Compliance February 25, 2021

Court Again Denies Dismissal of BBVA Lawsuit Alleging 401(k) Mismanagement

The court found that plaintiffs were never given clear instructions for how to exhaust their administrative remedies for claims of fiduciary breaches.

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A federal judge has denied BBVA Compass Bancshares’ motion to dismiss an Employee Retirement Income Security Act (ERISA) lawsuit accusing it of failing to monitor investments and remove imprudent ones in its 401(k) plan. This is the second time the court has rejected the firm’s motion to dismiss.

The original complaint accuses BBVA of mismanaging a $100 million money market fund “that was the investment equivalent of stuffing cash into a mattress” and failing to properly monitor investments and remove imprudent ones, “including high-cost mutual funds whose performance did not justify their increased costs.”

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BBVA argues that the court must dismiss the plaintiffs’ claims for failure to exhaust administrative remedies. However, Judge Madeline Hughes Haikala of the U.S. District Court for the Northern District of Alabama, found that the plaintiffs were never given clear instructions for how to exhaust their administrative remedies.

Looking at the plan’s summary plan description (SPD) and the plan document, Haikala found that neither contains an express provision concerning administrative procedures for claims for breach of fiduciary duty. “Because the SPD makes the language regarding ‘General Claim Procedure’ in the ‘Applying for Benefits’ section subordinate to an initial request for payment of benefits, a reasonable plan participant would not understand from the SPD that the claim procedure applies to a claim for breach of fiduciary duty in which no payment is sought,” she wrote in her opinion.

Haikala noted that the “Plan Administration” section of the SPD does not mention an administrative process for claims for breach of fiduciary duty. However, it does state that employees with questions should address them in writing to the plan administrator, and, as Haikala pointed out, that is what at least one plaintiff did.

Through her attorney, the plaintiff asked the plan administrator to tell her plainly what administrative procedure was available to her to pursue her concerns about the management of the plan and plan investments. She also asked for “all documents related to the administrative process.”

According to the court opinion, the plan administrator replied that her request for information was “unclear” and “overly broad” and did not appear to be within the scope of the information to which she was statutorily entitled. Haikala pointed out that the “ERISA Rights” section of the SPD states: “If a claim for benefits is denied or ignored, in whole or in part, suit may be filed in a state or federal court.”

Client Service February 24, 2021

15th Anniversary of RPAY: Greenspring Advisors

The practice believes that since so many advisory firms are acquired by aggregators, the personal attention it offers clients will come to be viewed as a precious commodity.

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Greg Hobson

Since Greenspring Advisors was named the 2018 PLANSPONSOR Small Team Retirement Plan of the Year, the Towson, Maryland-based practice has enjoyed significant growth, notes Greg Hobson, partner. When the practice won the award, it had $2.9 billion in assets under advisement (AUA) in 99 plans. Today, it manages $4.4 billion in 120 plans.

“Since then, our team size has also grown by a few people, particularly in the area of personalized advice for our clients who offer financial wellness to their participants,” Hobson notes. “Today, we have three certified financial planners [CFPs] whose sole function is to offer one-on-one participant advice. They are supported by an administrative staff that we have also expanded.”

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The four primary industries that Greenspring Advisors serves are manufacturing, not-for-profit, health care and professional services, he notes. However, within these industries, there are plans of all sizes—ranging from $1 million in AUA to $1 billion, although the majority are between $5 million and $50 million.

Hobson says Greenspring has also updated its service model in the past two years, from the standpoint of participant services.

“We are much more focused on and sensitive to participant advice and include this in our website, as well as webinars, blogs and financial planning tools that we produce,” he says. “So I would say that in the past 12 months, we have been enhancing the participant model significantly. We are now starting to go to the market to offer these as a standalone financial wellness suite to employers, even if they don’t use our retirement plan consulting services. So if an employer doesn’t want to change their adviser but likes our financial planning suite, they can access it and our CFPs on a contract basis.”

As for how the industry has changed in the past 10 years, Hobson says, “The focus among specialist advisers used to be the three F’s: funds, fees and fiduciary services. Those are now table stakes. Now, if you are not looking at financial wellness, participant advice and plan success metrics in the way of utilizing automatic enrollment and behavioral finance to improve outcomes—you are not on point. We are becoming more and more holistic about talking to plan sponsors about how their retirement plan pairs with health care and insurance protection benefits. To succeed today, a retirement plan specialist must move well beyond that to be more well rounded about all of the benefits that impact participants’ financial lives—not just the 401(k) in a vacuum. A successful retirement plan adviser fully understand the entire benefits package so that the retirement plan complements those benefits and creates better success for plan participants.”

Hobson says he is very optimistic about the future prospects for the retirement plan industry.

“Companies are increasingly looking to specialist advisers to create successful retirement plans,” Hobson says. “This is creating great opportunities for those of us working as fiduciaries to plans. Our job continues to expand because the name of the game is creating better retirement outcomes for individuals. My only concern is that with so many mergers and acquisitions [M&As] occurring, will independent firms like Greenspring be able to exist? I also wonder whether all of these mergers result in what is ultimately the best thing for participants. I think the personal touch that we can offer is becoming a commodity. We have a client cap in place on how many client relationships each of our retirement plan and wealth advisers can handle, and it is no more than 50.”

Hobson says there are a few clear ways for retirement plan advisers to improve defined contribution (DC) plans and retirement readiness for participants.

“I am old school. I really believe a great deal of the end result comes down to fees,” he says. “It is important for us to find the lowest cost investment options available that will still deliver good performance. It is also critical for us to act in the best interest of participants and to continue to convince plan sponsors to move their plan design to automatic enrollment and automatic escalation—and meaningfully increasing those numbers, even as much as up to a 20% deferral rate. We would like to see every client at those numbers.”

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