ADP, Morningstar Launch Managed Accounts for Small Business 401(k)s

Payroll provider and investment manager cite goal of providing personalized retirement portfolio guidance to underserved small-employer market.


The retirement divisions of payroll provider ADP Inc. and Morningstar Inc. have partnered on a managed account offering for small businesses, the firms announced Tuesday.

ADP Retirement Services and Morningstar Retirement Group announced the offering as a way of providing “personalized retirement investment and savings advice” to employees of all size companies.

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ADP is offering its more than 100,000 plan sponsor clients Morningstar’s proprietary managed account service as well as adviser managed accounts that can be managed by third-party advisers; both use Morningstar methodologies to build investment portfolios and suggest savings rates and goals. The service then takes “discretionary authority” to manage the participant’s retirement account going forward. Fees will vary based on whether the plan sponsor elects to use the service as an opt-in or a default/hybrid-default option in their plan, a Morningstar spokesperson wrote via email. 

    “Continued inflation and market volatility have made the need to help employees figure out how to maximize and invest their retirement savings greater than ever,” Brock Johnson, president of global retirement and workplace services at Morningstar Investment Management, said in a statement. “This is especially true in the small end of the market, where access to personalized advice within retirement plans is often limited.”

    Consultancy Cerulli Associates’ forecasts that the managed account market will grow more than 13% over the next four years to reach $15.6 trillion. Despite growth, the higher-cost of providing managed account services continues to turn off some retirement plan advisers and plan sponsors. In its second quarter earnings report, Morningstar reported its first jump in uptake of workplace solutions managed accounts of 3.8% after showing declines in the prior three quarters.

    Morningstar’s adviser managed accounts service allows for third-party registered investment advisers to offer co-branded managed account services to retirement plan clients. The data and investment firm’s flagship managed account services uses its proprietary portfolios and methodologies. In addition, ADP will make the adviser managed accounts service available to two retirement-focused RIA firms, with plans to add more.

    “We think every retirement plan, no matter the size, should have access to personalized advice at scale,” Chris Magno, SVP and general manager of ADP Retirement Services, said in a statement.

    ADP and Morningstar join other small plan providers that have partnered on managed account offerings. Plan provider Ascensus partnered with Franklin Templeton on an offering in 2022, and Vestwell partnered with Franklin Templeton on an adviser managed account offering in 2021.

    ADP is the second largest 401(k) recordkeeper for plans of under $10 million as of the end of 2022, second to Paychex Inc., according to the latest data from PLANSPONSOR, which is a sister publication of PLANADVISER.

    American Airlines ESG Lawsuit May Move Ahead, According to Court Filing

    A judge overseeing the complaint brought by a former pilot has set a potential trial date; the airline has said ESG-related investments were only available as a self-directed option.


    The judge assigned to a lawsuit against American Airlines in Texas federal court has slated a trial date to begin on June 24, 2024, a scheduling order in the case shows.  

    “Counsel and the parties shall be ready for trial on two days’ notice at any time during this four-week period,” Judge Reed O’Connor wrote in the order filed August 9. “The Court, having considered the status report submitted by the parties, finds that the following schedule should govern the disposition of this case.”

    The class action complaint was brought by a former pilot in June. The plaintiff alleged the airlines’ 401(k) plan scarified performance for environmental, social and governance factors. 

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    The lawsuit is Spence et al. v. American Airlines et al, and was brought before U.S. District Court for the Northern District of Texas.  

    O’Connor provided a summary of critical dates in the order, scheduling the first action on the roster, initial expert designation and report, for October 30, 2023.

    “The Court has attempted to adhere to the schedule requested by the parties,” O’Connor wrote.

    Completion of discovery is scheduled for January 26, 2024. Additional motions to dismiss and for summary judgment or summary adjudication of issues must be filed by February 24, 2024; pretrial disclosures May 15, 2024, and objections are due 14 days after that; pretrial materials due May 30, 2024; exchange of exhibits June 10, 2024; and pretrial conference to be set if necessary.   

    Attorneys for American Airlines filed a motion to dismiss the lawsuit on August 4, arguing that the ESG-related funds in question were only available through the self-directed brokerage window and that the plaintiff had not invested in the funds listed in his complaint. 

    “If the judge set a trial date after a motion to dismiss was filed, then it appears that the motion will be denied,” says Douglas Neville, Employee Retirement Income Security Act attorney, officer and practice group leader at St. Louis-based law firm Greensfelder, Hemker & Gale PC. “I would expect that the judge will issue an order denying the motion.”

    Defendants Fidelity Investments and Edelman Financial Engines were severed from the lawsuit in July.

    O’Connor ordered the parties to jointly select a mediator and mediate on or before December 27, 2023.

    The judge also instructed that the individual parties and their counsel, along with representatives of their liability insurance providers (if they have such coverage) shall participate in person, not by telephone or other remote means, O’Connor wrote in the order.

    Within seven days after the mediation, the parties are required to jointly prepare and file a written report, signed by counsel for each party, detailing the date on which the mediation was held, the people present including the capacity of any representative, and a statement informing the court of the effect of their mediation and whether this case has been settled by agreement of the parties, the order adds.

    “This case could go either way in terms of settlement,” explains Neville. “The case doesn’t seem to be very strong, so American [Airlines] may not be inclined to settle. But going to trial can be costly, so settlement is always a possibility to avoid the expense and inconvenience of litigation.”

    Neither the attorneys for the plaintiffs nor the counsel for defendants responded to requests for comment. Representatives for American Airlines did not reply to a request for comment.

    The plaintiff is represented by Hacker Stephens LLP and Sharp Law LLP; the defendant is represented by attorneys with the law offices of Kelly Hart & Hallman LLP and O’Melveny & Myers LLP. 

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