Products April 26, 2018

Firms Partner to Provide Customized QDIA for DC Plan Participants

Offered by Alight Solutions, WealthSpark combines highly customized investment portfolios designed by AllianceBernstein (AB) with Personal Capital’s digital wealth management tools.

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Alight Solutions has introduced WealthSpark, a new solution that combines highly customized investment portfolios designed by AllianceBernstein (AB) with Personal Capital’s digital wealth management tools that offer greater into people’s financial picture. WealthSpark’s initiatives are to create easier means for workers to plan, save and invest smarter.

“We believe WealthSpark will be a bridge to connect people’s financial realities with their financial goals to truly help them thrive,” explains Alison Borland, executive vice president of defined contribution [DC] solutions at Alight. “Most default investment options do not recognize and appreciate the complexities of people’s individual financial situations or the competing priorities they face through the course of their lifetimes.”

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WealthSpark’s investment recommendations are based on up to 18 individualized data points cultivated through Personal Capital’s technology, including individual financial situations, investment accounts outside their retirement plan, their partner’s financial situation and obligations like paying for a child’s college or elder care. The platform also helps workers better understand and make decisions about their personal finances from everyday budgeting to managing life events like paying back student loans, saving to buy a home or planning for retirement. WealthSpark can serve as the qualified default investment alternative (QDIA) in the employer-provided savings plan.

“We have more than a decade of experience designing custom glide paths for many of the largest U.S. defined contribution plans, and are excited to partner with two leaders in their respective fields to deliver this innovative solution,” says Jennifer DeLong, head of defined contribution at AB. “The solution combines asset allocation with technology to deliver a more personal participant experience. By better understanding a participant’s individual circumstances, we can create a series of optimized glide paths to tailor outcomes to participants’ unique financial objectives.”

More information about WealthSpark can be found here.

Compliance April 26, 2018

American Airlines Challenged for Not Offering Stable Value Fund in 401(k)

The airline company offered the AA Credit Union Fund as its capital preservation vehicle, which the plaintiffs in a lawsuit say yielded “tremendously” poor returns.

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Plaintiffs in a case challenging American Airlines’ (AA) decision not to include a stable value fund in its 401(k) investment menu has filed a motion for class action certification.

According to the original complaint, the plan does not offer a stable value fund as its “income producing, low risk, liquid fund.” Instead, it offered during the class period the AA Credit Union Fund, which yielded “tremendously” poor returns throughout the relevant time period.

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“The AA Credit Union Fund effectively delivered, at all material times, the returns of a poorly managed checking account. The AA Credit Union Fund consistently failed to outpace inflation and was at all times thus a categorically imprudent retirement investment under ERISA [Employee Retirement Income Security Act]. Therefore, Defendants violated their duties of prudence under ERISA by including it as a retirement investment option in the Plan’s menu of investment options,” the complaint states.

The complaint notes that as of November 5, 2015, the one-month return for the AA Credit Union Fund was 0%. As of November 29, 2015, the one-month return for the fund was 0.07%, and as of January 3, 2016, the one-month return for the fund was 0%. At the same time, the AA Federal Credit Union has an actual checking account option called a “Priority” checking account that, according to the AA Federal Credit Union Internet site, is currently paying interest rates of up to 2.27%.

The plaintiffs allege that stable value funds are commonly used by large 401(k) plans like the American Airlines’ plan and typically offer more in return than the AA Credit Union Fund.

“In light of stable value funds’ clear advantages and enhanced returns compared to the AA Credit Union Fund, when deciding which fixed income investment option to include in a defined contribution plan, a prudent fiduciary would have included a stable value fund—and not the AA Credit Union Fund,” the complaint states. “Had the funds invested in the AA Credit Union Fund instead been invested in a stable value fund returning average benchmark returns, as represented by the Hueler Index during the proposed class period here, Plaintiffs and other Plan participants would not have lost tens of millions of dollars of their retirement savings, and would not continue to suffer additional losses as a result of the AA Credit Union Fund being retained in the Plan.”

Last November, U.S. District Judge John McBryde of the U.S. District Court for the Northern District of Texas denied American Airlines’ motion to dismiss the case saying, “The court is satisfied that plaintiffs have met their pleading burden. The arguments defendants make go to the merits of the claims and would more properly be presented by motions for summary judgment.”

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