A federal court has dismissed a lawsuit alleging PNC Financial Services Group and its Incentive Savings Plan administrative committee violated their duties of prudence and loyalty by causing the plan to pay excessive administrative and recordkeeping fees.
Judge Christy Criswell Wiegand of the U.S. District Court for the Western District of Pennsylvania agreed with the defendants that the plaintiffs failed to state a claim that the defendants breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA).
In support of their allegations, the plaintiffs assert that plan participants paid, on average, a per-year administrative fee which rose from about $85 to about $90 from 2014 to 2018. However, recordkeeping fees paid to Alight Solutions, the plan’s recordkeeper, which account for the majority of the total administrative fee, in general fell from about $57 to $51 over the same period, according to the court decision. The plaintiffs also allege that the defendants “caused the plan to compensate PNC Financial Services, at an average of over $235,000 per year from 2014 to 2018, purportedly for ‘certain administrative services’ performed as the plan administrator.”
The complaint says the PNC plan had approximately 66,000 participants and assets of nearly $5.7 billion, as of December 2017. The plaintiffs rely on data from the “401k Averages Book” to assert that much smaller plans—with just 100 participants and $5 million in assets—pay, on average, only $35 per participant, per year, in recordkeeping fees. They also contend that “the plan should have been able to negotiate a recordkeeping fee of no more than $14 to $21 per participant, based upon the amount comparable plans were paying for the same or similar services during the relevant period.” Wiegand says this contention is made without any supporting reference in the complaint.
The plaintiffs say this information shows that the defendants failed to engage in “virtually [any] examination, comparison or benchmarking of the recordkeeping and administrative fees of the plan to those of other similarly sized defined contribution [DC] plans, or were complicit in paying grossly excessive fees,” and, had they done their due diligence, they “would have known that the plan was compensating its service providers at levels inappropriate for its size and scale.”
However, Wiegand said that even if the plaintiffs’ allegations were accepted as true, they stop short of crossing the threshold from possible to probable. She noted that the plaintiffs only compared direct recordkeeping and administrative costs of smaller plans with the fees PNC’s plan participants pay. However, the complaint notes that the plan pays these expenses either directly from participant accounts or indirectly through revenue sharing. The defendants pointed out that the plaintiffs’ $35 figure accounts for only direct recordkeeping fees, and when revenue sharing is included, smaller plans pay much more, according to the “401k Averages Book.”
In addition, the asserted $14 to $21 average recordkeeping fee the plaintiffs allege the defendants should have been able to obtain is premised on unspecified recordkeeping services provided by Fidelity to “other plans of over $1 billion in assets where Fidelity is the recordkeeper” without any comparison to the services provided to the PNC plan by Alight.
Wiegand adds that, “while a high fee may reflect imprudence even if the fee falls year-over-year, the fact that the plan’s recordkeeping fees trend downward for the period at issue points in the direction of prudence rather than imprudence.”
Regarding the breach of duty of loyalty claim, Wiegand noted that “courts look for allegations suggesting that the fiduciary made decisions benefitting itself or a third party; that is, a complaint must allege something more than just imprudence or mismanagement to state a viable claim for an ERISA fiduciary’s breach of the duty of loyalty.” She agreed with the defendants that that the plaintiffs have not alleged that “something more,” and instead simply attempted to repackage their breach of prudence claim as a breach of loyalty claim.
“The alleged imprudence, coupled with allegations that PNC performed administrative services on behalf of the plan in exchange for consideration, stops short of permitting a reasonable inference of anything more than PNC receiving an incidental benefit, especially in light of the plan’s overall size,” Wiegand concluded.
Wiegand also dismissed counts of a failure to monitor other fiduciaries and a participation in the breach of fiduciary duty, saying those claims rely on the existence of a claim for breach of fiduciary duty.
She granted the plaintiffs leave to file an amended complaint, which they did on August 17.
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Qualified Plan Advisors (QPA) has hired Kevin Toledano as director of managed account services.
Toledano comes to the company with decades of industry experience, most recently having spent 15 years running the in-plan managed account program at AIG Retirement Services.
In his new role, Toledano will develop strategy and manage and oversee all aspects of QPA’s adviser managed account (AMA) services. Additional responsibilities in this role will include investment analysis and portfolio management, recordkeeper and third-party communication, and adviser implementation.
The retirement plan consulting company says it is investing heavily in AMA options, with plans to go live with AMA offerings on approximately seven recordkeeping platforms by the end of the year and to add to that number in early 2022.
“We were looking for someone who had the motivation to take the firm to the next level and Kevin is that person. He knows this world inside and out and truly cares about doing what is right for the plan participants,” says Matthew Eickman, national retirement practice leader at QPA.
QPA says it believes the more comprehensive, customized approach provided by AMAs is a better way to serve client’s needs. “The COVID-19 pandemic made it even more obvious that people need more customized solutions when managing their money, and especially their retirement money,” says Eickman, “No two people are on the exact same financial path, so AMAs allow people to get the individualized planning they need.”
“What’s great about offering AMAs in a retirement plan is that it provides millions of Americans with access to these customized solutions. For the many plan participants who don’t have large enough savings accounts to attract a wealth manager, they can now get the same customized financial advice normally only offered to those with larger account balances. The number of people who could be positively impacted by this opportunity is very exciting,” says Toledano.
Toledano will be based out of Houston, where he lives with his wife and two children.
Lightyear Selects New Senior Adviser
Lightyear Capital LLC has appointed Marc West as a senior adviser to Lightyear Fund V LP and its parallel investment vehicles.
“We are delighted to have Marc on board as we explore opportunities for Fund V,” says Mark Vassallo, managing partner of Lightyear. “He brings valuable technology and leadership experience in financial services, which will benefit our diligence and value creation efforts.”
West recently served as chief information officer at Fiserv Inc. In this role, West oversaw information technology (IT) infrastructure and operations, corporate systems, enterprise architecture and technology governance, and he led the company’s focus on next-generation technology platforms, including an acquisition strategy from a technology perspective. His responsibilities covered mobile, digital and payments from core account processing to data services.
Prior to that, West served in other leadership roles at Fiserv, including as president of digital channels, where he drove strategy, product management and marketing for a range of digital banking solutions, and as senior vice president of banking and aggregation for electronic payments, where he oversaw the development and delivery of money movement products as well as account aggregation tools.
Before joining Fiserv in 2013, West was the president and CEO at Mamasource, an e-commerce platform focused on mothers, where he was responsible for business growth and strategic partnerships. He has also served as managing director of e-business at Barclays Global Investors and has held senior leadership positions at H&R Block and Electronic Arts.
West holds a bachelor’s degree in computer science from the University of Maryland and a master’s degree in human resources (HR) management from Golden Gate University.
NFP Acquires FBG
NFP has acquired Fallon Benefits Group Inc. (FBG), an Atlanta-based employee benefits brokerage and consulting firm. The transaction closed July 23.
FBG’s focus on employee benefits includes specialized expertise in health management, wellness consulting, human resources (HR) consulting, compensation consulting and executive coaching.
The FBG leadership team of Steve Fallon (founder and CEO), Jeff Layman, Katie Stone and Susie Simpson will remain fully engaged in the growth of the business and work closely with leaders across NFP to bring additional value to clients.
“We are very excited to welcome Steve and the entire FBG team to the NFP family,” says Ethan Foxman, president of NFP’s Atlantic region. “FBG will accelerate our growth in the Atlanta metro area and will complement our already strong presence in the Southeast market.”
“The entire Fallon team is thrilled to join NFP and be part of a community that shares our values,” says Fallon. “We’re proud of the relationships we’ve built with clients across industries and the value we provide to them. With access to NFP’s resources and expertise, we are better positioned to help these employers overcome challenges and improve outcomes in every area of their business.”
CAIS Appoints Business Development Director
CAIS has added Michelle Browning as its director of business development for the CAIS IQ learning platform.
Browning brings two decades of experience in financial services education to the role, having served in a variety of different roles ranging from adviser relations to sales leadership at Merrill Lynch, ATEL Capital Group, W. P. Carey Inc., AI Insight and, most recently Alternative Investment Exchange. Browning has also managed relationships across the entire wealth management ecosystem including advisers, broker/dealers (B/Ds), and custodians.
Browning says, “I share CAIS’s commitment to transform adviser education. With CAIS IQ, we have an unparalleled advantage to truly advance the wealth management industry with our state-of-the-art learning platform.”
With this new hire, CAIS IQ continues its commitment to empowering financial advisers to master alternative investments and better serve end clients. The platform combines machine learning and content curation from industry leaders to accelerate learning for financial advisers who access the platform via web and mobile applications. Most recently, CAIS IQ partnered with Buckingham Strategic Wealth to develop original content for advisers.
“CAIS’s strong adviser adoption rates and accelerated growth allow us to attract the top-tier talent required to build the leading fintech platform for financial advisers and asset managers,” says Matt Brown, founder and CEO of CAIS. “Michelle’s passion for financial services education, combined with her deep industry experience, makes her an outstanding choice to lead CAIS IQ’s business development efforts.”
Principal Announces Executive Promotions
Principal Financial Group has announced senior management promotions within its corporate finance and U.S. Insurance Solutions (USIS) businesses.
Joel Pitz has been named senior vice president and controller for Principal, effective November 15. In this new role, he’ll have leadership responsibilities for corporate accounting, global sourcing and financial reporting.
Pitz previously was vice president and chief financial officer (CFO) for Principal International and has held several other leadership positions during his 26 years at Principal, including the corporate role of assistant vice president and chief accounting officer. He will report to Deanna Strable, CFO for Principal, and succeeds Angie Sanders, who will retire after 32 years with Principal.
Nate Schelhaashas been named senior vice president, in charge of protection solutions for USIS, effective October 15. In his new role, Schelhaas will be responsible for the company’s life insurance and nonqualified deferred compensation (NQDC) lines of business, in addition to leading product development for the business owner segment.
He previously served as vice president and actuary in the individual life division of Principal, focusing on product development and strategy. Schelhaas has been with the company for 24 years holding various roles including CFO for the life insurance business. Schelhaas will report to Amy Friedrich, president of USIS, and succeeds Greg Linde, who will retire after nearly 30 years with Principal.
“Joel and Nate have built their careers with Principal, progressing to serve in increasingly important roles within the company,” says Dan Houston, chairman, president and CEO of Principal. “I am confident in their leadership, experience and strategic thinking to help serve our customers and guide our organization into the future.”
After Pitz transitions to his new role, John Egan, vice president and head of investor relations, will assume the role ofvice president and CFO for Principal International. Egan will report to Pat Halter, president of global asset management for Principal, and continue to lead investor relations until a successor has been named.
Aegon Appoints Chief Technology Officer
Aegon Asset Management has appointed Nicole Grootveld-Sandig as its new chief technology officer.
Reporting to Aegon’s global chief administration officer, Sander Maatman, Grootveld-Sandig will be responsible for defining and executing its enterprise architecture plans and strategic road maps, as well as overseeing its governance activities related to technology design, implementation and information security.
Grootveld-Sandig has more than 25 years of financial, operations and information technology (IT) experience and joins Aegon AM from MN NV, Vermogensbeheer, where she was director of investment management services for the Netherlands-based specialist pensions management company.
At MN, she was responsible for strategic steering of its shared service center, consisting of investment operations (including asset servicing, data management, reporting and performance measurement) and functional IT.
Prior to MN, Grootveld-Sandig was chief operating officer (COO) Netherlands at Cardano Risk Management, where she was responsible for its derivative servicing operations, functional and infrastructure IT, and its operational risk control framework.
Her previous roles have included several senior positions within the financial markets division of ABN Amro in The Netherlands, as executive director (markets and asset securitization operations) and global head of fixed income and treasury product control. She also worked at ABN Amro Bank Canada and started her financial career at Royal Bank of Canada.
Maatman says, “Nicole has a wealth of financial services experience with over 25 years of working in the sector, particularly in operations and IT, which will prove very valuable, as we continue to build our global asset management business.”
Mutual of Omaha Retirement Promotes Two
Mutual of Omaha Retirement Services recently announced two leadership promotions within the organization.
Julie McConahay has joined the Retirement Services leadership team and assumed the role of director of client operations. McConahay, who has more than 30 years of insurance industry experience, has been with Mutual of Omaha since 2008, serving in key leadership positions and facilitating many critical business transformation efforts. In her new role, McConahay is responsible for 401(k) operations, which includes business operations and relationship management areas. McConahay is based in Omaha, Nebraska.
John Schuele has assumed the role of manager of client relationships. Schuele has more than 20 years of experience in financial services and retirement plans. He has been with Mutual since 2013. In his new role, Schuele will oversee a team of relationship managers who work closely with clients and plan advisers to help educate employees about their employer-sponsored retirement plan and increase participation. He is based out of Kentucky.
“We’re excited about Julie and John and the leadership they will bring to our Mutual of Omaha Retirement Services team,” says Laura Huscroft, vice president of 401(k) for Mutual of Omaha Retirement Services. “Julie has played an instrumental role in many of our critical business transformation efforts and John has successfully managed key relationships with plan sponsors, advisers and TPAs [third-party administrators]. They are both influential leaders and I’m excited about what we’ll accomplish with their expertise.”
Principal Hires Senior Actuary for Retirement Business
Principal Financial Group announced that Sumit Kundu has joined the company’s retirement business to further help defined benefit (DB) plan sponsors manage their escalating pension risks.
Kundu takes the role of senior actuary and has been added to the pension consulting practice leadership team at Principal as the company continues to lead and innovate through its PrincipalTotal Retirement Solutions, including the patent-pending Principal Complete Pension Solution. In his new role, Kundu will manage and lead pension plan design; risk mitigation strategies, including funding strategies and pension risk management; de-risking strategies of pension plans; plan terminations; and bulk lump-sum implementation.
“This is a crucial time for many employers in managing their pension risk, and Sumit’s wealth of expertise and experience will be an asset to both existing and new clients,” says Joe McCarty, vice president, retirement and income solutions at Principal. “Principal continues to invest in the talent and technology needed to meet the evolving needs of defined benefit plan sponsors, and we’re pleased to have Sumit join in this work.”
Prior to joining Principal, Kundu was the DB and actuarial team leader at Empower (formerly MassMutual), and before that worked as a consultant and consulting actuary for 14 years at Willis Towers Watson. He brings to Principal a combined 20 years of experience as an investment analyst, pension actuary and innovator in areas including liability-driven investing (LDI), asset liability modeling (ALM) and pension risk transfer (PRT).
Kundu earned his master’s in actuarial science from Boston University and his master’s in statistics and a master’s in business administration from Calcutta University. He is a credentialed actuary with designations from the Society of Actuaries (ASA) and Joint Board of Enrollment of Actuaries (EA). He has also earned the right to use the Chartered Financial Analyst (CFA) designation.
