Deals & People May 25, 2011

AUL Appoints Northern California Sales Leader

American United Life Insurance Company (AUL), a OneAmerica company, hired Chris Blair to be regional sales director for retirement services for Northern California and the Pacific Northwest.
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Blair will lead sales, marketing and service functions throughout Northern California, Nevada, Oregon, Washington and Alaska. He will be based in AUL’s San Francisco office. 

Most recently, Blair led Principal Retirement & Investment Services’ retirement sales practice, responsible for business development in Northern California. He also served as Principal’s national director of consultant relations. Before his time at Principal, he led retirement plan sales for Union Bank of California, and held sales management positions with Charles Schwab and New York Life.  

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Blair has a Bachelor of Science degree in business administration from the University of New Hampshire and a Master of Business Administration from Clark University.
Compliance May 25, 2011

John Hancock Excessive Fee Suit Dismissed

The U.S. District Court for the District of New Jersey has dismissed a suit alleging John Hancock charged 401(k) plans excessive fees for investment services.
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U.S. District Judge William J. Martini agreed with John Hancock’s argument that plaintiffs’ Employee Retirement Income Security Act (ERISA) claims are derivative, meaning they belong to the plans, so the plaintiffs must first make demand upon the trustees of the plan to file suit. The court found no such demand was made, nor are the trustees listed as defendants in the action.   

Martini pointed out that the 2nd U.S. Circuit Court of Appeals has held that in relation to an ERISA § 502(g) claim, which is akin to the Section 502(a) claims in the current suit, “[a] participant in a fund governed by ERISA can sue derivatively on behalf of the fund only if the plaintiff first establishes that the trustees breached their fiduciary duty.” According to Martini, this would seem to preclude suit here – because plaintiffs’ complaint makes no allegations against the plans’ trustees.   

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Also, the appellate court was applying the rule mandating demand on the trustees, except when such demand is futile, Martini said, adding that plaintiffs made no allegations against the trustees or that demand is otherwise futile. 

John Hancock Life Insurance Company operates 401(k) plans through group annuity contracts (GACs), which it establishes by selecting a menu of investment options or funds, the opinion said. John Hancock provides the menu of options to the employer who then selects a subset of the funds. Participants in a portfolio offered by John Hancock direct their monies into their own separate sub-accounts, where they are allocated into particular funds within the portfolio.   

John Hancock charges plan sponsors a contract level fee and charges plan participants fees for their investment in the sub-accounts.  

A participant invested in two John Hancock subaccounts within her employer-sponsored 401(k) plan alleged that John Hancock’s sales and service is excessive and in violation of ERISA; that the firm allowed payment of 12b-1 fees in violation of ERISA; that John Hancock allowed its investment management division to charge plan participants an advisory fee in violation of ERISA; and that the firm wrongfully received revenue sharing payments from participants’ investments into sub-accounts in violation of ERISA.  

The opinion is here. 

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