Products October 30, 2007

New Web Site Helps With Cash Balance Plan Business

Kravitz has launched a Web site focused on cash balance plans to help retirement plan advisers, providers, and third party administrators grow their retirement plan business.
Reported by

According to the California-based company, www.cashbalancedesign.com will also help these parties learn how cash balance plans work and how to identify cash balance candidates.

The Web site also features a Cash Balance Coach Program to help retirement plan advisers carry out one-on-one coaching and prepare custom prospect plan illustrations and co-branded sales and marketing materials.

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“Our mission is simple: to create a single, comprehensive source and help retirement plan advisers, providers and third party administrators grow their 401(k) and investment advisory business with cash balance plan designs,” said Daniel Kravitz, the president of the company, in the news release.

For more go to www.lkravitz.com.

Compliance October 30, 2007

Citigroup Sued Over Possible ERISA Violations

Citigroup has been hit with a lawsuit alleging the financial services giant committed a variety of fiduciary breaches in improperly having its 401(k) plan do business with its affiliates and subsidiaries.
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The federal court lawsuit by named plaintiff Marya J. Leber asks that the case be declared a class action, noting that the Citigroup 401(k) has nearly 190,000 participants. Filed by New York attorney David S. Preminger, the suit has been assigned to U.S. District Judge Sidney H. Stein of the U.S. District Court for the Southern District of New York.

Also named in the suit – which alleges violations of the Employee Retirement Income Security Act (ERISA) against self-dealing and imprudent investing – were a variety of the firm’s executives including those on the administrative and investment committees.

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The suit says ERISA requires the defendants “to act prudently and solely in the interest of the 401(k) plan and its participants and beneficiaries when selecting investment, products, and services for the 401(k) plan,” the complaint charged. “They did not do so. Instead, they put Citigroup’s interests ahead of the 401(k) Plan’s interests by choosing investment products and pension plan services offered and managed by Citigroup subsidiaries and affiliates, which generated substantial revenues for Citigroup at great cost to the 401(k) plan.”

Specifically, according to the complaint, the defendants chose:

  • mutual funds offered and managed by Smith Barney Fund Management and Salomon Brothers Asset Management
  • guaranteed investment contracts and a stable value fund offered and managed by Travelers Life & Annuity
  • trustee services by Citibank
  • recordkeeping and other plan services provided by CitiStreet.

Declares the suit: “At virtually ever turn, Committee defendants placed Citigroup’s interests ahead of the 401(k) Plan’s interests. When the Committee defendants terminated an investment option fund, the assets in that investment option were almost always moved into a Citigroup affiliated fund.”

The suit cites as an example a 2003 decision to replace four unaffiliated Van Kampen funds with four Smith Barney funds “effectively transferring $160 million to the control of Citigroup affiliates.’

The suit charges that the plan suffered millions of dollars in losses because of decisions to invest what the suit said were billions of dollars in affiliated funds “which resulted in millions of dollars of revenue for Citigroup while delivering poor investment returns for the 401(k) plan.’

The complaint is available here.

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