Compliance May 7, 2009

GM Single-Equity Suit Falls

A group of General Motors defined contribution plan participants cannot proceed with their lawsuit claiming GM had improperly included undiversified single-equity funds in its plans.
Reported by

The Employee Retirement Income Security Act (ERISA) only requires overall plan level investment diversification. That was the ruling from the 2nd U.S. Circuit Court of Appeals in a case discussing a fiduciary’s responsibility to properly diversify plan investments. Hearing the case were Circuit Judges Rosemary S. Pooler and Sonia Sotomayor and U.S. District Judge Mark R. Kravitz, of the U.S. District Court for the District of Connecticut.

The appellate judges upheld a lower court ruling dismissing the suit that named General Motors Investment Management Corp. (GMIMCO) as a defendant after finding participants had filed it past the applicable legal deadline. However, in agreeing that the participants’ suit should be thrown out, the appellate panel focused instead on what it said were unsubstantiated legal claims that the inclusion of the single-equity funds violated ERISA Section 404(a)(1)(C)“s diversification requirements.

“The complaint’s narrow focus on a few individual funds, rather than the plan as whole, is insufficient to state a claim for lack of diversification,” the appellate court said.

In addition, the court found that the participants could not continue with their claim that GMIMCO knew or should have known that the fees and expenses it paid for mutual funds in which it invested were excessive compared with alternative investments. The court said the participants did not provide a basis on which it could infer that GMIMCO’s offering of the funds was a fiduciary breach.

The suit covered four GM defined contribution plans, the:

  • General Motors Savings-Stock Purchase Program for Salaried Employees in the United States
  • General Motors Savings Plan for Hourly-Rate Employees in the United States
  • General Motors Income Security Plan for Hourly-Rate Employees
  • Saturn Individual Savings Plan for Represented Members.

The disputed fund options included the:

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

  • EDS Common Stock Fund
  • DIRECTV Group Common Stock Fund
  • News Corporation Non-Voting Common Stock Fund
  • Delphi Common Stock Fund
  • Raytheon Common Stock Fund.

The ruling is available here.

Deals & People May 7, 2009

Mercer Expands DC Services Distribution Team

Mercer announced the addition of six new hires to support the expanded distribution of its defined contribution (DC) administration services to plan sponsors with 500 or more employees.
Reported by

According to a news release, individuals that report to Kerry Sain, North American sales leader for Mercer’s outsourcing business, include:

  • William Callaway, sales leader—Southeast, Great Lakes, and Midwest: He joins Mercer from Wachovia Retirement Services, where he served as vice president, regional sales director. He is based in Nashville, Tennessee.
  • Derrick Capps, DC business strategist: He joins Mercer from Wachovia Retirement Services, where he served as Core Market Inside Sales Desk manager and consultant relations associate. He is based in Charlotte, North Carolina.
  • Martin Cole, sales leader—Northeast: He joins Mercer from Wachovia Retirement Services, where he served as vice president, sales manager, Core Market Team, North region. He is based in Middletown, New Jersey.
  • Shannon Massey, DC business strategist: She joins Mercer from AllianceBernstein, where she served as a client service officer. She is based in Norwood, Massachusetts.
  • Frank Tighe, sales leader—West, Northwest, and Southwest: He joins Mercer from Wachovia Retirement Services, where he served as vice president, regional sales director. He is based in Houston, Texas.

In addition, Mercer announced that Elizabeth Antin has joined the firm as a relationship manager. Antin comes to Mercer from ING America, where she was vice president, Client Service Team manager. She is based in Norwood, Massachusetts, and will report to Bill McDevitt, U.S. leader, Relationship Management, for Mercer’s outsourcing business.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

In March, Mercer it was expanding sales of its defined contribution administration services to add distribution through the adviser channel and offering its DC services to clients with 500 or more employees (see “Mercer Adds Adviser Channel to DC Administration Sales“).

«