Deals & People June 26, 2020

Retirement Industry People Moves

TIAA announces additions to executive committee; TRA acquires retirement plan administrator; and Compass Advisors names retirement services director.

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Art by Subin Yang

TIAA Announces Additions to Executive Committee

TIAA has added two company leaders to its Executive Committee reporting to TIAA President and Chief Executive Officer Roger W. Ferguson Jr.  

Martha Willis, currently Nuveen chief marketing officer, has been named chief marketing officer for TIAA, where she will oversee marketing, brand and corporate communications across TIAA, TIAA Bank and Nuveen. Doug Chittenden, head of Institutional Relationships, will also serve as chair of the TIAA Financial Solutions (TFS) Senior Leadership Team. These changes are effective immediately.

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“As we take steps to operate in a more streamlined and integrated way for the benefit of our participants, we have in Marty and Doug two highly accomplished, client-focused leaders,” Ferguson says. “They will concentrate on activities with the highest impact for delivering excellence and financial security to our institutional and individual clients. Marty and Doug have devoted their careers to building and maintaining long-term client relationships, and I couldn’t be more pleased to recognize their contributions to the business.”

Willis has more than 30 years of experience as a marketing, distribution, product development and business strategy leader, including roles at OppenheimerFunds, Fidelity Investments and MFS. She has earned numerous industry awards for her marketing and branding campaigns. Since joining the company in 2016, she has overseen the development of client and product marketing, corporate and investment communications, and digital and brand strategies.

In his role, Chittenden will partner closely with his TFS senior leadership colleagues and ensure the needs and perspectives of TFS are well-represented at the Executive Committee level. Chittenden continues to manage the company’s Institutional Retirement business.

TRA Acquires Retirement Plan Administrator

The Retirement Advantage Inc. (TRA) has acquired PlanTech LLP.

PlanTech provides full-service, employer-sponsored retirement plan administration and consulting, and assists employers and their advisers in the design, implementation, administration and communication of retirement plans.

“Our acquisition of PlanTech complements our overall strategy of providing flexible, market-leading solutions to our clients,” says Matt Schoneman, president of TRA. “The acquisition leverages many of TRA’s existing capabilities, and we look forward to the opportunity to serve our new joint clients.”

“We are pleased to announce the transaction as it ensures the continued support and enhancement of services for current and future clients over the longer term,” say Tom Powell and Benny Paternostro, owners of PlanTech LLP, in a statement. “TRA is the perfect fit for us. We share a common culture of providing outstanding, personalized service to our clients and advisers as well as an ongoing desire to integrate the necessary tools and technology to ensure each plan’s success. We look forward to the additional resources that will be available to us and are very enthusiastic at what the future holds for both of our firms.” 

Compass Advisors Names Retirement Services Director

Compass Advisors has added Brendan Hyde as the director of Retirement Services. 

“The current economic reality has highlighted the importance of savings and retirement planning for so many individuals and families,” says Michael Cuneo, managing partner of Compass Advisors. “Brendan has a long record of success in delivering results—and we are proud to welcome him to our team. His experience and vast knowledge base is going to be a tremendous asset to our clients.”

As director of Retirement Services at Compass Advisors, Hyde will act as a fiduciary and consultant to small and large businesses alike, assisting owners and executives to maximize their employer-sponsored plans. With a focus on qualified and non-qualified plans alike, he will be working with plan sponsors to maximize their corporate plans.

“Businesses of all shapes and sizes, including large institutions, are faced with challenges when offering a corporate retirement plan. By joining Compass Advisors and acting as a fiduciary for our clients, I am looking forward to bringing my years of institutional retirement plan consulting experience to the firm and partnering with business owners, helping them build and manage their retirement plan programs that will enable their employees to retire successfully,” Hyde says. 

Hyde earned his bachelor’s degree in economics from the State University of New York at Cortland. He holds the Accredited Investment Fiduciary (AIF) designation through the Center for Fiduciary Studies as well as the Chartered Retirement Plan Specialist (CRPS) from the American College of Financial Planning. Prior to joining Compass Advisors, Hyde worked institutionally with Transamerica Retirement Solutions and The Principal Financial Group.   

Compliance June 26, 2020

Estee Lauder Faces 401(k) Plan Excessive Fee Lawsuit

The lawsuit argues that while the TDFs in the plan are CITs, they are private label CITs with much higher expense ratios than the typical CITs offered by JPMorgan.

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Former participants in the Estee Lauder Companies 401(k) Savings Plan have filed a proposed class action lawsuit alleging the company, its board of directors and the plan’s investment committee breached fiduciary duties under the Employee Retirement Income Security Act (ERISA) by failing to prevent the plan from paying lower investment and recordkeeping fees.

“As a large plan, the plan had substantial bargaining power regarding the fees and expenses that were charged against participants’ investments. Defendants, however, did not try to reduce the plan’s expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the plan to ensure it was prudent,” the complaint states.

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The plaintiffs allege that from June 22, 2014, through the date of judgment, the defendants, as fiduciaries of the plan, breached their duties by 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 by maintaining certain funds in the plan despite the availability of identical or materially similar investment options with lower costs and/or better performance histories.

They say these breaches cost the plan and its participants millions of dollars.

Estee Lauder has not yet responded to a request for comment.

As is common in ERISA cases now, the complaint states that the plaintiffs did not have knowledge of all material facts necessary to understand that the defendants breached their fiduciary duties and engaged in other unlawful conduct in violation of ERISA until shortly before the suit was filed.

The lawsuit says the plan has retained several actively managed funds as investment options “despite the fact that these funds charged grossly excessive fees compared with comparable or superior alternatives, and despite ample evidence available to a reasonable fiduciary that these funds had become imprudent due to their higher costs relative to the same or similar investments available.” The complaint states that this decreased participant compounding returns and reduced the available amount participants will have at retirement.

The lawsuit notes that the majority of funds in the plan stayed relatively unchanged during the class period. And, in 2018, it says, nearly half of the funds in the plan were significantly more expensive than comparable funds found in similarly sized plans. The complaint includes a chart that shows the expense ratios for funds in the plan were, in some cases, up to 57% greater than the median expense ratios in the same category.

Between 2014 and 2018, the plan maintained between $489 million and $1.06 billion in JPMorgan collective investment trusts (CITs). In 2018, more than a billion dollars of plan assets were invested in private label collective trust target-date funds (TDFs) offered by JPMorgan. The complaint explains that CITs are less expensive than mutual funds; however, it says that while the TDFs in the plan are CITs, they are private label CITs with much higher expense ratios than the typical CITs offered by JPMorgan. “A clear indication of defendants’ lack of a prudent investment evaluation process was their failure to identify and select available lower cost collective trusts,” the complaint states.

The plaintiffs argue that, given that the lower-cost CITs were comprised of the same underlying investments as their mutual fund counterparts, and managed by the same investment manager, they would have had greater returns than the plan’s funds. In addition, they note that the plan did not receive any additional services or benefits based on its use of more expensive funds.

The lawsuit also alleges that the defendants failed to prudently manage and control the plan’s recordkeeping costs by failing to track the recordkeeper’s expenses; identify all fees, including direct compensation and revenue sharing; and perform a request for proposals (RFP) process at regular intervals. It notes that Alight has been the plan’s recordkeeper since at least 2014, and “there is no evidence defendants have undertaken an RFP since 2014 in order to compare Alight’s costs with those of others in the marketplace.” The complaint says that “by any measure,” Alight’s direct compensation for recordkeeping services has been unreasonable.

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