), though Larry Jensen, named to the post, has been Interim Chief Risk Officer since October 1, 2010, when he was appointed to head the new Office of Enterprise Risk Management and to independently assess risk for CalPERS.  Jensen oversees four primary functions: Enterprise Risk Management, Enterprise Compliance, Enterprise Privacy and Security, and Business Continuity/Disaster Recovery.

CalPERS said the position was created to improve the pension fund’s overall risk management program.

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As Chief Risk Officer, Jensen will serve as an independent adviser and consultant to the Board’s Ad Hoc Risk Committee. He will oversee risk intelligence gathering to support decision-making and help evaluate executives’ risk management performance, according to the announcement.

Prior to his interim appointment last year, Jensen served as the Assistant Executive Officer for the Administrative Services Branch since January 2010. He joined the CalPERS Office of Audit Services in June 1995 and became Chief Auditor in 2002.

 “Larry Jensen has done an excellent job in his interim role,” said CalPERS Chief Executive Officer Anne Stausboll. “He’s very familiar with CalPERS operations and has extensive experience in evaluating administrative and fiscal operations, pension, health and investment programs.”

Jensen reports to Steve Kessler, Deputy Executive Officer for Operations; Chief Executive Officer Anne Stausboll; and the CalPERS Board.

CalPERS, the nation’s largest public pension fund with approximately $229 billion in assets, administers retirement benefits for more than 1.6 million active and retired State, public school and local public employees and their families.

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