Compliance September 19, 2017

Participant in Small Plan Files Excessive Fee Suit Against Voya

The lawsuit alleges that Voya charged the plan “an unreasonable asset-based fee of between 0.67% and 1.86% of the net assets invested in the various mutual funds offered as investment options.”
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A participant in the Cornerstone Pediatric Profit Sharing Plan has filed suit against Voya Financial and its subsidiary Voya Retirement Insurance and Annuity Company for violating the Employee Retirement Income Security Act (ERISA) by the way it charged fees.

According to the complaint, the participant is bringing the lawsuit on behalf of the Cornerstone plan and all other similarly situated plans seeking the return of undisclosed and unreasonable asset-based fees charged by Voya for recordkeeping and administrative services.

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In a statement, Voya Financial said, “Voya denies the plaintiff’s claims and we plan to vigorously defend this matter.”

The complaint cites a survey by NEPC, a firm that advises on health care institutions’ defined contribution (DC) plan assets, which found the median recordkeeping cost of 113 plans was $64 per participant. It alleges that as a result of Voya’s asset-based fees, in 2014 the plan paid $30,790 for recordkeeping services for 21 participants, translating to $1,466 per participant, and in 2015, the plan paid $34,568 for 19 participants, translating to $1,819 per participant. “VOYA’s fees are 36 times more than the reasonable amount of compensation that should have been charged to the Cornerstone Plan,” the complaint says.

The lawsuit alleges that Voya charged the Cornerstone plan “an unreasonable asset-based fee of between 0.67% and 1.86% of the net assets invested in the various mutual funds offered as investment options.” It goes on to say Voya concealed the true amount of its fees in disclosures to participants by adding its asset-based fees to the operating costs of the mutual funds.

The plaintiff extrapolates this to the $175,780,000 in retirement plan assets Voya had under management as of the end of June this year, and says based on the fees charged to the Cornerstone plan, Voya potentially earns more than $1 billion a year “in excessive compensation at the expense of the individual plans and their participants.”

The complaint also states that Cornerstone plan fiduciaries engaged in a prohibited transaction by entering into the Voya contract. However, it does not name any person or committee of the plan as defendants.

Products September 19, 2017

FutureFuel.io Enhances Student Loan Refinancing Benefit

The firm is taking a tech-first and mobile-ready approach toward helping employers roll out student loan refinancing as a benefit option for employees.

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FutureFuel.io, a firm helping companies offer student loan repayment and refinancing as an employee benefit, has announced new partnerships and capabilities designed to help employers overcome some of the biggest challenges in the student-loan refinancing space.

Employers can onboard to FutreFuel.io via a new dashboard which also allows them to keep real-time track of when employees make loan payments, when FutureFuel.io pulls payments, and when these transactions are processed to the employees’ student loans. The system also allows firms to ease the flow of any employer matches they decide to make toward their employees’ outstanding loans.

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Laurel Taylor, founder and CEO of FutureFuel.io, tells PLANADVISER that these capabilities allow employers to modernize an outdated system of student loan servicing.

“Student debt repayment as a benefit is incredibly difficult to operate because, on the back end, the people getting money don’t provide a lot of transparency,” explains Taylor. “Loan servicers and lenders are fairly antiquated in their abilities to electronically take in money, post money and create visibility around the fact that payments were received and deposited correctly.”

But through a collaboration with financial technology (fintech) firm Quovo, FutureFuel.io provides employees with access to real-time sign-up, account linking, account aggregation, and account verification capabilities, as well as a new mobile experience. Taylor says the account verification feature is extremely important because it can detect, in real-time, any onboarding or payment posting errors that can be made – something she says is all too common.

If a payment is made to a loan using the wrong data such as the wrong account number, sometimes nobody knows that a payment was not made for as long as 120 days, she notes. With Quovo, Taylor says these errors can be detected and fixed automatically.

The firm also partnered with fintech company Credible, which gives employees access to a refinancing marketplace where companies can compete to offer users better rates and loan conditions for which they may qualify.

“We can serve up to six refinancing offers to a user,” says Taylor. “On average, we save users about $19,000 through that partnership with Credible. We’re taking an auction-like approach so users know that if they’d like to refinance their loans, they are getting the best deals the market has to offer.”

She adds, “There is a real simplicity in consolidating loans but the real alleviant is saving money; $19,000 is a lot of money and if you couple that with contributions from your employer that can be a value of $30,000 or more.”

Through Credible, employees can also discuss the details of each refinancing option with professionals via phone or online instant messaging. “Credible’s instant messaging and engagement center can help users understand the differences, as well as the pros and cons of each offer,” explains Taylor.

But beyond helping employees pay off their student loans, FutureFuel.io says these benefits can also help employers attract and retain the best talent by offering to help employees ease what could be one of their biggest financial burdens. These benefits can be implemented company-wide or to specific worker populations that may find it most appealing.

In fact, several studies indicate that a significant amount of employees with student loans have trouble saving for retirement and many would even choose student loan assistance over a 401(k) as a benefit. And despite the common narrative that student loan debt is generally a Millennial issue, studies show student debt is a major burden on Generation X and student loans haunt Baby Boomers in retirement.

A student loan refinancing option integrated with a solid financial wellness program may help employees across generations manage their long-term finances and save for a comfortable retirement.

“By integrating student debt repayment and refinancing as a standard part of health and wellness benefits packages, companies alleviate their employees’ number one source of financial stress: student debt,” says Taylor. “From a systems-thinking perspective, this relief can help close the wealth gap by inspiring employee participation in wealth accumulating vehicles, like 401(k)s, just like their debt-free peers. We have to get these users to get back into the game of wealth creation, rather than sitting on the sidelines. When this happens, employee love and loyalty follows.”

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