Compliance October 20, 2022

Elevator Constructors’ Union Retirement Plan Sued

Two counts for breach of fiduciary duty were brought against the defendants.

Reported by

Retirement plan participants have brought a class action lawsuit against the International Union of Elevator Constructors and the multiemployer 401(k) retirement plan on behalf of members of the elevator constructors union. The suit alleges excessive fees for plan services.

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The named defendants to the lawsuit include the executive board of the union, the board of trustees of the Elevator Constructors Annuity and 401(k) Retirement plan, and 30 unnamed individuals.

“The plan was saddled by outrageous per participant fees,” the complaint states.

The plaintiff’s complaint asserts two counts against the international union and board defendants—alleging  fiduciary breach of prudence to participants, against the committee and failure to monitor other fiduciaries to the plan.

“Defendants did not adhere to fiduciary best practices to control plan costs … such as monitoring investment management fees for the plan’s investments, resulting in several funds during the class period being more expensive than comparable funds found in similarly sized plans—conservatively, plans having over [$]in assets,” the complaint states. “Had a prudent process been used, the plan would not have been saddled with a total plan cost that was more than 160% higher than the median for similar plans.”

The plan had at least $2.6 billion in assets under management during the class period, the court filing shows and over 29,000 participants as of 2020. The plan’s asset amount qualifies it as a jumbo plan in the defined contribution plan marketplace, and among the largest plans in the United States, according to the plaintiff’s complaint.

Attorneys for the plaintiffs have alleged that the plan’s recordkeeper, Mass Mutual, charged between $95 and $125 per participant—from 2016 to 2020—for recordkeeping and administration services.  

The complaint argues, as a ‘jumbo’ plan, fiduciaries for the union plan should have been able to negotiate lower recordkeeping costs, ranging from $14 to $30 per participant.

“Anything above that would be an outlier especially later in the class period when [recordkeeping and administrative] costs per participant should have been at the cheapest,” the complaint states.

Plaintiffs’ have alleged against fiduciaries near identical excessive fee claims for the plan’s investment management fees and the 401(k) target-date fund that was used as the plan’s qualified default investment alternative, in the complaint.  

From 2016 to 2019, the plan’s target-date suite was the T. Rowe Price Advisor Class series, that carried expense ratios from 92 basis points to 97 basis points for the 2060 fund, the court filing shows. In 2019, the plan moved to the T. Rowe Price Investor Class Series that had expense ratios ranging from 53bps for the 2030 fund to 59bps for the 2060 fund.

“The Investor class was a choice which was still not the best choice for the plan,” the complaint states.

Plaintiffs allege plan fiduciaries move to the less expensive suite “was too little too late as to the damages to the plan had already been baked in,” and further, management failed to use remaining, less costly options for plan participants, according to the complaint. 

“[T]he plan could certainly have qualified for the [collective investment trust] version of this target-date fund,” the complaint states. “The CIT version is nearly identical to its mutual fund version in all material respects having the same fund managers and same underlying investments.”

The complaint shows that a version of the CIT carried a 46bps fee for all target-date years from 2020 to 2060.

“Had either the CIT version of this target-date suite or the Investor Class version been selected from the inception of the class period, the plan would have realized greater savings, which would have compounded over the years,” plaintiffs allege.

Citing Supreme Court precedent from the ruling in the 2022 decision Hughes v. Northwestern Univ., the plaintiffs asserted plan fiduciaries have a continuing duty to monitor investments and remove underperformers.

While the complaint is typical of excessive fee claims, it is uncommon for such lawsuits to target a multiemployer plans’ defined contribution plan.

The complaint erroneously termed the Taft-Hartley union plan “a multiple employer plan.” The plan is, in fact, a multiemployer plan for union members.

Plaintiff’s attorneys, from Harrisburg, Penn.-based law firm Capozzi Adler, filed the complaint in the U.S. District Court for the Eastern District of Pennsylvania. The attorneys argued for the court to certify the class period as any time between October 13, 2016, through the date of judgment.

The Elevator Constructors Annuity and 401(k) Plan was a 2019 finalist for Plan Sponsor of the Year. 

The International Union of Elevator Constructors is headquartered nationally in Washington, D.C. The principal place of business is in Newton Square, Penn.

Requests for comment to the union on the lawsuit were not returned. 

In Practice October 20, 2022

Know Where the Puck Will Be

Advisers discussed three areas of focus to position practices for the future.

Reported by

From left: Angela Achatz, Putnam Investments; Stephen Welch, The Foote Welch Group at Morgan Stanley; Jeff Cullen, Strategic Retirement Partners; Renee Scherzer, 401K Resources (photo by Prana Portraits)


There’s a quote by hockey great Wayne Gretzky, “I skate to where the puck is going to be, not where it has been.” Angela Achatz, director, DCIO strategic accounts at Putnam Investments, likened the information to be shared during the panel discussion she moderated at the 2022 LeafHouse National Retirement Symposium to “knowing where the puck will be.” The session was titled, “Angle of Pursuit.”

“There’s so much more [to an adviser’s duties] than fees, funds, and fiduciary,” she told conference attendees. “The three F’s are table stakes. Advisers need to manage beyond them and know how to position themselves for years to come.”

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Stephen Welch, vice president, financial adviser at The Foote Welch Group at Morgan Stanley, started with the angle of personal touch. He said he does wealth management as well as retirement plan advising. “On the wealth side, it doesn’t get more personalized than financial planning. On the retirement side, we need to customize,” he said.

Welch argued that “no one goes to group retirement plan meetings anymore.” He said his firm shifted from group meetings to one-on-one participant conversations eight to 10 years ago. “It moved the needle,” he said. “We got way more from those 20-minute, quarterly one-on-ones. We saw a lift in contribution levels and more plan engagement.”

Jeff Cullen, managing partner at Strategic Retirement Partners, pointed out that despite the increase in technology, there has been no broad move to robo-advice. “We tried to replace human interaction with technology, and it didn’t work,” he told conference attendees. “If you want to personalize, you have to see the whole picture, not just a participant’s investments. For example, what insurance do they have? Only one-on-ones worked for us.”

However, Renee Scherzer, principal at 401K Resources, noted that technology is needed for personalization—even if behind the scenes. “Advisers need tools from partners for education and other aspects of relationship-building,” she said. “Clients don’t need to see everything; they just want to talk to their advisers. But advisers should build a network to leverage technology and other resources to address issues they might not have insight or expertise on.”

Cullen agreed that artificial intelligence offers so much information advisers can leverage for personalization—which he says is the obvious next angle of pursuit in advisers’ relationships with participants.

Welch added that technology does have some place in interactions with participants. “Some of our one-on-ones were done on Zoom, such as for evening appointments when clients were off work.”

A New Angle on Financial Wellness

“Financial wellness” has been a buzzword in the retirement planning industry for a decade or more, but there hasn’t been a standard definition. Cullen said to him, financial wellness means getting people to the point of financial independence. “It’s being able to do what they want to do, not what they have to do,” he said.

He suggested advisers need to meet participants where they are. “For the people living paycheck to paycheck, they need a coach, not a financial planner,” he said. “Those further along financially need more.”

Cullen said people just like to be told what to do. “They don’t want to learn everything that’s in an adviser’s head. Just tell them what to do,” he said.

Scherzer said all players in the retirement planning industry have a responsibility to help participants achieve financial wellness. “If we don’t, the government will dictate what needs to be done,” she warned. “There won’t just be SECURE 2.0; there will be SECURE 3.0, etc.” Scherzer said advisers need to get engagement from their plan sponsor clients and make delivering financial wellness resources to participants easier for them.

Welch suggested that advisers are struggling with the return on investment in financial wellness—what is the benefit, why do it? However, he said, if advisers are not including financial wellness in their practice to some degree, they will be missing out on opportunities. Still, if they go all in, they’ll likely be disappointed, he added.

DEI in Advisers’ Practices

The third angle to pursue discussed during the panel is getting the advisor industry to look more like the people it serves. Scherzer said advisory firms need to look for new ways to find talent. “I think a lot of women are out of the workforce and need to get back and gain some confidence. So, we’re doing education about that,” she said. “Advisers should ask themselves who and what type of person they want to work with.”

Welch recounted attending a conference of African American advisers and wondering how Morgan Stanley ranked in diversity. “I realized we only have 45 Black women advisers out of 17,000 or so advisers,” he said. “What do we do about it?”

Welch said firms should be in touch more and think about looking for candidates in a different way. “Don’t look to Ivy League graduates or even finance majors,” he suggested. “Maybe a candidate doesn’t even have a degree. We need to think unconventionally. We can find talent anywhere. We need to stop overlooking people.”

“We can’t change the face of the industry by hiring within the industry,” said Cullen. “We need to tell potential candidates a different story.”

He explained that Strategic Retirement Partners has had no problem hiring young people who never thought they’d be a financial adviser, but they are mission-driven. “We get paid to help people. They buy into that mission,” he said. “Then, we don’t just give them the opportunity; we give them a path to have a stake in it.”

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