Compliance November 27, 2007

Citigroup Ordered to Change Cash Balance Payment Credits

A federal judge in New York has ordered Citigroup to increase the payment credits in its cash balance plan to comply with minimum accrual rules.
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The latest ruling from U.S. District Judge Shira A. Scheindlin of the U.S. District Court for the Southern District of New York followed her order a year ago that the Citigroup cash balance program violated the Employee Retirement Income Security Act’s (ERISA) anti-backloading rules (See Court Gives Thumbs Down to Citigroup Cash Balance Plan). The plan, Scheindlin ruled then, relied on a “fractional test” for figuring out minimum accruals only when a participant separates his or her service from Citigroup, rather than on a year-by-year basis as required by ERISA.

“This proposal best ensures that participants in the Plan receive the benefits to which they are entitled. As a result, this Court orders defendants to increase pay credits as required. To avoid further violation of ERISA, the Plan must make additional payments as required to avoid whipsaws,” Scheindlin asserted in the latest decision.

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Relating to her earlier ruling that the Citigroup plan violated age discrimination rules, Scheindlin indicated in her latest decision that she would await the outcome of a pending cash balance age discrimination case from the 2nd U.S. Circuit Court of Appeals before proceeding on that issue in the Citigroup matter.

The latest decision in In re Citigroup Pension Plan ERISA Litigation, S.D.N.Y., No. 05 Civ. 5296, 11/20/07, is available here.

Deals & People November 27, 2007

SGI Brings on Nationwide Growth Equity Traders

Topeka, Kansas-based Security Global Investors (SGI) has reached an agreement with Nationwide’s NWD Investment Management to hire the nine-person growth equity investment team from Nationwide Separate Accounts (NSA), an NWD subsidiary.
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According to a press release, the move is expected to occur in early February 2008. The incoming team will assume portfolio management responsibility for the Security Equity Fund Select 25 Series, the Security Mid Cap Growth Fund, and one-half of the Security Equity Fund Equity Series (and the respective related Variable Insurance Trusts), totaling approximately $970 million in incremental AUM.

The team currently manages approximately $475 million in assets across Large Cap Growth (with a 17-year track record, led by Mark Bronzo and Daniel Portanova) and Mid Cap Growth (with an eight-year track record, led by Joseph O’Connor).

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“We know that we will be able to retain our investment autonomy while maintaining our entrepreneurial culture. SGI is clearly committed to being a real competitor in the asset management business with a solid mission and strategic plan in place,” said Mark Bronzo, portfolio manager at NSA, in the release. “We are happy to be part of the team.”

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