Compliance June 24, 2016

Overpaid Former Plan Participant Found to Be a Fiduciary

A federal court said that by not repaying the overpaid funds, the former participant has breached her ERISA fiduciary duties.
Reported by

The U.S. District Court for the District of New Jersey has ruled that a former participant in the Lucent Technologies Inc. Pension Plan’s (LTPP) sponsored by Alcatel-Lucent USA Inc. (ALU), became a plan fiduciary under the Employee Retirement Income Security Act (ERISA) because she retained control over plan assets she was not entitled to and breached her fiduciary duties by not returning the assets to the plan.

Prior to 2012, Pamela Neely received payment from the LTPP in satisfaction of the benefits to which she was entitled. In November 2012, the LTPP mistakenly paid Neely an additional amount of $233,691.92 to which she was not entitled. The LTPP notified her of the error and demanded return of the overpayment by written letters sent on January 16, 2013, and February 15, 2013. However, Neely has not returned the overpayment.

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The court said there was evidence that Neely possessed $207,645.17 of the overpayment as of October 1, 2013, and found the plaintiffs in the case were entitled to default judgement in that amount.

In her court opinion, U.S. District Judge Madeline Cox Arleo noted a plan fiduciary is anyone who “exercises any authority or control respecting management or disposition of [plan] assets.” She cited other case law that found “ERISA ‘defines fiduciary not in terms of formal trusteeship, but in functional terms of control and authority over the plan,’” and “The plain language of this statute encompasses those who knowingly and unlawfully retain plan assets to which they are not entitled.”

Neely’s counterclaims were dismissed in part because she “acted culpably as she has been served with the Complaint, exhibited a history of dilatory behavior, and has failed to participate in this litigation since July 2015 in violation of multiple Court orders.”

The opinion in Alcatel-Lucent USA Inc., et. al. v. Samueal Borlabi, et. al. is here.

Products June 23, 2016

Investment Product and Service Launches

American Century Investments redesigns and renames large cap equity fund; Wilshire Associates Incorporated announces the launch of the Wilshire Bond Index. 
Reported by

American Century Reveals Focused Dynamic Growth Strategy

In order to provide its clients with a more concentrated investment option, American Century Investments is redesigning and renaming its Legacy Focused Large Cap strategy.

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With the changes, newly named American Century Focused Dynamic Growth Fund “becomes a more concentrated, active growth investment strategy.” Under its new moniker, the fund will have a smaller number of holdings and strive for increased difference between the portfolio’s returns and its benchmark.

According to the firm, stocks held in the portfolio will be comprised of companies that the team believes are in the early stages of their long-term growth cycle. The repositioning also will move the fund from the large-blend to the large-growth category.

Launched in 2006, the fund originally was designed as a “go-anywhere” product using a proprietary momentum investment approach. “Enhancements will address a strategic need for a concentrated, high-growth extension of American Century’s current fundamental growth investment capabilities,” the firm says.

Focused Dynamic Growth is co-managed by Keith Lee, vice president and senior portfolio manager; Michael Li, vice president and portfolio manager; Henry He, portfolio manager; and Prabha Ram, portfolio manager.

More information is at www.americancentury.com.  

NEXT: Wilshire Associates Launches Wilshire Bond Index

Wilshire Associates Launches Wilshire Bond Index

Wilshire Associates Incorporated announced the launch of the Wilshire Bond Index, aimed at providing investment firms with a more accurate reflection of the investible U.S. fixed-income market.

The new index is being introduced by the company’s Wilshire Analytics business arm. According to the firm, the index is “uniquely designed to track money managers’ holdings, providing a valuable perspective on the fixed-income market.”

“The Wilshire Bond Index assesses the performance of fixed-income securities that have been selected by institutional bond managers who actively trade pension assets, which we believe is a measure that better reflects true bond market performance,” explains Cecilia Loo, president of Wilshire Analytics. “Composition of the new index is an important distinguishing factor because its holdings are based on actual investor holdings which are far more relevant from a benchmarking perspective than the simply issued-based holdings of other bond market indexes.”

The index tracks the approximately 13,000 securities from the Wilshire Trust Universe Comparison Service (Wilshire TUCS) database, which represents more than $3.7 trillion in institutional assets. Returns for the Wilshire Bond Index are available on a daily basis from December 31, 2015 and on a monthly basis from June 30, 2004 and can be found at www.wilshire.com/indexcalculator. 

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