Compliance May 24, 2017

University of Chicago Faces Excessive Fee Lawsuit

The university is accused of not negotiating a better price for recordkeeping and retaining high cost, underperforming investments, among other things.
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Another university is charged with breaching its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by allowing plan participants to pay excessive investment and administration fees. 

The proposed class action lawsuit against the University of Chicago says, “Because the marketplace for retirement plan services is established and competitive, and because the Plans have billions of dollars in assets, the Plans have tremendous bargaining power to demand low-cost administrative and investment management services and well-performing investment funds.” 

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However, the lawsuit contends that rather than negotiating separate, reasonable and fixed fees for recordkeeping, participants paid an asset-based fee for administrative services that continued to increase with the increase in value of participants’ accounts even though no additional services were offered. 

In addition, the lawsuit accuses university fiduciaries in failing to monitor investments and retaining certain investment options for the plans that historically and consistently underperformed their benchmarks while charging excessive fees. The lawsuit calls out the inclusion of “a dizzying array” of 35 TIAA-CREF and more the 80 Vanguard investment options. Interestingly, judges in lawsuits against Emory University and Duke University had differing opinions about the effect of such large fund lineups. 

According to the complaint, the university selected as the plans’ principal capital preservation fund, an insurance company fixed-income account, the TIAA Traditional Annuity, that prohibited participants from re-directing their investment in the Traditional Annuity into other investment choices during employment except in ten annual installments, effectively denying participants the ability to invest in equity funds and other investments as market conditions or participants’ investment objectives changed. The Traditional Annuity also prohibits participants from receiving a lump sum distribution of the amount invested in the Traditional Annuity unless they paid a 2.5% surrender charge that bore no relationship to any reasonable risk or expense to which the fund was subject.

The university is also accused 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.

The suit seeks to restore to the plans all losses resulting from each breach of fiduciary duty, as well as other equitable or remedial relief for the plans as the court may deem appropriate.

Administration May 24, 2017

Tips for Using Social Media to Engage Participants

According to Corporate Insight, plans can see as much as a 50% increase in communication with Millennials by using social media versus relying on call centers and in-person interactions.
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Corporate Insight suggests ways plan sponsors can use social media to increase participant engagement.

The company first suggests responding to inquiries via social media, and secondly, to ask for feedback from participants.

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Plan sponsors should tailor each post to the strengths of each platform. For example, Facebook can be used for general information and dialogue building, YouTube can be used for succinct and/or witty video content, and Twitter can be used for concise announcements.

Vary the frequency of posts depending on the medium. For example, Facebook posts may appear weekly, while Twitter posts can be used more often

“Do not build social media pages that will remain dormant or unused,” Corporate Insight says. “Accomplish more than just dialogue building by linking to resources and articles when applicable.” The firm also suggests incorporating infographics wherever possible.

Corporate Insight suggests using standard business language: don’t be too formal or try to speak in the perceived voice of a specific generation. However, plan sponsors should keep in mind the audiences they are most likely to reach through each medium. According to the firm, plans can see as much as a 50% increase in communication with Millennials by using social media versus relying on call centers and in-person interactions.

Finally, Corporate Insight says, while a social media manager would be nice, plan sponsors do not need one to get started posting.

An infographic of Corporate Insights’ suggestions is here.

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