Compliance June 7, 2021

John Hancock Agrees to Procedural Changes in ERISA Suit Settlement

In addition to a $14 million payment, the defendants agreed to retain an independent third-party investment consultant to review investment options in the plan, among other things.

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A $14 million settlement has been reached in a lawsuit accusing John Hancock Life Insurance Co. of self-dealing in its defined contribution (DC) plan.

The proposed class action suit suggested that John Hancock breached its Employee Retirement Income Security Act (ERISA) fiduciary duties “by applying an imprudent and inappropriate preference for John Hancock products within the plan, despite their poor performance, high costs and lack of traction among fiduciaries of similarly sized plans.” In addition, the self-dealing lawsuit accused the firm of failing to monitor or control the plan’s administrative expenses, allegedly costing the plan millions of dollars in excessive administrative fees over the course of the class period.

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Last year, a district court judge denied the defendants’ motion to dismiss the case.

The settlement agreement also includes prospective relief in which the defendants agree to:

  • retain an independent third-party investment consultant to provide ongoing monitoring and review of the investment options in the plan’s investment lineup for at least five years from the settlement effective date;
  • develop and approve an investment policy statement (IPS) for the plan; and,
  • use the services of an independent consultant to assist with negotiating the next recordkeeping agreement and issuing a request for information (RFI) for recordkeeping services at or before the expiration of the plan’s current recordkeeping contract.
The settlement agreement says it is entered into solely for the purpose of avoiding possible future expenses, burdens or distractions of litigation. The defendants, individual benefits committee members, individual investment subcommittee members and any other released parties deny any and all wrongdoing and deny any and all liability in connection with any claims.
Data and Research June 7, 2021

Americans Continue to Grapple With Retirement Savings

Forty-seven percent of DC plan participants say the pandemic has had an adverse effect on their retirement savings.

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While studies find that 401(k) contributions have remained stable over the past 15 months, some Americans have struggled to save for retirement.

Research from BlackRock’s 2021 “DC Pulse Survey” found that the coronavirus pandemic may have exacerbated concerns for plan participants who were already behind on their savings.

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Covering more than 1,000 participants and 225 large defined contribution (DC) plan sponsors, the study found that 52% of plan sponsors kept track of short-term 401(k) loan withdrawals. Those that kept track said employees spent their 401(k) savings on emergency spending needs throughout 2020. Other effects of the pandemic, including furloughs and suspensions of company matches, devastated retirement savings for some—61% of employers noted that at least half of their employees were negatively affected in terms of retirement readiness. Fifty-two percent say more participants withdrew or borrowed from their retirement savings plan than normal due to COVID-19.

The study added that 68% of DC plan participants reported feeling like they were on track with their retirement savings in 2021; however, 47% of participants overall say the pandemic has had some adverse effect on their retirement savings.

This is especially true for members of younger generations, who believe they will not be able to enjoy the same quality of retirement as Baby Boomers and the Silent Generation, which includes people born between 1928 and 1945. The study found 76% of Millennials and 68% of Generation Xers agree that people in their generation will not have the level of retirement income that retirees used to own. Amid the skepticism over their savings, Millennials are looking at owning retirement income solutions instead, as 94% reported expressing interest in annuities.

Gen Xers were most likely to say they are unsure if they are on track with their retirement savings, with 25% revealing they are unsure and another 13% saying they are not on track. They cited the rising cost of living, not saving enough and other expenses as their top concerns.

Financial insecurity has overwhelmed Gen Xers since before the pandemic. Also known as the “sandwich generation” for the financial squeeze that simultaneously caring for parents and children has put on them, this group of workers often juggles child care, elder care and mortgages with their careers and saving for a post-career life. For many, the pandemic had knocked over any stability that grounded their financial wellness, experts say. 

Women are also facing ongoing turmoil, with 64% saying they are worried about outliving their retirement savings, compared with 55% of men. Additionally, while over half (59%) believe they are on track for retirement, this is overshadowed by 78% of men who believe the same. Eighty-four percent of women also prefer to save more now to ensure they won’t have to scale back in retirement, the study reports.

Plan sponsors have the opportunity to focus their outreach to help women feel more prepared for retirement, the BlackRock study notes. Forty-five percent of women trust their employer to help them determine how their savings should be invested, and 62% trust their employer to make good decisions about the investments offered in their retirement plan.

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