Participants February 26, 2015

Participants May Be Overlooking Appropriate Investment Options

Nearly four out of 10 retirement plan participants are not familiar with all the investment options in their plan.
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Findings from a survey by TIAA-CREF suggest retirement plan participants may be overlooking important options that could benefit them.

Nearly four in 10 participants (39%) surveyed for the TIAA-CREF 2015 Investment Options Survey say they are not familiar with their retirement plan investment options—an increase from 33% in 2014. Yet, the vast majority of respondents (85%) say they feel comfortable with the investment choices they have made.

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Of the 39% of individuals who said they are not familiar with all of the investment options in their retirement plan, 42% said they chose how to invest their retirement savings themselves. Thirty-one percent of respondents overall said they have made no choice at all, placing their savings in their employer’s default investment option.

The survey also reveals that nearly 40% of individuals feel they have either too many or too few investment options in their retirement plan.

“People may be missing out on options that could help ensure they will achieve their goals, or they could be choosing the wrong options for their particular situation,” says Teresa Hassara, executive vice president of institutional business at TIAA-CREF. “Advice and education can make an enormous difference in helping people ensure that their strategy and mix of investments will fulfill their expectations for retirement.”

Unfamiliar with Target-Date Funds

According to the TIAA-CREF 2015 Investment Options Survey, only 35% of individuals are familiar with target-date funds, and just 10% say they are invested in one.

Those who are invested in the funds were asked to evaluate what they find most appealing about them. Of that group, 36% said it is the professional management that automatically and appropriately rebalances investments over time, while another 33% cited the ease and convenience of a single investment choice as being most appealing. The survey found that 83% of people who have a target-date fund also have savings in other investments.

Thirty-seven percent of respondents invested in target-date funds want their fund to grow slightly more conservative but continue investing for growth as they approach retirement, while another 24% want their fund to continue investing for growth without growing more conservative. Survey results suggest that many people do not realize there are differences between target-date funds: Only 55% of individuals invested in target-date funds recognized that various funds differ in their investment mix.

“While target-date funds are designed with a similar purpose, not all target-date funds are the same, and choosing the right one for your situation is important,” says Hassara.

The survey was conducted by KRC Research by phone among a national random sample of 1,000 adults, ages 18 and older, from January 7 through 13, 2015, using a combination of landline and cell phone interviews. Nearly half of respondents (46%) reported they are concerned about running out of money in retirement.

Compliance February 26, 2015

Court Orders Additional Recovery of Misused Pension Funds

A federal court has ordered a fiduciary to repay $300,000 to a number of pension plans, for which the Department of Labor sued over misuse of assets.
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The U.S. District Court for the Eastern District of Kentucky has issued a consent judgment against George Hofmeister, trustee of several pension plans.

Hofmeister has been ordered to repay $300,000 to the plans sponsored by TPOP LLC, formerly known as Metavation LLC; Fairfield Castings LLC, formerly known as Revstone Castings Fairfield LLC; and Fourslides Inc. Hofmeister is also banned from being a fiduciary or service provider to employee benefit plans under the Employee Retirement Income Security Act (ERISA).

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Consent judgments were previously issued against William Tweardy and Nelson Clemmens, members of the investment committee for the Metavation LLC of Southfield, Michigan, and Fairfield LLC of Fairfield, Iowa, pension plans. Consent judgments were also obtained against Robert La Courciere and Pamela Babbish, former trustees of the Fourslides Inc. pension plan. 

More than $12 million has been recovered after investigations by the U.S. Department of Labor resulted in court orders and injunctions against Hofmeister and other fiduciaries. A series of lawsuits alleges that, among others, Hofmeister, Bernard Tew, investment service provider Bluegrass Investment Management LLC, investment service provider Tew Enterprises LLC, Metavation, Fairfield, Fourslides, Tweardy, and Clemmens improperly used pension funds. Judgments against the remaining defendants are being sought by the department in ongoing litigation.

Investigators found improper use of plan assets for the purchase and lease of company property, the prohibited purchase of customer notes from affiliated companies, the prohibited transfer of assets in favor of a party-in-interest, the payment of excessive fees to service providers. Other violations are also alleged. 

In July 2013, the court issued a preliminary injunction removing Hofmeister, Tew, and Bluegrass from exercising management or control of the pension plans, and appointed Fiduciary Counselors, investment advisers in Washington, D.C, to independently administer the plans.

Metavation, Fairfield, Fourslides, Revstone and their affiliated companies, design and manufacture components used in the transportation and heavy-truck industries. Revstone and its various affiliates, including Metavation and Fairfield, were directed by Hofmeister and owned by the irrevocable trusts of Hofmeister’s children.

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