Compliance January 24, 2023

Allianz Asset Management 401(k) Participants Allege Self-Dealing

Two participants in the Allianz 401(k) plan allege the asset manager maintained an all-proprietary fund lineup that included expensive, underperforming investments for the benefit of the defendants.

Reported by


Two Allianz Asset Management of America 401(k) Savings and Retirement Plan participants have claimed in federal court that plan fiduciaries engaged in self-dealing, according to the complaint, Chad Rocke and Christopher Collins v. Allianz Asset Management of America et al.

The plaintiffs’ attorneys allege two counts of fiduciary breach—of loyalty and prudence—against the company, the plan committees and numerous individuals, and—failure to monitor fiduciaries.

“Although using proprietary options is not a per se breach of the duty of prudence or loyalty, a fiduciary’s process for selecting and monitoring proprietary investments is subject to the same duties of loyalty and prudence that apply to the selection and monitoring of other investments,” the complaint states. “Based on the defendants’ decision to maintain an all-proprietary lineup in lieu of any less expensive and otherwise superior nonproprietary alternatives, it is reasonable to infer that the defendants’ process for selecting and monitoring the Allianz Funds was imprudent and disloyal.”

Workers contributing to the savings and retirement plan during this time were only offered investments managed by either Allianz Global Investors or Pacific Investment Management Company LLC—except the self-directed brokerage account—both of which are subsidiaries of Allianz, according to the complaint. For example, at year-end 2021, the plan’s menu consisted of three proprietary collective investment trusts and 36 proprietary mutual fund investments, the plaintiffs allege.

The retirement plan fiduciaries are alleged to have maintained an all-proprietary fund lineup that included expensive, underperforming investments, for the benefit of the defendants and at the expense of plan participants from 2018 to the present, the complaint states.

The plaintiffs’ attorneys allege the defendants’ use of proprietary funds also caused participants to incur excessive fees, because the AllianzGI and PIMCO proprietary mutual funds are actively managed funds. As such, the active funds charged an annual operating expense, paid to AllianzGI or PIMCO and deducted from the rate of return of the fund, according to the complaint.

“In part because of the high fees associated with the AllianzGI and PIMCO proprietary investment products, these investments tended to underperform, costing the plan tens of millions of dollars in lost benefits that participants would have had in their accounts had the plan’s investments been managed in a prudent and impartial manner,” the complaint states. “A prudent fiduciary offering proprietary high-fee options like the AllianzGI and PIMCO Funds would continuously monitor whether the higher total plan cost as a result of using an exclusively all-proprietary lineup was justified by a reasonable expectation of increased returns.”

From 2018 through the end of 3021, the last year for which data is publicly available, the Allianz 401(k) plan had between 4,156 and 4,710 participants and comprised approximately $1.1 billion to $1.9 in total retirement assets, according to the complaint. The plaintiffs’ attorneys requested that a class action be certified by the U.S. District Court for the Central District of California and be applied to all participants of the Allianz Asset Management of America 401(k) Savings and Retirement Plan, who were invested in the AllianzGI or PIMCO Funds at any time on or after December 27, 2017, excluding individuals with any responsibility for the plan’s administrative functions or investments.

The named defendants in the lawsuit include Allianz Asset Management of America, the administrative plan committee of the 401(k) Savings and Retirement Plan, the retirement plan committee of the Allianz Asset Management of America 401(k) Savings and Retirement Plan and 30 unnamed individuals.

The plaintiffs are represented by the Keller Law Group, based in Los Angeles and Nichols Kaster, based in Minneapolis.

Allianz Asset Management of America is based in Newport Beach, California, and a division of global financial services company Allianz SE, headquartered in Munich.

A spokesperson for Allianz in Munich declined comment on the litigation. 

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Products January 23, 2023

Delta Taps Fidelity to Run New Emergency Savings Program

Starting in January, Delta will give eligible employees up to $1,000 toward an emergency savings account if they complete a financial education program.

Reported by


Delta Air Lines and Fidelity Investments have teamed up to put into action two trending topics in the retirement plan space: emergency savings funds and financial wellness.

Delta announced on Monday that eligible employees can opt to take an online financial education course and a series of one-on-one financial coaching sessions to earn a $750 kickstart for an emergency savings account. Delta will also match up to $250 for an employee’s contribution. U.S. employees below director level, including pilots, are eligible, and Delta will pay the taxes on the $1,000 it contributes to the account, according to the Atlanta-based company.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Fidelity will be administering the savings and company matching portion of the program through Fidelity Goal Booster, its out-of-plan short term savings account, according to the Boston-based recordkeeper. The program has similar elements to an emergency savings program Fidelity started with Starbucks in September 2022, but with a keen focus on how to ensure that employees receive useful financial education, says Katie Taylor, vice president of planning and engagement at Fidelity.

“Delta said to us that we want to build this program and yes, incentivize people to open an emergency account, and fund it, but also to educate them in a meaningful way,” she says. “They didn’t want it to just be a check the box, but for [participants] to really get something out of it.”

Participating employees will take an online financial education course of between two and three hours, then choose from three options for their coaching sessions: 1) managing day-to-day saving and spending; 2) strengthening financial foundations; and 3) focusing on future goals.

Operation Hope Inc., an Atlanta-based nonprofit, is also partnering in the program and will provide financial coaches as an option along with Fidelity. In the Fidelity program, employees will participate in a group online session, and then two one-on-one sessions either by phone, or in person with a Fidelity coach, Taylor says.

Employees participating in the program are prompted to set up the goal and open an account with Fidelity that is dedicated to emergencies and funded directly from their paycheck. That investment will go into Fidelity’s out-of-plan emergency savings account through a service called Goal Booster, which is designed to encourage regular savings with celebratory markers along the way, says Emily Kolle, vice president of product management for Fidelity.

“People can feel very negative about their short-term savings, so it helps to bring moments of joy and celebration into that savings journey,” she says.

The goal-driven savings model came out of research showing that it’s hard for people to “set-and-forget” putting aside emergency funds as they do with retirement payroll distribution, Kolle says. “We knew if a person would ‘set and forget’ their retirement savings, they should do the same thing for their emergency funds. But those behaviors weren’t flowing over … we made it easy for you to set up a recurring payment to yourself.”

Emergency savings payroll deduction is only available for plan sponsors who choose to offer the option to employees, according to the company. The Fidelity Goal Booster has no fees for use, and puts savings into Fidelity’s Cash Management account.

The SECURE 2.0 Act of 2022 retirement reform passed with the inclusion of emergency savings plan options, though they will not go into effect until 2024. Financial wellness for participants has also been a focus for recordkeepers such as Fidelity, as well as retirement plan advisers, with new products and offerings coming to market on a regular basis.

These issues were always important for plan sponsors, but the pandemic has made them higher on the list of priorities, Taylor says.

“Before plan sponsors were saying [having a savings fund] is something we need to solve for, but we’re not really sure we can right now,” she says. “Whereas now, this is absolutely a driver of many of the strategic conversations we have with our clients about benefits in the coming years.”

«

Close