Products August 13, 2014

WMSI Introduces Readiness Modeling Tools

Four new tablet-friendly retirement readiness modeling tools from Wealth Management Systems Inc. (WMSI) help users set and track retirement savings goals based on projected income needs.
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The modeling tools also help retirement plan participants project how much wealth they may accumulate during their working lifetime, based on current savings strategies and market conditions. Advisers can work with the tools to provide clients with recommendations for closing any potential shortfalls, WMSI says. The suite of tools includes the Retirement Planner Tool, the Retirement Plan Contribution Tool, the Social Security Illustrator Tool and the Distribution Planner Tool.

The firm cites industry research showing only about half of people saving for retirement today have actually assessed how much savings they will need to support their desired retirement lifestyle. These tools are designed to address this gap and empower users to define their own retirement income needs interactively.

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All tools are visually oriented and incorporate dynamic modeling features so users can change their inputs and immediately see the impact on their longer-term retirement income projections. WMSI says these modeling features are an effective way to educate and translate key retirement saving and investing concepts into reality for users who learn better by doing.

“The ability to change assumptions on the fly and immediately see their impact graphically has been received very favorably – especially by advisers,” comments John Geli, CEO of Wealth Management Systems Inc. The tools are designed to work in unison, he adds, and can help users zero in on different facets of their retirement savings strategy.

Key features of the tools include the following:

  • Retirement Planner Tool – Helps users determine how much retirement income they will need to maintain their desired lifestyle in retirement and then evaluates this income need relative to the amount of savings they will accumulate based on their current savings strategy. Any potential savings gap or shortfalls are identified along with suggestions and recommendations for closing any gaps.
  • Retirement Plan Contribution Tool – Allows users to zero in on their savings contributions by modeling the impact various contribution rates can have on their paycheck and long term retirement income. Can also be customized to more accurately model employer matching contributions.
  • Social Security Illustrator Tool – Estimates a user’s Social Security benefits based upon their personal earnings history and illustrates how the age at which a user claims their benefits will impact their total retirement income picture.
  • Retirement Distribution Planner – Designed for retirees or those near retirement, this tool enables users to calculate and balance the level of income they require in retirement with the length of time their savings can be sustained.

WMSI says each tool also has a save-and-retrieve feature that makes it easy to quickly generate customized output reports using personalized data to share with spouses and family members, and to support advisers in preparing for client meetings.

More information is available at www.wealthmsi.com.

Compliance August 13, 2014

Fidelity to Settle Excessive Fee Suits

Fidelity Investments has agreed to a settlement of two lawsuits charging it with subjecting its own 401(k) plan participants to high investment fees.
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Under the settlement agreement, without admitting any wrongdoing, Fidelity will pay up to $12 million to settle the suits, with the first payment being made to an escrow account in the amount of $1.2 million within 10 days of preliminary approval of the settlement by the court. In addition, the settlement calls for the following affirmative relief:

  • The default investment option under the plan shall be the Fidelity Freedom Funds-Class K;
  • The plan shall allow plan participants access to a large number of Fidelity and non-Fidelity mutual funds;
  • For employees eligible for a company match of 7% of deferrals, the automatic enrollment default deferral rate under the plan shall be raised from 3% of eligible compensation to 7% of eligible compensation, and current participants who are deferring less than 7% of pay will be defaulted to a 7% deferral rate; and
  • The plan shall provide that revenue sharing attributable to non-Fidelity mutual funds shall be credited to participants in the same way as revenue attributable to Fidelity mutual funds and collective trusts as spelled out in the eighth amendment to the 2005 restatement of the plan. This revision to the plan will remain in effect for at least three years.

 

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In a statement, Fidelity told PLANADVISER, “We believe both lawsuits are entirely without merit. However, litigation imposes substantial costs. We determined that settling these cases is in the best interest of our employees and our business. Since the substantial majority of the $12 million settlement (after costs and expenses) will be allocated to Fidelity employees, we believe that it is better for our employees to receive that financial benefit rather than have the company expend a substantial amount on litigation. 

“Fidelity has a long history of providing our employees with competitive compensation and benefits, including our retirement program with a dollar for dollar 401(k) match of up to 7% of a worker’s salary. This level of match is enjoyed by only approximately 2% of 401(k) plan participants nationwide. In addition, Fidelity has traditionally made annual profit-sharing contributions of at least 10% of each eligible employee’s total compensation. (This is added to employees’ 401(k) accounts.)”

The agreement settles two lawsuits filed by Fidelity 401(k) plan participants. In Bilewicz v. FMR LLC (see “Fidelity Accused of Self-Dealing in New Lawsuit”), the plaintiff claims the proliferation of Fidelity funds in the plan caused the plan and participants to incur unusually high expenses, to the benefit of Fidelity. It also says the defendants maintained the plan’s investment in high-fee Fidelity target-date funds (TDFs) when Fidelity affiliates offered lower-fee and better-performing TDFs. According to the complaint, the pattern of adding new Fidelity funds to the plan demonstrates severe conflicts of interest.

The second suit, Yeaw v. FMR, LLC (see “Fidelity Faces Lawsuit over Revenue Sharing”), focuses on Fidelity’s treatment of revenue-sharing payments, arguing “Defendants caused the Plan to forego tens of millions of dollars in revenue-sharing rebates that Fidelity kept for itself.” According to the complaint, in 2012, the Fidelity plan had approximately 71% of its investment assets in actively-managed Fidelity mutual funds. All the funds are managed by an affiliate of the recordkeeper. Instead of negotiating a revenue-sharing recapture arrangement favorable towards participants, plan fiduciaries arranged with Fidelity Operations and Fidelity Management to keep all revenue sharing for Fidelity, the complaint contends, saying this arrangement cost the Fidelity plan and its participants approximately $15 million a year for the years 2008 to 2013.

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