Data & Research August 17, 2016

One-Third of Millennials Don’t Expect Social Security to Be There for Them

And only 21% are working with a financial adviser
Reported by

While 80% of Millennials are confident that they will achieve their financial goals, 34% of them do not think the Social Security safety net will still be in existence by the time they retire, according to the 2016 Northwestern Mutual Planning & Progress Study.

Only 21% of Millennials have a financial adviser, yet 72% of those who do not are interested in receiving professional guidance, compared to just 57% of the general population.

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Among the different age groups, Millennials (ages 18 to 34) are least likely to anticipate more financial crises in the future (66% versus 76% for Gen X, those ages 35 to 49, and 80% of those 50 and older).

Additionally, 40% of Millennials think the economy will improve this year, compared to 33% of the general population and 25% of those 50 and older.

Fifty-eight percent of Millennials consider themselves highly disciplined or disciplined when it comes to planning out their financial futures. They are also more likely to recognize that the lack of planning can impede one’s retirement than other age groups (40% versus 28% of both Gen X and those 50 and older).

While they are optimistic about the long-term, they are worried about the present; one in 20 Millennials worry about money on an hourly basis. Their top-cited sources of anxiety include day-to-day expenses (50%), unexpected expenses (45%) and student loan debt (34%).

Sixty percent of Millennials who are suffering from financial anxiety say it is negatively impacting their careers, compared to 41% of the general population. Asked how financial security could change their lives, 39% of Millennials said it would permit them to pursue their dreams or their passions, compared to 29% of the general population.

Among those Millennials experiencing financial anxiety, 80% said that eliminating financial stress would enable them to improve their careers, compared to 66% of the general population.

“It is encouraging to see that Millennials are striking a balance between being realistic about the implications of extended longevity and remaining positive about building a solid financial future,” says Rebekah Barsch, vice president of planning for Northwestern Mutual.

Northwestern Mutual’s full study can be downloaded here.

Compliance August 17, 2016

New Fee Suit Filed Against Columbia University

Another law firm has joined in the filing of lawsuits against major universities' 403(b) plan designs.
Reported by

An employee of Columbia University has filed a lawsuit on behalf of participants and beneficiaries in the Retirement Plan for Officers of Columbia University and the Columbia University Voluntary Retirement Savings Plan for breach of fiduciary duties under the Employee Retirement Income Security Act (ERISA). 

In a statement to PLANADVISER, the university said, “Columbia is proud of the retirement benefits offered to its faculty and staff and takes its responsibility as a fiduciary seriously. Columbia does not comment on pending litigation.”

The claims in the lawsuit are similar to lawsuits filed against eight other large universities in the past couple of weeks. However, this lawsuit was filed by a different law firm. This case involves more than 27,000 participants and former participants of the plans. 

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According to the complaint, billion-dollar defined contribution plans, like Columbia’s plans, have tremendous bargaining power to demand low-cost administrative and investment management services. The case alleges that instead of leveraging the bargaining power of both plans, Columbia University caused the plans to pay unreasonable and greatly excessive fees for recordkeeping, administrative, and investment services. In addition, it claims that instead of using its sophistication to identify and select high-quality investments that benefited participants and beneficiaries, Columbia University selected and retained expensive and poor-performing investment options that consistently and historically underperformed their benchmarks and similar funds. 

“By acting contrary to their fiduciary duty, Columbia University caused both plans, and hence participants, to suffer hundreds of millions of dollars of staggering losses to retirement savings,” the complaint states. 

The complaint specifically mentions the TIAA-CREF Stock Account R3, which represented nearly $1 billion of the plans’ assets, saying it ranked in the bottom quartile for the past three, five, and 10 years for like investments, according to Morningstar. In addition, the complaint says Columbia University loaded the plans with many retail share class options that were more expensive than the institutional share class options in the same mutual funds that were otherwise available for Columbia University to include in the plans. 

The complaint also calls out annuity products offered by the plan which have restrictions for when participants can liquidate assets in the products and charge a surrender fee if they liquidate assets before the restriction period.

According to the complaint, Columbia University used two recordkeepers for its plans, TIAA and Vanguard, which caused participants in the plans to pay duplicative, excessive, and unreasonable fees for plan recordkeeping and administrative services.

The lawsuit seeks damages for financial losses to plan beneficiaries resulting from the plans’ underperforming investments and excessive fees; reform to Columbia’s retirement plans that would remove imprudent investments and ensure only reasonable recordkeeping expenses; and the removal of the University’s fiduciaries who have violated their duties to plans’ beneficiaries under ERISA.

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