Compliance November 3, 2022

Excessive Fee Complaint Filed Against Large Freight Transporter

The Phoenix-based company is alleged to have breached its fiduciary duty to plan participants.

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Retirement plan participants employed by Knight-Swift Transportation have filed a class action lawsuit alleging breach of fiduciary duty against the Phoenix-based trucking company’s 401(k) plan under the Employee Retirement Income Security Act.

Plaintiffs allege in the complaint that fiduciaries mismanaged the plan by having participants pay excessive fees for recordkeeping and administrative services to the plan’s recordkeeper, Principal. Additionally, plaintiffs have alleged a plan sponsor fiduciary breach caused by participants paying excessive revenue sharing as direct and indirect compensation to Principal, according to the complaint.

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The Knight-Swift Transportation retirement plan uses revenue sharing to compensate Principal for the cost of providing recordkeeping services. Under the plan sponsor’s revenue-sharing arrangement, payments are derived from investments in the plan.

“The direct and indirect payments defendant caused the plan, participants, and beneficiaries to make for recordkeeping and administrative services during the class period were excessive and unreasonable,” the complaint states. “Defendant breached its duty of prudence by failing to monitor, control, negotiate, and otherwise ensure that indirect compensation plan participants’ pay to Principal [was] not excessive and unreasonable.”

The complaint explains that revenue-sharing payments are not “per se imprudent,” but must be closely monitored for reasonableness.

“Plaintiffs are not making a claim against defendant merely because it used revenue sharing to pay administrative expenses,” the complaint states. “However, when (as here) revenue sharing is left unchecked, it can be devastating for plan participants.”

The complaint further argues that the plan sponsor failed to implement a prudent fiduciary process to properly monitor and control the fees that plan participants were paying for recordkeeping costs, as “prudent fiduciaries implement three related processes to prudently manage and control a plan’s recordkeeping costs,” the complaint states. 

According to the complaint, “this [proper fiduciary process] will generally include conducting a request for proposal process at reasonable intervals, and immediately if the plan’s recordkeeping expenses have grown significantly or appear high in relation to the general marketplace. [A]n RFP should happen at least every three to five years as a matter of course, and more frequently if a plan experiences an increase in recordkeeping costs or fee benchmarking reveals the recordkeeper’s compensation to exceed levels found in other, similar plans.”

The plan sponsor has not undertaken a “proper RFP,” since 2016, plaintiffs state in the complaint.

The plaintiffs alleged that the defendants failed to properly evaluate if the plan sponsor had caused participants to pay more than a reasonable fee for the services provided to the plan. The complaint also argued the plan sponsor failed to stay informed on trends in the marketplace regarding fees paid by similar plans, as well as the recordkeeping rates available in the marketplace.  

The complaint also alleged the plan sponsor breached its fiduciary duty to participants by selecting more expensive share classes of investments instead of less expensive institutional shares of the same funds. By causing plan participants to pay more for identical investments, the plan sponsor failed to uphold its statutory duty under ERISA to prudently monitor and defray costs of the plan, plaintiffs argued in the complaint.

“Plan participants, in most cases, are paying about double to invest in the imprudent share classes,” the complaint states.

The lawsuit was brought before the United States District Court for the District of Arizona. Attorneys for the plaintiffs and the proposed class are from Scottsdale, Arizona-based law firm McKay Law, Tampa law firm Morgan and Morgan and Tampa law firm Wenzel Fenton Cabassa, the court document shows.

Knight-Swift Transportation did not respond to a request for comment on the lawsuit.

Data and Research November 3, 2022

Women Have Significantly Less Wealth than Men at Retirement

In the U.S., the gender wealth gap at retirement mirrors the global average.

 

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Women in the U.S. are expected to accumulate significantly less wealth at retirement than men, new data shows.

In the U.S., women are projected to reach retirement with 75% of the wealth accumulated by men, the WTW Global Gender Wealth Equity Report finds.

The Wealth Equity Index—developed by WTW and the World Economic Forum—takes a holistic view of gender inequities across the lifetimes of women and quantifies the gender wealth gap between men and women at retirement.

Manjit Basi, senior director for integrated and global solutions at WTW, in a press release called the results “startling,” and said that the research finds a persistent gender wealth gap “consistently across the 39 countries,” studied.

“Primary drivers contributing to gender-based wealth disparity include gender pay gaps and delayed career trajectories,” Basi explained in an email. “Career absences due to maternity and responsibilities outside the workplace – child and elder care – influence women’s participation in paid employment and therefore their ability to build wealth. Additionally, gaps in financial literacy exacerbate the divide.”

Regionally, the research shows Europe, Asia Pacific and North America with higher Wealth Equity Indexes, the Wealth Equity Index for Latin America at 67% and Middle East North Africa is 71%. 

The average for North America is 76%, with Canada having performed better than the U.S at 78% and Mexico lower at 63%, data shows.

The wealth accumulation disparity increases with seniority, the report finds. Globally, women in senior expert and leadership roles accumulate 62% of the wealth of their male counterparts, research shows. For mid-career professional and technical roles, women accumulate 69% of what their male counterparts do and for frontline operational roles, women have 89% wealth equity, research shows.

“Women in senior positions have the largest gaps in accumulated wealth,” added Basi. “The index considers different roles to measure the impact of gender on wealth accumulation across different career paths, and we found that the women in senior positions faced the compounded effect of gender pay gaps and delayed career paths.”

In the U.S., the pay gap is larger in leadership roles, because the pay trajectories for women are significantly lower than men, the paper states.

The researchers’ identified several factors contributing to the gender wealth gap:

 

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  • Lower pay compared to men – the gender pay gap – contributing to lower savings and less wealth generation for the same workplace roles as men.
  • Less opportunity for promotion and recognition than men, leading to slower wage growth and less wealth accumulation.
  • Gaps in career due to women being more likely to temporarily or permanently exit the workforce to fulfill caregiving responsibilities.
  • Different levels of financial awareness and greater risk aversion when investing.
  • Life events such as divorce or becoming widowed and becoming single-earner households, which limits expendable income and wealth accumulation.

 

The research analyzed both quantitative and qualitative data on gender wealth gap equity, according to WTW.

Previous gender studies focused on assessing gender disparities from the “single lens of pay, career, pensions and longevity or workforce representation,” the report states. “The reality is that the issue of gender inequity and its causes and effects are multidimensional and should be studied and addressed as such,” according to the report.

By focusing on wealth, the researchers say they were able to consider the effects of several intermingled inequities including pay, career progression, financial literacy and events outside of work.

“And we can measure the one metric—accumulated wealth at retirement,” the report states. Data for the report was collected by WTW, the World Bank, International Labor Organization and Organisation for Economic Cooperation and Development, from January to March. Researchers selected the 39 countries with the largest gross domestic product.

Accumulated wealth was projected from age 22 to a common state retirement age, which was based on the male state retirement age in the country, for greater comparability, according to the research methodology and assumptions.

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