Compliance December 13, 2021

Retirement Plan Participant Claims Harm From Transamerica Data Breach

In a lawsuit, he alleges the retirement plan service provider did not take steps to protect the personal information of participants in plans it serves.

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A retirement plan participant has filed a lawsuit against Transamerica Retirement Solutions, alleging that it failed to exercise reasonable care in securing and safeguarding its clients’ personally identifiable information (PII)—including names, addresses, Social Security numbers and retirement fund contribution amounts.

The proposed class action lawsuit was filed on behalf of individual participants in plans served by Transamerica who had their PII accessed by unauthorized parties after a data breach that occurred in or around June. The lawsuit says the plaintiff was not notified by Transamerica until nearly four months after Transamerica became aware of the breach.

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When he was notified, the plaintiff was also offered two years of credit monitoring through Equifax, which the lawsuit says is ineffective for the plaintiff and other class members. “The Equifax credit monitoring would have shared [the plaintiff’s] information with third parties and could not guarantee complete privacy of his sensitive PII,” the complaint states.

The lawsuit claims that for years following the data breach, retirement plan participants who were affected will experience “a slew of harms as a result of the defendant’s ineffective data security measures.” It says the plaintiff has already experienced a number of fraudulent purchase requests and spam calls in his name since the data breach, which the lawsuit says will negatively affect his finances in the future.

The complaint alleges that the data breach occurred because Transamerica failed to take reasonable measures to protect the PII it collected and stored. “[The] defendant disregarded the rights of the plaintiff and class members by intentionally, willfully, recklessly or negligently failing to take and implement adequate and reasonable measures to ensure that the plaintiff and class members’ PII was safeguarded, failing to take available steps to prevent an unauthorized disclosure of data, and failing to follow applicable, required and appropriate protocols, policies and procedures regarding the encryption of data, even for internal use,” the complaint states.

It includes lists of recommended actions to protect the PII of clients.

The lawsuit makes claims for negligence, breach of contract, breach of implied contract, breach of fiduciary duty and violations of New York General Business Law Section 349.

In a statement to PLANSPONSOR, Transamerica said: “Transamerica has become aware of a lawsuit filed recently in the Southern District of New York that asserts claims against our retirement operations. The allegations in the lawsuit are inaccurate and misleading. At no time did unauthorized individuals gain access to Transamerica’s systems as the lawsuit suggests. The allegations that Transamerica failed to meet legal or regulatory obligations are false. Transamerica is proud of the services we provide to our retirement plan clients, and we will vigorously defend against this lawsuit.”

Compliance December 13, 2021

Senators and Investment Group Push Back on DOL ESG Proposal

They say the latest proposed regulations ‘dismantle important actions’ taken by the previous administration and politicize retirement savings.

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Different presidential administrations have been back and forth over the years about the role environmental, social and governance (ESG) factors should play in investments chosen for employer-sponsored retirement plans. Now, the latest iteration of regulations proposed by the Department of Labor (DOL) is getting some pushback.

In a letter to U.S. Secretary of Labor Marty Walsh, a group of senators say they are concerned that the DOL’s latest proposed regulations will “dismantle two important actions” taken by the prior administration. In 2020, the DOL under the Trump administration published a final rule, titled “Financial Factors in Selecting Plan Investments,” which emphasizes that retirement plan fiduciaries should only use “pecuniary” factors when assessing investments of any type—which is to say that they should only use factors that have a material, demonstrable impact on performance. The final rule leaves room for plan sponsors to use ESG-related investments, provided that they are assessed in a purely economic manner and that their financial features make them prudent investments.

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The rule proposed by the DOL under President Joe Biden in October, titled “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” seeks to emphasize that climate change and other ESG factors can be financially material and that considering these elements can lead to better long-term risk-adjusted returns. The Biden administration’s DOL says the rule would “remove barriers to plan fiduciaries’ ability to consider climate change and other environmental, social and governance factors when they select investments and exercise shareholder rights.”

However, in their letter, the senators argue that the newly proposed rule would effectively mandate “consideration of climate change and ESG factors in all investment and proxy voting decisions.” They also say the proposal “vastly expands the circumstances in which retirement plan fiduciaries can pursue ‘woke’ ESG causes even when they provide no financial benefits to plan participants and beneficiaries.

“As a result, it will significantly harm Americans’ retirement savings by allowing plan fiduciaries to promote non-pecuniary policy objectives like lowering global carbon emissions and promoting ‘social justice’ rather than being solely focused on maximizing investment returns,” the letter says.

The senators say the proposed rule fails to define what ESG considerations or factors are, or explain why such terminology is an appropriate regulatory standard. In addition, they say, the proposal does not appear to significantly change any legal liability from private class action lawsuits under the Employee Retirement Income Security Act (ERISA), and plan fiduciaries who select ESG investments could face “increased litigation risk should those investments result in higher fees, inferior risk-adjusted performance, and/or less diversification.”

Meanwhile, in a letter to the Office of Regulations and Interpretations at the DOL’s Employee Benefits Security Administration (EBSA), the American Securities Association (ASA) expressed similar concerns. Its letter notes that total assets for ESG funds are soaring “despite there being no clear definition of ‘ESG’ and that ESG funds have been shown to charge higher fees than traditional funds.”

The ASA also expresses concern that the proposed rules will be viewed as a mandate. “Far from being ‘neutral’ on the topic of ESG investing, the proposal seems to instruct fiduciaries to incorporate more ESG criteria into their decisionmaking,” the letter says. “In other words, the department is taking the position that if a fiduciary does not include the undefined criteria of the ESG movement into its investment analysis, then the fiduciary could be running afoul of its legal duties.”

The ASA says, “The proposal reverses the 2020 rule in a way that would weaken protections for retirement investors. ERISA fiduciaries should never be permitted to subordinate the interests of plan participants to political objectives.” The letter urges the DOL to drop the newly proposed rule and instead work to implement the 2020 final rule.

Recently, industry sources expressed support for the new proposal, telling PLANADVISER it provided clarity on the issue. John Hoeppner, head of U.S. stewardship and sustainable investments, Legal & General Retirement America, said, “In terms of the comment period and the final rule, I expect this package could be slightly modified, but I think the main parts will stick.”

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