Compliance March 16, 2022

Costco Agrees to $5.1M ERISA Case Settlement

The agreement, in which Costco admits no wrongdoing, also includes mandatory changes to the plan’s fee management process.

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The parties in an Employee Retirement Income Security Act lawsuit filed against Costco have reached a settlement that will see the company pay $5.1 million to resolve allegations that it committed fiduciary breaches in the provision of retirement benefits to employees.

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The lawsuit arose in June 2020, when a participant in the Costco 401(k) Retirement Plan filed a suit against his employer, its board of directors and the members of a benefits committee. The lawsuit suggested the fiduciaries of the plan breached their ERISA duties by authorizing the plan to pay unreasonably high fees for recordkeeping; failing to objectively and adequately review the plan’s investment portfolio with due care to ensure that each investment option was prudent in terms of cost; and maintaining certain funds in the plan despite the availability of identical or similar investment options with lower costs and/or better performance histories.

The complaint alleged the defendants did not have a viable methodology for monitoring the expenses of the funds in the plan, failed to have an independent system of review  to ensure that the plan participants were charged appropriate and reasonable fees for the plan’s investment options, and failed to leverage the plan’s size to negotiate lower expense ratios for certain investment options maintained and/or added to the plan during the class period.

In agreeing to the settlement, Costco admits no wrongdoing and insulates itself and its executives from future related allegations. The firm will pay  $5.1 million into a settlement fund, of which a maximum of $1.5 million will be paid out as attorney’s fees, with the remainder going to participants and beneficiaries of the Costco retirement plan.

In addition to the settlement payment, the settlement agreement also covers various non-monetary items. For example, commencing no later than the end of the first calendar quarter beginning after the settlement’s effective date, Costco “will ensure that the plan administrative service per capita recordkeeping fee deducted from plan accounts does not exceed $3.25 per plan account per quarter.”

The settlement agreement further stipulates that Costco’s obligation to ensure that the plan administrative service per capita recordkeeping fee does not exceed $3.25 per plan account per quarter “shall continue for the number of calendar quarters necessary for the value of the reduction of the plan administrative service per capita recordkeeping fee amount to total $3.2 million.” To this end, the agreement presents a formula that Costco must use to calculate the level of recordkeeping and administration fees paid. In basic terms, the plan’s fiduciaries must subtract from the actual per-plan account recordkeeping fee charged in the first quarter of 2022, the fee charged in the subsequent quarter in question, and then multiply the result by the number of fee-paying plan accounts during the quarter in question. Then, the fiduciaries must add the results for all such quarters.

“If this calculation results in a reduction in the plan administrative service per capita recordkeeping fee for any fraction of a calendar quarter, the fee for such quarter may be reduced on a pro rata basis such that the total fee reduction does not exceed $3.2 million,” the agreement stipulates. “Costco may, but is not required to, meet its obligation to ensure the value of the fee reduction in the amount described … by obtaining a plan administrative service per capita recordkeeping fee lower than $3.25 per plan account in one or more quarters.”

The settlement says Costco may arrange for a lower fee “by any reasonable means including, but not limited to, direct negotiation with the recordkeeper, a request for proposal, and/or a company subsidy.”

The full text of the settlement agreement is available here.

Deals & People March 16, 2022

SageView Names Wealth Management Head in Sign of Evolving Industry

The appointment of Jim Dario as head of wealth management comes as SageView increases its focus on this strategic area of its business—mirroring the actions of other national retirement plan advisory shops.

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SageView Advisory Group this morning announced the addition of Jim Dario as its first head of wealth management.

The leadership at SageVeiw says Dario’s hiring to this key new role underscores the firm’s commitment to accelerating growth as a provider of comprehensive wealth management solutions for individuals and families across the country. Alongside other national registered investment adviser shops, SageView has been actively acquiring firms with a concentration in wealth management over the past several years, complementing its longstanding retirement plan consulting business.

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According to SageView Founder and CEO Randy Long, the firm’s wealth management business has grown to more than $4 billion via organic strategies and acquisitions, with plans for “further robust expansion throughout 2022 and beyond.”

Reflecting on the pace and future of retirement industry M&A activity, Long says there is a lot of runway left to go. His personal perspective is that retirement adviser-focused deals will likely continue at the current pace for at least several years. On the wealth management side, he says he sees potentially another decade of accelerated dealmaking. In this context, it is no surprise the firm has taken the step of bringing Dario on board.

“In terms of the signals it sends to the marketplace and to our clients, it is very meaningful and special to have this new title of head of wealth management, and to be bringing Jim into the role,” Long tells PLANADVISER. “We have not had anyone with this title before. He is coming to the table really understanding the technology and the product development that have been reshaping the wealth management industry.”

Dario previously served as head of product management and strategy at TD Ameritrade Institutional, where he focused on supporting business growth and client experience objectives. At SageView, he is charged with reimagining the firm’s overall wealth management strategy and managing the development and implementation of a full-service advisory platform—including design, product development, pricing, promotion and training.

According to the firm’s hiring announcement, with Dario’s support, SageView will seek to make additional acquisitions of successful independent wealth management firms. The firm aims to be in a position to support individual plan participants who are interested in attaining a higher degree of financial wellness and desire a financial planning solution. The firm will also work to support the growth of its existing financial advisers with improved technology, tools and talent.

“Our firm’s well-established leadership in supporting qualified retirement plans by driving individual financial wellness for plan participants uniquely positions us for considerable future success,” Long says. “Qualified retirement plan assets represent the single greatest financial asset for most individuals and families. As older generations advance toward retirement in ever-larger numbers, SageView’s capabilities and expertise as a wealth management solutions provider, with its historical focus on financial wellness, will be increasingly in demand.”

For his part, Dario tells PLANADVISER that he looks forward to leveraging the experience he has gained while partnering with “countless RIAs” over his multiple decades of experience working with large custody platforms.

“SageView’s business model and wealth management growth strategy stand out as both distinctive and actionable,” Dario says.

Prior to joining TD Ameritrade Institutional, Dario was head of business development and relationship management for Pershing Advisor Solutions. Before that, he served in senior roles in the institutional wealth business of Fidelity Investments.

“The firm’s expansion potential is especially bright given its tremendous growth momentum to date, combined with the significant backing the firm enjoys through Aquiline, which has emerged as a top private equity investor in the wealth management industry,” Dario says. “I’m excited to join SageView, and I look forward to working with Randy and his incredibly talented leadership team to create a truly differentiated wealth management offering for the firm’s advisers and clients.”

Long says other key hires made in the past year will also be supporting this mission. These include Jeremy Holly, hired last year as chief development and integration officer. Additionally, SageView in early 2022 welcomed Amy Barber as vice president of legal, regulation and compliance.

“When you think about the evolution of this marketplace, it is significant,” Dario concludes. “The place of employment is becoming the natural center for peoples’ financial lives. Success is about building trusted relationships with employers and participants alike, by focusing on each and every clients’ pre- and post-retirement needs. The other crucial piece of the puzzle is bringing a fiduciary approach to the table on the wealth management side, which SageView does so well.”

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