The new solution by Appo Group aims to cut costs and
time by allowing users to create and manage multimedia communication materials
through a single platform.
Appo Group, a communications technology provider focusing on the retirement services industry, is rolling out a new solution designed to integrate the creation and management of multimedia communications including print, email and Web into a single platform.
The Appo solution is comprised of two components. The Appo Toolset allows designers to drag and drop variable content into various documents, while storing content replicated across different media channels as “modules” for future use. All elements used to create communications are stored in the Appo Portal, a secure website where internal and external users can manage and order materials with varying security and approval processes in place.
The firm says the solution aims to cut time and costs while improving efficiency of the participant communication process, a challenge and increasingly important task in the retirement services space.
“Participant engagement can be difficult and expensive, especially when it means integrating complex data sources and working across multiple platforms,” explains Steve Wigler, president of Appo Group.
He adds, “Unlike many of the existing solutions on the market, Appo is first and foremost a technology solution, not a print solution. In fact, clients appreciate that we are agnostic as to which fulfillment provider they use, so bringing us in doesn’t cause disruption to existing relationships.”
The firm says it’s currently working with one major plan provider and considering others to find ways to apply the solution to other data-driven objectives including annual plan reviews, enrollment materials, fund fact sheets, participant statements and compliance communications.
TIAA Loan Practices Questioned in Latest ERISA Lawsuit
A participant who drew four loans from a retirement account
over the years argues her provider inappropriately kept portions of interest payments
that should have been credited back to her account.
A new lawsuit argues the practices used by the Teachers
Investment and Annuity Association (TIAA) to credit portions of interest payments
made by participants on loans taken from their own retirement accounts back to
the firm—rather than to the borrowing participant—violate the Employee
Retirement Income Security Act (ERISA).
The complaint, which names as defendant the Teachers Investment
and Annuity Association, was filed in the U.S. District Court for the Southern District
of New York. It seeks to recover money that TIAA “unlawfully took” from retirement
accounts similarly situated in the Washington University Retirement Savings
Plan and across its U.S. business.
Background information included in case documents shows the
lead plaintiff borrowed money from her retirement account on four separate
occasions. She has completely repaid two of the loans, she claims, plus
interest, and is currently repaying the other two loans. All of the interest the
plaintiff paid in connection with those loans “should have been credited to plaintiff’s
account,” the suit argues.
According to the compliant, TIAA did not credit the full
amount of paid interest to plaintiff’s account and instead “credited a smaller
amount of interest to her account and kept the remainder for itself.”
The allegations go further and suggest the conduct at issue
is systematic. “Defendant is retaining interest paid by similarly situated
investors across the country,” the suit contends. “The amount of defendant’s
ill-gotten gains exceeds $50 million per year.”
The action cites violations of ERISA Sections 502(a)(2) and
502(a)(3), along with the corresponding sections in the U.S. Code.
NEXT: Examining the
allegations
The chain of events leading to the suit is recounted as
follows by the plaintiff, who took four loans from her Washington University
Plan individual account. The suit takes pains to argue that retirement plan
loans are a normal and even healthy part of retirement planning, making the
roundabout case that taking a loan from a retirement plan account is actually a
positive for retirement security if it occurs before a market selloff.
“Plaintiff took the first loan on May 10, 2011 in the
principal amount of $ 1,612.01. The loan carried an interest rate of 4.42%. She
repaid the loan in full on August 29, 2014. Plaintiff took the second loan on
January 8, 2013 in the principal amount of $1,000.00. That loan carried an
interest rate of 4.22%. She repaid the loan in full on March 10, 2015.
Plaintiff took the third loan on September 2, 2014 in the principal amount of
$8,500. That loan has a variable interest rate that is currently set at 4.44%.
Plaintiff is in the process of paying off the third loan. Plaintiff took the fourth
loan on March 17, 2015 in the principal amount of $7,500. The fourth loan has a
variable interest rate that is currently set at 4.17%. Plaintiff is in the
process of paying off the fourth loan.”
The case goes on to suggest the way interest was
tracked/credited in the loan program violated ERISA’s standards of loyalty.
“Ordinarily, when a plan participant borrows from a plan
account, the participant is deemed to have invested a portion of his or her
account in the loan,” plaintiff suggests. “The loan proceeds are derived from
liquidating the participant’s investments, and the loan effectively becomes a fund
in which the participant has invested. As an example, suppose that a
participant has a current plan account balance of $60,000, allocated equally
among three different mutual funds, Fund A, Fund B, and Fund C, and the
participant elects to borrow $6,000 from the plan account. The plan trustee
will liquidate $2,000 from each of the three investment funds and will
distribute the $6,000 to the participant in exchange for a note signed by the
participant, obligating the participant to repay the loan at a stated rate of
interest.”
The plaintiff argues that this is how many firms process
loans, citing specifically the process in place at Charles Schwab. As the case
lays out, the fact the plan (as with many TIAA clients) invests heavily in
annuities complicates the picture.
“[TIAA] does not follow this loan process,” the argument continues.
“Instead, defendant requires a participant to borrow from defendant’s general
account rather than from the participant’s own account. In order to obtain the
proceeds to make such a loan, defendant requires each participant to transfer
110% of the amount of the loan from the participant’s plan account—in our
example, Fund A, Fund B, and Fund C—to defendant’s ‘Traditional Annuity,’ as
collateral securing repayment of the loan. The Traditional Annuity is a general
account product that pays a fixed rate of interest, currently 3% … The
Traditional Annuity is a general account product, which means that all of the
assets are held in defendant’s general account and are owned by defendant.
Therefore, defendant also owns all the assets transferred to its general
account to ‘collateralize’ the participant loan.”
NEXT: Claims for
damages
The plaintiff goes on to suggest that “because the
participant loan is made from defendant’s general account, the participant is
obligated to repay the loan to defendant’s general account, and the general
account earns all of the interest paid on the loan, in contrast to the loan
programs for virtually every other retirement plan in the country, where the
loan is made from and repaid to the participant’s account and the participant
earns all of the interest paid on the loan … As noted above, plaintiff
currently has two outstanding loans from her Washington University Plan
account. The first loan bears a current interest rate of 4.44%, and the second
bears a current interest rate of 4.17%. The interest rate for both loans, in
another break from standard plan loan policy, is variable.”
Allegations continue: “Defendant has engineered a
retirement loan process that enables it to earn additional income at the
expense of retirement plan participants equal to the spread between the loan
interest rate paid by participants and the interest rate received by
participants for investment in the Traditional Annuity (or, now, a Retirement
Loan certificate). The loan process that is the subject of this lawsuit is the
epitome of self-dealing.”
The text of the lawsuit goes on to lay out in detail the
TIAA loan processing practices as understood by the plaintiff, accusing the
firm of permitting a number of conflicts impermissible under ERISA. Plaintiff
is seeking class action status “on behalf of the Washington University Plan and
all other similarly situated retirement plans that are serviced by defendant
and that offer participant loans.” Such a proposed class includes hundreds if
not thousands of 403(b) plans.
Plaintiff asks the district court judge to “declare that defendant
breached its fiduciary duties to plaintiff and the class; enjoin defendant from
further violations of its fiduciary responsibilities, obligations, and duties
and from further engaging in transactions prohibited by ERISA; order that defendant
restore to plaintiff and the class all losses resulting from its serial
breaches of fiduciary duty; award plaintiff reasonable attorney’s fees and
costs of suit incurred herein … and/or for the benefit obtained for the class; order
defendant to pay prejudgment interest; and award such other and further relief
as the court deems equitable and just.”
A TIAA spokesperson shared the following statement with PLANADVISER regarding the complaint: “This case is without merit and all allegations of wrongdoing are unfounded. The participant loan services we provide are for the benefit of participants and beneficiaries, and are fully compliant with ERISA. We will vigorously defend against these claims.”