Compliance December 11, 2020

Principal Remains as Defendant After CHS Settlement

The proposed agreement stipulates that the class counsel does not intend to seek recovery of any attorneys’ fees or litigation costs from Community Health Systems (CHS) in connection with the settlement.

Reported by

The plaintiffs and the plan sponsor involved in the Employee Retirement Income Security Act (ERISA) lawsuit known as Kirk v. Retirement Committee of CHS/Community Health Systems Inc have filed a settlement motion in the U.S. District Court for the District of Tennessee, Nashville Division.

In the underlying lawsuit, the Community Health Systems (CHS) defendants are accused of breaching their fiduciary duties by maintaining excessively expensive and poorly performing index funds in the plan. Though these funds are managed by Principal, the fiduciary breach allegation only pertains to the employer, CHS. However, there are also allegations that the default target-date fund (TDF) suite provided by Principal performed poorly for an excessive period of time, without being adequately reviewed or removed from the plan. According to the complaint, because these TDFs are organized as separate accounts for the plan, Principal owes fiduciary duties to the plan and its participants with respect to the management of those accounts.

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For its part, Principal has strongly denied these allegations and continues to fight the lawsuit.

Under the terms of the proposed settlement, the CHS defendants will pay a gross settlement amount of $580,000 into a common fund for the benefit of settlement class members, defined as those who invested in the standalone Principal index funds in the plan.

“This is a fair and reasonable recovery that represents approximately 50% of the damages (and 94% of the excess fees) that plaintiffs calculate to be associated with those standalone funds that were the focus of plaintiffs’ claim against the CHS defendants,” the settlement agreement states. “Further, the CHS defendants have agreed to provide certain further discovery related to the remaining claim against the Principal defendants relating to the management of the target-date separate accounts in the plan, which was asserted primarily against the Principal defendants.”

The proposed settlement agreement stipulates that the class counsel does not intend to seek recovery of any attorneys’ fees or litigation costs in connection with the settlement. Presumably, they will seek such compensation from the ongoing litigation involving Principal.

Data & Research December 11, 2020

Self-Directed Investors Satisfied With Their Strategies in 2020

Most say they learned the importance of staying the course, despite market volatility.

Reported by

StreetWise, E*TRADE’s quarterly tracking study of experienced investors, has released a report that shows 71% of investors are satisfied with how they have managed their investments this year.

The top lesson they say they learned this year is the importance of staying the course (50%), followed by focusing on strategic market moves (19%) and building an emergency fund (15%).

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As the year draws to a close, the No. 1 thing that self-directed investors plan on doing is using an online tool to review their portfolio (38%), followed by reaching out to an adviser (35%). Their top financial resolution for 2021 is to use online tools to diversify their portfolio and help meet goals (33%), followed by seeking the help of an investment professional (30%).

“The year kicked off with a market shock that may define a generation in COVID-19, and, as a nation, we then experienced a social movement of monumental proportions in the fight for equality, only to cap the year with the most contentious election in modern history,” says Mike Loewengart, managing director of investment strategy at E*TRADE Financial. “And these next few months may continue to see pronounced volatility as markets balance winter virus woes with vaccine developments. In spite of all of this, it’s encouraging to see investors tune out the noise and remain focused on long-term investment goals. In this environment, a properly diversified portfolio across asset classes is a powerful way to help smooth out unpredictable market conditions.”

For the new year, Loewengart suggests investors review and rebalance their portfolios in response to major life events, such as retirement, the birth of a child or buying a house. Next, he suggests they check to see if their retirement plan is putting them on a path to success and consider tax loss harvesting.

The survey was conducted in October among an online U.S. sample of 842 self-directed active investors who manage at least $10,000 in an online brokerage account.

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