Products October 31, 2024

Product & Service Launches

Principal launches TDFs with ARS in-plan annuity option; Capital Group, KKR debut public-private fixed-income funds; North American and AMS introduce annuity series; and more.

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Principal Announces TDF Suite With ARS’s Lifetime Income Builder

Principal Financial Group Inc. is launching a target-date-fund suite embedded with Advantage Retirement Solutions LLC’s in-plan annuity option for participants to set up guaranteed distributions in retirement, according to an announcement.

ARS’ proprietary Lifetime Income Builder functions like an investment for plan participants while being backed by a group fixed-indexed annuity with a guaranteed lifetime withdrawal benefit.

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Starting next year, Principal will offer target-date series that include both active and passive investment options for plan sponsors using its recordkeeping services.

The recordkeeper and asset manager will also encourage plan sponsors to use the TDF as the qualified default investment alternative or the default investment option to “help remove difficult participant-level decisions that often lead to confusion or inertia,” according to the announcement.

Capital Group, KKR File for 2 Public-Private Fixed-Income Funds


Capital Group Companies Inc. and KKR & Co. Inc. registered with the Securities and Exchange Commission two public-private fixed-income funds, Capital Group KKR Core Plus+ and Capital Group KKR Multi-Sector+. The firms expect the funds to launch in the first half of 2025, pending approval.

The filings follow the firms’ announcement that they would be creating a category of hybrid public-private investment funds with the goal of giving investors access to private markets in their portfolios. The funds will be offered via financial professionals in the U.S. wealth market, the firms noted.

“These strategies aim to solve the access gap that individual investors currently face when it comes to private investments, and we expect these two public-private strategies will be the first of many across asset classes and geographies,” Holly Framsted, head of global product strategy and development at Capital Group, said in a statement.

Capital Group is responsible for the overall fund strategies, with KKR leading on the private market offerings. The former manages more than $555 billion in public fixed-income assets, while KKR manages more than $100 billion in private credit.

North American and AMS Financial Services Group Announce Max Elite Annuities

Fixed-index-annuity provider North American Co. for Life and Health Insurance, a member company of Sammons Financial Group Inc., is partnering with AMS Financial Services Group on a new annuity product series.

The companies announced this week the Max Elite Accumulation FIA series and the Max Elite Guaranteed MYGA series, both of which will be wholesaled by AMS and sold through bank and broker/dealer channels. Each series will offer five-, seven- and 10-year surrender charge options.

“Right now, the U.S. annuities marketplace has broad client attraction as consumers see the value of guaranteed income,” Rob TeKolste, president of Sammons Independent Annuity Group, said in a statement. “We intend to lead the market by delivering a product that may help clients grow their nest egg.”

Candidly Unveils Onward, a Debt Optimization Solution for the Workplace

Candidly, an artificial intelligence-backed student debt and savings optimization platform, has launched a new consumer debt management program for retirement plan advisers, plan sponsors and recordkeepers to offer to participants.

Candidly’s Onward, which has been available as an application programming interface, will in 2025 have a full “front-end experience,” according to the firm. The new platform’s goal is to help consumers best allocate their money across debt, savings and investing to maximize interest-bearing deposits.

Onward can be used as a “plug-and-play” option in existing employer-sponsored benefits, including health care savings accounts, flexible savings accounts, brokerage accounts and retirement accounts.

“Lowering consumer cost of debt, and directing those dollars into first time deposits, savings, and retirement savings, transforms financial outcomes today and tomorrow,” Candidly CEO Laurel Taylor said in a statement.

Compliance October 30, 2024

Coca-Cola Southwest Faces Lawsuit Over Forfeitures, Target-Date Funds

The soda distributor was accused of offering a suite of ‘underperforming’ target-date funds in its 401(k) plan, as well as mismanaging forfeited funds.

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Former participants of Coca-Cola Southwest Beverages LLC’s 401(k) plan have filed a complaint against the soda distributor, alleging a breach of fiduciary duties under the Employee Retirement Income Security Act for offering “underperforming” target-date funds and mismanaging forfeited 401(k) funds.

In Ware et al. v. Coca-Cola Southwest Beverages LLC, filed in U.S. District Court for the Northern District of Texas, the former participants accused Coca-Cola SW, a bottling company owned by Mexico-based Arca Continental, of offering a suite of pricey J.P. Morgan TDFs, which they claimed underperformed relative to comparator TDFs and indexes.

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In 2018, the 401(k) plan held more than $204 million in the J.P. Morgan TDFs, and by the end of 2020, the plan held more than $234 million in TDFs, according to the complaint. The plaintiffs, represented by law firms Ward + White PLLC and Capozzi Adler PC, alleged that with such a large amount invested in the target-date series, the plan “would have been able to choose virtually any available target date series for the plan.”

The J.P. Morgan TDFs were the only target-date investing options available in the plan until November 17, 2021.

The complaint cites Morningstar’s Lifetime Moderate Index to show that J.P. Morgan SmartRetirement target-date funds did not perform as well as other TDF suites offered by American Funds, MFS, Mutual of America and T. Rowe Price.

“By choosing or continuing to include the JPMorgan TDFs in the plan despite the clear evidence that the funds had a flawed investment strategy as evidenced by the series’ performance for many years, … it deprived Plan participants of meaningful returns costing them millions of dollars in retirement savings needlessly,” the complaint states.

The plaintiffs further argue that participants were charged “unreasonable fees” for the TDFs, with each having an expense ratio of at least 0.75%, higher than comparator funds.

The Coca-Cola Southwest Beverages 401(k) plan has more than $543 million in assets and serves 10,776 participants, according to its most recent Form 5500 filing.

In addition, plaintiffs accuse Coca-Cola SW of misusing the plan’s forfeited funds for its own benefit by using them to reduce future company contributions to the 401(k) plan, instead of not allocating the funds to participants’ accounts.

“Based on the fact that in 2019, 2021 and 2023 the amount of offset exceeded the balance of the forfeiture accounts, it is likely the company used forfeiture funds from prior years to offset company contributions,” the complaint states. “This is a violation of IRS and general ERISA requirement that forfeitures are to be exhausted during the year in which they are incurred.”

In the last several months, numerous similar lawsuits have accused a variety of employers of improperly allocating forfeited funds—or unvested 401(k) money from terminated employees—and using them toward future contributions. However, according to the IRS, which reaffirmed its position in 2023, 401(k) plan forfeitures can be used for any of three permitted purposes: to pay plan expenses, to reduce future employer contributions or to make an additional allocation to participants. 

Manufacturing company Siemens Corp. last week filed a motion to dismiss a forfeiture allegation filed against the firm in August, arguing that Siemens’ actions caused no injuries and are in line with plan terms and the opinions of federal regulators.

A federal court in California also recently dismissed a forfeiture case against Thermo Fisher Scientific Inc., because the allegations were “too broad to be plausible.”

In the Coca-Cola SW case, the plaintiffs allege breaches of the fiduciary duties of prudence and loyalty, as well as a breach of ERISA’s anti-inurement provision. The plaintiffs are seeking an order requiring the company to disgorge all profits received from, or in respect of, the plan and/or equitable relief, as well as actual damages in the amount of any losses the plan suffered to be allocated to participants’ individual accounts.

Cola-Cola SW did not immediately respond to a request for comment. Information on representation for the company was not immediately available.

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