The Coca-Cola Bottlers’ Association has agreed to settle for $3.3 million a claim brought against it by a former employee under the Employee Retirement Income Security Act in the U.S. District Court for the District of Kansas. The court has yet to approve the proposed settlement in the case, Kimario Anderson v. Coca-Cola Bottlers’ Association.
The multiple employer plan sponsored by the association is composed of 65 independent bottlers for Coca-Cola. As of 2021, it had approximately $973 million in assets under management. The initial complaint, brought in February 2021, alleged that the association had paid overpriced management and recordkeeping fees and had kept an undiversified Coca-Cola Common Stock Fund in its investment menu.
In March 2022, the majority of this claim was dismissed. The court ruled that the plaintiff could not challenge the Coca-Cola Common Stock Fund because he had not invested in it personally and the complaint that it was undiversified made it discrete from other allegations of high fees. That resulted in the plaintiff’s ineligibility to challenge it on the grounds that it was part of a broader flawed process of negotiating fees. The court also dismissed the allegation of excessive recordkeeping fees because the plaintiff did not discuss the services that the recordkeeper, Wells Fargo, had provided in its analysis of the cost.
However, the court did rule that the claim against the association for maintaining a T. Rowe Price mutual fund called the Equity Index 500 Fund, which the plaintiff alleged charged fees grossly higher than funds with similar composition, could proceed. The court upheld this in part because the plaintiff identified instances of the plan dropping overpriced funds in the past, but not this one, which is a sign of an incomplete or flawed process under ERISA and therefore more than a mere sampling of better alternatives.
On March 23, the association filed a brief in support of a settlement for $3.3 million, which will be put into a fund accessible to other, as yet undeclared, members of the class. Other expenses, such as attorneys’ fees, will be subtracted from this amount, leaving the remainder for class members. The plan also retained Gallagher Fiduciary Advisors to review the settlement.
The proposed and agreed settlement must still be approved by the court before being finalized.
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Adviser Group Forecasts Federal, Private Plan “Battle” Over US Retirement System
A government-led plan threatens private 401(k) industry, NAPA head tells national conference. A think tank proponent says the plan focuses on left-behind workers and would pair well with current system.
A bipartisan effort to create a federally sponsored retirement plan is teeing up a multi-year battle with the private defined contribution retirement plan industry, the head of a national adviser association said at its annual conference on Sunday. Separately, a think tank leading the effort countered that the program is not in conflict with private industry, but is aimed at workers left out of the current system.
A proposal launched late last year called the Retirement Savings for America Act is the start of an effort backed by Democrats, Republicans and business leaders to create a government-sponsored retirement program that would undercut privately run plans, Brian Graff, executive director and CEO of the National Association of Plan Advisors, said at its conference in San Diego.
“We are beginning a battle that I expect will be a continuous battle over the next several years over the future of America’s retirement system,” Graff said. “It will be a debate as to whether the retirement plan system that we know should continue to be controlled … by the private sector, as it is now, or if the federal government will intervene and start taking over. It’s as fundamental and basic as that.”
The RSAA was introduced by Senators John Hickenlooper, D-Colorado, and Thom Tillis, R-North Carolina, and Representatives Terri Sewell, D-Alabama, and Lloyd Smucker, R-Pennsylvania in December 2022. The sponsors of the bill said they hope to reach roughly 50 to 60 million American workers who do not have access to workplace retirement plans.
Graff also noted research showing 40 million people left out of workplace retirement plans, saying the SECURE 2.0 Act of 2022 retirement reform, passed in December 2022, will bridge that gap through a combination of incentives and mandates. He argued that policymakers should not be pushing for this plan until SECURE 2.0 has had a chance to work.
The Economic Innovation Group
The RSAA is being supported by a public policy organization called the Economic Innovation Group, under its “Inclusive Wealth Building Initiative.” The EIG was founded by Sean Parker, the former president of Facebook (now Meta); John Lettieri, former public policy head for the Organization for International Investment; and Steve Glickman, who served as a senior economic adviser during the Obama administration.
One of the group’s proposals is a “new retirement savings program modeled after the federal Thrift Savings Plan (TSP), a 401(k)-like program enjoyed by federal employees.” The program would include automatic enrollment for eligible workers and federal matching contributions.
In a 2021 white paper funded by the group, authors Teresa Ghilarducci of The New School and Kevin Hassett of the Hoover Institution argue that the current defined contribution retirement system favors higher-earning workers by being based on “tax benefits through deductions, as opposed to credits or direct matches.” The authors argue that “the minimum wage worker whose income is so low that they do not deduct or pay income taxes gets no additional benefit for savings.”
Lettieri, the co-founder and CEO of the EIG, says the organization first started looking at the retirement savings space a few years ago, as workplace retirement savings is the largest source of wealth for the majority of Americans, but that 10s of millions are left out of the system. “If you are trying to do anything to help lower-income Americans build wealth, retirement is at the top of the list,” Lettieri says.
Lettieri says the goal of the proposal is to provide a government option for workers not currently being served by the private market, rather than to supplant existing workplace plans. He argues that the system would actually help get more people saving, and some eventually could join privately-run workplace plans.
“It’s structured in a tailored way specifically to avoid a crowd-out and take the pressure off the private sector who don’t find it practical or profitable to serve this space,” he says. “This is not some kind of government takeover of the 401(k) system—and in fact we would explicitly oppose that. This is a decades-long gap in retirement savings, and we are just saying, ’Why not address it now?’”
On Sunday, Graff told an audience of hundreds of retirement industry participants not to “underestimate” the EIG’s effort. “They are extremely well-funded,” he said, “and they have hired prominent D.C. lobbyists and PR firms.
Graff called the group’s push to broaden the federal savings program a “first salvo” in a battle to bring the federal government into a retirement savings industry that is currently run by a combination of private industry and, increasingly, state-run programs. “Think of it as a MEP operated by the Treasury,” Graff said, referring to a multiple employer plan.
Graff and other speakers at the conference called on attendees to contribute funds to the American Retirement Association’s political action committee to help lobbying efforts for the industry. He said that by funding the PAC, industry players would be supporting a chance for SECURE 2.0 and the current market to start bridging the retirement savings gap. NAPA is a sister organization of the ARA.
Graff reiterated to the audience that they are “the fighters” in this policy debate and said implementing retirement plans is the best way to show the current system can work with new legislation. “We can fight this politically, but there’s no better way to answer the bell than us expanding coverage in a real and meaningful way,” he said.
Meanwhile, Lettieri says the EIG does not believe SECURE 2.0 will be able to reach everyone currently left out of the workplace retirement plan space, even if given time.
“There is a limit to any incentive program,” he said. “I don’t know if anybody thinks that it’s going to make the gap go away. I hope it reduces it and think it can and will—but it’s not going to go away. Not even close.”
