Compliance February 19, 2021

NFP Named in ERISA Lawsuit Alongside Plan Sponsor

Much of the text of the complaint is dedicated to detailing the reduction in the average fees paid by large U.S. retirement plans for both investments and administrative services.

Reported by


A new Employee Retirement Income Security Act (ERISA) lawsuit filed in the U.S. District Court for the Central District of California names both the plan sponsor and various financial service providers as defendants, including NFP Retirement.

The plan sponsor involved in the case is the Wood Group, which is an international business involved in the U.S. oil and gas sector. According to the complaint, filed by plaintiffs under the representation of the well-known law firm Schlichter Bogard & Denton, the plan’s in-house fiduciaries and various service providers with functional fiduciary status failed to operate the Wood Group’s retirement plan for the exclusive benefit of participants and beneficiaries. The defendants are further accused of failing to ensure that all plan expenses are reasonable and that all plan investments are prudent.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

“Instead of acting in the exclusive best interest of participants, the Wood defendants and NFP caused the plan to invest in NFP’s collective investment trusts [CITs] managed by its affiliate flexPATH Strategies, which benefitted the NFP defendants at the expense of plan participants’ retirement savings,” the complaint states. “The Wood defendants and NFP also failed to use their plan’s bargaining power to obtain reasonable investment management fees, which caused unreasonable expenses to be charged to the plan.”

As is common in these cases, the text of the complaint speaks at length about the general principles underpinning the fiduciary duties of prudence and loyalty mandated by ERISA. Much of the text of the complaint is also dedicated to detailing the reduction in the average fees paid by large U.S. retirement plans for both investments and administrative services.

“Fiduciaries must be cognizant of a service provider’s self-interest in maximizing fees, and cannot simply accede to the provider’s desires and recommendations to include the provider’s proprietary funds and services that will maximize the provider’s fees without negotiating or considering alternatives,” the complaint states. “In order to act in the exclusive interest of participants and not in the service provider’s interest, fiduciaries must conduct their own independent investigation into the merits of a particular investment or service by considering alternatives.”

The complaint goes on to suggest that, in recommending the placement of the flexPATH funds in the plan, NFP acted under “a profound conflict of interest between acting in the exclusive best interest of plan participants as the plan’s fiduciary investment adviser while also seeking to grow its collective investment trust business through flexPATH Strategies and maximize its revenue through investment advisory fees collected from the flexPATH funds.

“NFP had an incentive to recommend investment vehicles offered by flexPATH Strategies because it receives additional compensation when its clients invest in those vehicles, such as in the form of bonuses and other incentives for the individual NFP investment advisers whose clients invest in affiliated products or services,” the complaint continues.

Lawsuits including similar allegations have so far met mixed outcomes across the federal district court system, based on the facts of each case and on the varying degrees of willingness of individual judges to grant standing to plaintiffs and permit discovery. For example, a ruling filed in September by the U.S. District Court for the Northern District of Georgia permitted the case to advance, though it carved out two service providers as defendants. In short, the court granted motions to dismiss filed by Alight and Financial Engines, in which the defendants argued they are not, given their contracted roles and inability to set their own compensation levels as service providers, liable for the fiduciary breach claims alleged in the broader suit. The dismissal motion filed by the in-house fiduciary Home Depot defendants, on the other hand, was denied.

Asked for comment on the lawsuit, NFP provided the following statement:

“NFP Retirement and flexPATH Strategies have two central goals: to enhance retirement processes for our clients and improve outcomes for their participants. Our respective companies have years of experience and work with outside counsel to ensure that the services and processes offered are compliant with all state and federal regulations.

“The allegations of fiduciary breaches asserted against NFP Retirement, flexPATH, and one of our largest retirement plan clients in a lawsuit filed recently in California are without merit. The lawsuit contains numerous inaccuracies pertaining to our fees, services, and processes.

“NFP Retirement and flexPATH Strategies intend to defend against plaintiffs’ allegations vigorously, and are confident that the compliance protocols and business processes that are currently in place not only meet all state and federal statutes and regulations but also drive better outcomes and value for our clients.”

The Markets February 19, 2021

Investment Experts Warn of a K-Shaped Recovery

But there is hope as the nation returns to work that those most impacted by the pandemic will be able to recover.

Reported by


Investment experts say the economic recovery that is beginning after the COVID-19-induced downturn could be K-shaped, meaning it would benefit some members of society, but others—mostly lower income people who have less to begin with—will not fare nearly as well.

“We are in a K-shaped recovery,” says Devin Miller, chief executive officer and co-founder of Secure, a fintech startup that seeks to address the emergency savings problem facing Americans. “We hear benefits leaders and brokers talk about designing for two types of employee groups. One is older, more professional and more established in life, with technical or professional skills and jobs that can be done remotely. The other group is younger, less established and does not have a lot of assets to rely on. These workers are in much more vulnerable and expendable roles. Our view is that those who are most likely to be on the downward slope of the K are at risk of a downward spiral, as things get tight financially.”

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

However, Jason Vaillancourt, co-head of global asset allocation at Putnam Investments, says he is optimistic that those on the downward slope of the K-shaped recovery can rebound as the vaccine helps Americans get back to work.

He notes that in January, approximately 10 million people were unemployed, and 90% of the jobs that were lost were in the service sector—with approximately 70% of those jobs in two categories: education and health services, and leisure and hospitality.

“We believe those are jobs that can return as vaccines are rolled out and the United States begins to approach herd immunity in the second half of the year,” Vaillancourt says. “Our expectation is that we are in the early stages of a strong cyclical recovery, fueled by powerful fiscal and monetary stimulus, pent-up demand and a strong consumer balance sheet, in aggregate.”

Vaillancourt says he is bullish on value, small-cap equity, developed and emerging non-U.S. markets and commodities.

Strong Outlook for the Economy Overall

Even amid concerns about the potential for an unequal recovery, investment experts have fairly strong outlooks for the economy and the markets in 2021, due to the distribution of the vaccine and pent-up consumer demand.

Tony Roth, chief investment officer (CIO) at Wilmington Trust, says, “As we enter 2021, [the] gap between our 12-month economic outlook and equity market valuations is starting to close, and we find the backdrop of an improving economy and a supportive Federal Reserve to be one of the most constructive for equities since before the pandemic hit. Promising vaccine developments and expectations for accelerating productivity growth are leading to a broadening of equity market strength in different regions and more cyclical areas of the market. The structural shift toward digitization in all areas of the economy means growth equities—particularly in the U.S. and emerging markets—remain a compelling investment over a multi-year horizon.”

However, Roth says, with President Joe Biden’s plans and a Democratic-controlled Congress, the United States could see higher taxes, more regulation and sweeping policy changes that could weigh on corporate profit margins.

Rhea Thomas, senior economist at Wilmington Trust, says that, last year, the U.S. gross domestic product (GDP) growth contracted by 3.5%. This year, Thomas expects GDP growth of 3.5%—if the government provides additional stimulus. “It also depends on the path of the virus and the vaccines,” Thomas adds. In particular, she is bullish on U.S. small cap and emerging market stocks.

Jack Janasiewicz, a portfolio strategist with Natixis Investment Managers, expects the S&P 500 will perform the most strongly in the next 12 months out of all the indexes, and he also agrees that small-cap stocks are likely to outperform.

Esty Dwek, global market strategist with Natixis, says she favors growth over value stocks—and she foresees a secular bull market that will last a few years.

Last year, manufacturing stocks performed well, Dwek says. As the economy begins to ramp up in 2021, “there is still plenty of room for the service industries to catch up,” she says.

She is also optimistic that the Biden administration will provide additional stimulus money and that this will help stock market returns.

Thomas says she does expect something of a K-shaped recovery in which higher earners will fare better than lower-paid workers. “We could see a slowing of employment for lower income people,” she says.

«