Deals and People June 11, 2021

Retirement Industry People Moves

QMA Hires David Blanchett as managing director and retirement research head and Alerus adds new senior business adviser.

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Art by Subin Yang
Art by Subin Yang
Art by Subin Yang

QMA Hires David Blanchett as Managing Director and Retirement Research Head 

QMA LLC, the quantitative equity and multi-asset solutions specialist of PGIM, has hired leading retirement academic and researcher David Blanchett as managing director and head of retirement research.  

“We have been focused on solving upcoming challenges in the retirement space,” says QMA’s CEO Andrew Dyson. “Over the next 10 years, income solutions will come to dominate the DC [defined contribution] marketplace. David is a recognized retirement thought leader and his experience will be invaluable as we position ourselves for the future.”  

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“With $214 billion managed on behalf of defined contribution clients across multiple asset classes and vehicles, PGIM has a significant retirement focus,” says PGIM president and CEO David Hunt. “We are committed to providing best-in-class support to our clients and in delivering new and innovative retirement solutions founded on market-leading research.”

Blanchett joins from Morningstar Investment Management LLC, where he was most recently head of retirement research. He has published over 100 papers in a variety of industry and academic journals. Blanchett’s research has received awards from associations including the Academy of Financial Services, the CFP Board, the Financial Analysts Journal and the Financial Planning Association. He is also a regular contributor to Advisor Perspectives, ThinkAdvisor and the Wall Street Journal.

“I am incredibly excited to join QMA given PGIM’s position as a leader in the retirement space,” Blanchett says. “I look forward to working alongside some of the brightest minds in the industry to develop new proprietary investment solutions to improve retirement outcomes for potentially millions of investors and DC participants.” 

Blanchett is an adjunct professor of wealth management at The American College of Financial Services and was formerly a member of the ERISA [Employee Retirement Income Security Act] Advisory Council.

Alerus Adds New Senior Business Adviser

 Alerus has added Jeffrey Scott as a senior business adviser, retirement specialist.

In this role, Scott will provide comprehensive retirement solutions to business clients, including 401(k) plans, employee stock ownership plans (ESOPs), health and wellness programs, payroll, wealth management, insurance, and other services. He will also collaborate with experts across Alerus to ensure business clients have access to the company’s full suite of diversified financial services. 

Scott has nearly 30 years of experience in the financial industry and has extensive expertise in managing corporate retirement plans. He specializes in providing retirement education and financial literacy training for advisers and clients. He holds a bachelor’s degree in economics from St. Cloud State University in St. Cloud, Minnesota. He is based at Alerus’ office in Minnetonka, Minnesota.

Compliance June 11, 2021

Generac Power Systems New Target of ERISA Excessive Fee Suit

As with similar litigation, the company’s 401(k) plan fiduciaries are accused of failing to take measures to ensure reasonable recordkeeping and investment fees.

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Generac Power Systems and its board of directors have joined the list of recent targets of an Employee Retirement Income Security Act (ERISA) excessive fee lawsuit.

A participant in the company’s 401(k) plan whose employment with Generac Mobile Products, a wholly owned subsidiary of Generac Power Systems, was terminated in May alleges in his proposed class action suit that the defendants breached their fiduciary duties by, among other things: authorizing the plan to pay unreasonably high fees for retirement plan services (RPS); failing to objectively, reasonably and adequately review the plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost; and maintaining certain funds in the plan despite the availability of identical or similar investment options with lower costs and/or better performance histories.

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According to the complaint, the defendants failed to regularly monitor the plan’s RPS fees paid to covered service providers, including by not regularly soliciting quotes or bids from service providers. It states that from the years 2015 through 2019, “based upon the best publicly available information … the plan had on average 2,880 participants with account balances and paid an average effective annual RPS fee of at least approximately $260,250, which equates to an average of at least approximately $90 per participant.” The plaintiff contends that “a hypothetical prudent plan fiduciary would have paid on average an effective annual RPS fee of around $52 per participant, if not lower.”

Regarding investment fees, the lawsuit points to the plan’s use of higher-fee share classes as evidence that the defendants were not using a prudent process for selecting and monitoring investments. The complaint says plan fiduciaries should understand all fees related to different share classes as well as different types of investment vehicles, such as collective trusts.

The complaint also says that if a plan fiduciaries choose an active investment option, they must make a specific and informed finding that the probability that the active portfolio manager will outperform an alternative lower-cost active investment option or index fund warrants the higher fees charged by the active portfolio manager and that the risk/reward trade-offs show that the potential of outperformance is in the best interest of plan participants.

The complaint includes charts to support the plaintiff’s argument that during the class period, the investment options selected by the plan fiduciaries were 857.64% more expensive than prudent alternative and less expensive options covering the same asset category. “During the class period, defendants did not engage in an objectively reasonable process when selecting funds for the plan,” the lawsuit states.

Generac says it cannot comment on pending litigation.

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