Compliance May 24, 2018

University of Chicago Settles 403(b) Plans Excessive Fee Suit

In addition to a monetary payment, the university has agreed to structural changes to its 403(b) plans.

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Without admitting any wrongdoing, the University of Chicago has agreed to a $6,500,000 settlement of an Employee Retirement Income Security Act (ERISA) excessive fee case.

The original case alleged violations for both the University of Chicago Retirement Income Plan for Employees (ERIP), a plan for faculty and staff members, and the University of Chicago Contributory Retirement Plan (CRP), a plan for non-academic employees. In addition to various counts regarding excessive fees, the complaint accused the university of approving a TIAA loan program that required excessive collateral as security for repayment of the loan, charged grossly excessive fees for administration of the loan, and violated U.S. Department of Labor (DOL) rules for participant loan programs.

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Last fall, U.S. Chief District Court Judge Ruben Castillo of the U.S. District Court for the Northern District of Illinois dismissed claims related to the CRP and the TIAA loan program because the plaintiffs were not participants in the CRP plan nor did they participate in the TIAA loan program. The judge also at the time dismissed the claims for failure in the duty of loyalty under ERISA, saying the plaintiffs did not show that the defendant engaged in any self-dealing or failure to communicate material information.

The case was reinstated in January after a new motion was filed with a new named plaintiff.

According to the settlement agreement, which has already been preliminarily approved by the judge, but is awaiting final approval, the university has agreed to structural changes to its 403(b) plans. The University of Chicago agrees not to increase per-participant recordkeeping fees for three years from the date of final approval of the settlement and to use commercially reasonable best efforts to continue to attempt to reduce recordkeeping fees.

Effective April 2, 2018, the university implemented a new investment lineup for its 403(b) plans that reduced the total number of investment options and eliminated the CREF Stock Account as an investment option available to plan participants. However, the TIAA Real Estate Account will continue to be available as an investment option.
Data and Research May 24, 2018

Millennials Preparing for Retirement Better Than Other Generations Did

More than one-quarter of Millennials have more than $100,000 in retirement savings, with an average of 30 to 35 years before retirement, compared to 75% of Boomers with more than $100,000 in savings and an average of only three years before retirement.

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Millennials are better prepared for retirement than their parents, J.D. Power learned in a survey. Of all of the demographic groups, Millennials are the most likely to have set specific retirement goals and to have the highest amount of savings, relative to age.

“The fact that many in the youngest generation of plan participants are actively preparing for retirement now sends a clear message to providers,” says Mike Foy, senior director of the wealth management practice at J.D. Power. “They need to be focused on upping their game on their digital and mobile offerings to meet the expectations of this digitally enhanced customer segment, not only to help differentiate themselves with plan sponsors who make provider selection decisions on behalf of the employees, but to position themselves to benefit from rollover events when employees eventually leave their jobs.”

The survey also found that 51% of Millennials have set specific retirement goals, compared to just 44% among Gen X and Boomer participants. Of the 51% of Millennials who have set goals, 83% say they are on track to meet them.

Sixty-one percent of Millennials have at least $25,000 in retirement savings, and 27% have more than $100,000, with an average of 30 to 35 years before retirement. By contrast, 75% of Boomers have more than $100,000 in savings, with an average of only three years before retirement.

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Only 20% of plan participants of all ages plan to roll their assets over to their current provider. However, when they are digitally engaged, this rises to 48%.

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