Products July 20, 2016

Plan Sponsor Support Focus of CUNA Mutual ClearDirection Program

Known as the ClearDirection Plan Management program, a new client service approach from CUNA Mutual Retirement Solutions focuses on simplifying key administrative processes.

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A new client service approach being rolled out by CUNA Mutual Retirement Solutions features experienced relationship managers delivering support, thought leadership and strategic planning.

“We’ve worked with various industry experts such as Ann Schleck and Company, surveyed our customers and reviewed industry studies [to devise the new service model],” explains Jennifer Norr, vice president of marketing and strategy for CUNA Mutual Retirement Solutions. “Our new service model is designed to provide strategic insights for advisers and plan sponsors.”

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Norr calls the solution “pretty unique for our target market of employers with 500 employees or less.”

The newly formed client relationship management team is led by Denise Penn, strategic relationship manager for north central states. She has served the retirement plan industry since 1997, the firm adds, working in internal sales, investment account services, business solutions, and strategic relationship management for DCIOs.

Other team members include Larisa Knafelc, strategic relationship manager for the western region; Thomas Mitchell, strategic retirement plan manager for the northeast and mid-Atlantic regions; Edward Gaffney, serving the south central region from Kansas and Missouri south through Texas and Louisiana; Kevin Gaston, strategic relationship manager for the Southeast and Florida; and Gerard Pernot, strategic relationship manager for key accounts.

The team will be deployed to offer expertise and support directly to clients, CUNA explains. “We’ve made a significant investment in the tools and resources available to help simplify plan management and improve outcomes for plan participants,” Norr says.

More information is available at www.cunamutualrs.com. 

Compliance July 20, 2016

Another Small Plan Targeted in Excessive Fee Suit

Checksmart and its investment adviser, Cetera Advisor Networks, have been specifically targeted over fees of risk-based asset allocation funds in Checksmart’s 401(k) plan.
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A participant in the Checksmart Financial 401(k) Plan has filed a lawsuit contending fees for funds offered in the plan are too excessive.

The lawsuit accuses Checksmart; its plan committee, which only has one member; and the plan’s investment adviser, Cetera Advisor Networks, of only offering expensive and unsuitable actively managed mutual funds as investment options in the plan without an adequate or appropriate number of passively managed and less expensive mutual fund investment options. According to the complaint, most investment options have expense ratios of 88 to 111 bps, which the document says are four or more times greater than retail passively-managed funds—which were not made available to the plan and its participants during the class period. In addition, the average expense of all funds is 104 bps.

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The compliant points out there are virtually no Vanguard index funds offered in the plan, and mentions that retail shares of the Vanguard S&P 500 Index Fund have an expense ratio of 16 basis points, while Admiral Shares (which requires a minimum $10,000 investment—an amount the plan would easily cover) has an expense ratio of 5 basis points.

The lawsuit specifically calls out the plan’s ‘Lifestyle Portfolios’—risk-based investment options that hold $13.25 million, or 52.63%, of the approximately $25 million in plan assets—saying not only are they the most expensive plan investments, but they materially underperformed the S&P 500 total return under every benchmark.

“The plan has paid grossly excessive fees during the pertinent period for extremely underwhelming performance, and …defendants have engaged in significant breaches of fiduciary duty by (a) failing to ensure that the plan paid reasonable and appropriate fees, and (b) retaining these improper and imprudent investment options,” the compliant says.

Perhaps with the defendant Cetera in mind, the complaint notes that the Employee Retirement Income Security Act (ERISA) also imposes explicit co-fiduciary liabilities on plan fiduciaries, providing a cause of action against a fiduciary for knowingly participating in a breach by another fiduciary and knowingly failing to cure any breach of duty. It also asks that “to the extent that any of the defendants are not deemed a fiduciary or co-fiduciary under ERISA, each such defendant should be enjoined or otherwise subject to equitable relief as a non-fiduciary from further participating in a breach of trust.”

In May, a lawsuit was filed suggesting retirement plan excessive fee suits were moving down market. However, that lawsuit was later voluntarily dismissed. 

The complaint in Bernaola v. Checksmart Financial LLC is here.

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