Compliance January 14, 2022

Lawsuit Alleges Choice of Target-Risk Funds Caused Losses to Participants

Milliman has been accused of failing to remove poorly performing investments, subadvised by its affiliate, from its 401(k) plan.

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A participant in Milliman Inc.’s 401(k) plan has filed an Employee Retirement Income Security Act (ERISA) fiduciary breach lawsuit against the company, its board of directors and members of its 401(k) investment and administrative committees.

The proposed class action lawsuit accuses the defendants of failing to prudently monitor the plan’s investments and failing to remove three of the plan’s “poorly performing investment options.” According to the complaint, when the investment committee decided to add a suite of target-risk funds to the plan’s investment menu in 2013, the funds had only been launched two months prior, had no track record and were untested.

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The complaint notes that Milliman’s investment adviser affiliate, Milliman Financial Risk Management LLC, is the subadviser to the Unified Trust Wealth Preservation Strategy Target Growth Fund, Unified Trust Wealth Preservation Strategy Target Moderate Fund and Unified Trust Wealth Preservation Strategy Target Conservative Fund. It says that by the end of 2013, Milliman’s plan was the sole investor in the conservative and moderate funds and represented about 97% of assets in the aggressive fund.

“During the nine years since their introduction to the plan in 2013, the Unified Funds have significantly underperformed meaningful benchmarks, which include both benchmark indexes (including the index preferred by the Unified Funds’ investment manager itself) and comparable target-risk funds,” the complaint states. “But mere underperformance is not the whole story—the depth and breadth of the underperformance is as jarring as it is incomprehensible. Since January 1, 2013, the aggressive fund’s investment return underperformed a key investment benchmark by a cumulative total of over 62%; and it ranks in the bottom 90th percentile among the funds in its peer universe, according to the highly regarded financial services and research firm, Morningstar Inc.”

According to the lawsuit, despite the underperformance, “and a marketplace teeming with hundreds of better performing investment options,” the defendants did not remove any of the Unified Funds from the plan.

The lawsuit claims that the defendants’ failure to act has resulted in a nearly one-quarter-billion-dollar loss to participant accounts. The plaintiff is asking that the defendants be ordered to make good to the plan all losses resulting from the breaches of fiduciary duties alleged in the lawsuit.

Milliman told PLANADVISER it does not comment on ongoing litigation.
Data & Research January 13, 2022

Advisers Have Window to Help Women Strengthen Retirement Readiness

A survey shows that, because of the COVID-19 pandemic, many women feel they are on the wrong track for retirement.

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The COVID-19 pandemic has rocked women’s retirement planning confidence, according to a Nationwide Retirement Institute survey.

The survey found that nearly one in five women (18%) report feeling like they’re on the wrong track for retirement, and the same percentage expects to delay the retirement date they originally planned because of the pandemic.

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The economic impacts of the pandemic from lost income are widespread, but women were more likely to be laid off or furloughed during the COVID-19 crisis. Gender pay disparities, time out of the workforce and disproportionate caregiving responsibilities for elders and children were longstanding challenges to women’s retirement preparedness prior to the onset of the pandemic.

“Working through the pandemic hasn’t been easy for anyone,” says Amelia Dunlap, vice president, retirement solutions marketing at Nationwide. “This is particularly true for women, who are balancing child or elder care challenges and career burnout. This only adds to the stress that women are facing, feeling off course from their overall financial and retirement goals.”

The survey found that fewer women than men have achieved their financial goals because of the pandemic. Results show that 50% of women versus 58% of men are contributing to a 401(k) or individual retirement account (IRA); 47% of women are building an emergency fund, compared with 59% of men; and 39% of women are increasing retirement contributions versus 51% of men.   

With the challenges for women front and center, plan sponsors are taking notice, with 70% saying female participants are more likely to have been financially impacted by the pandemic than men.

Many of the survey respondents expressed experiencing negative emotions when thinking about retirement planning, including worry (34%) and frustration (15%).

Women are also more interested (48%) in exploring in-plan guaranteed lifetime income investment options than any other option offered.

To help fill some of the gaps female participants might face in saving for retirement, in July, U.S. Senator Patty Murray, D-Washington, chair of the Senate Health, Education, Labor and Pensions (HELP) Committee, and Representative Lauren Underwood, D-Illinois, reintroduced the Women’s Retirement Protection Act of 2021 (WRPA).

And as female participants act to bolster their retirement readiness, plan sponsors are presented with an opportunity to educate participants on available in-plan options, Dunlap adds.

“As employees are setting goals for the new year, plan sponsors have an opportunity to explore solutions that help their female participants—and all participants—retire on time with confidence, such as guaranteed lifetime income investment options,” says Dunlap. “However, in addition to considering their investment option lineup, our survey reveals that plan sponsors must also include educational offerings to ensure participants have the tools they need to address lack of knowledge and confidence.”

The Nationwide survey is available here.

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