Compliance July 31, 2019

SEI Agrees to Pay $6.8 Million to Settle Self-Dealing Suit

The defendants also agree to retain the services of an unaffiliated investment consultant to provide an evaluation of the design of the plan’s investment lineup and to review the plan’s investment policy statement, among other things.

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SEI Investments Company has entered into a settlement agreement to resolve claims in an Employee Retirement Income Security Act (ERISA) self-dealing lawsuit.

According to the Settlement Agreement, the defendants will pay $6.8 million to a Qualified Settlement Fund.

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In addition, SEI agrees that the following procedures shall apply to the management of its 401(k) plan on a prospective basis for a period of no less than three years beginning no later than the settlement effective date:

  • Defendants shall retain the services of an unaffiliated investment consultant to provide an evaluation of the design of the plan’s investment lineup and to review the plan’s investment policy statement;
  • SEI shall continue to pay all recordkeeping fees associated with the plan that it is currently paying and that would otherwise be payable from plan assets; and
  • SEI shall ensure that all of the plan’s investment committee members will participate in a training session on ERISA’s fiduciary duties.

The lawsuit claims the defendants offer “only designated investment options that generate fees for SEI and its affiliates and treat the plan as a captive customer of SEI in order to prop up SEI-affiliated investment products and advance SEI’s business objectives.”

The complaint further states that SEI investment products “are not competitive in the marketplace.”

“Participants would have been better served if defendants had investigated and retained non-proprietary alternatives,” the complaint states.

The Settlement Agreement needs to be approved by the court.
Client Service July 31, 2019

Participants Not Up to Speed on Distribution Options

“There can be huge consequences from making the wrong decision, ranging from taxes and penalties to higher fees and risky or poor performing investments," says Ric Edelman, with Edelman Financial Engines.

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Many retirement plan participants are unaware of the various distribution options available to them when they leave a job, Edelman Financial Engines learned in a survey.

Forty-two percent of those between the ages of 35 and 65 who left a job where they had money in a 401(k) plan were unaware that they could have left the money in the plan. Twenty-eight percent didn’t know that some retirement distribution choices trigger tax liabilities and penalties, and 51% didn’t know that it is possible to move money from an individual retirement account (IRA) to their 401(k).

Sixty-nine percent of participants have not consulted with a retirement adviser about their various distribution options. Among those who took a distribution before retiring, 26% did so without any help from an adviser or without consulting any resource.

“There is a lot of confusion and a general lack of awareness among employees about their 401(k) distribution options when they retire or change jobs,” says Ric Edelman, co-founder and chairman of financial education and client experience at Edelman Financial Engines. “There can be huge consequences from making the wrong decision, ranging from taxes and penalties to higher fees and risky or poor performing investments.”

Edelman’s findings are based on a survey of 1,071 individuals between the ages of 25 and 65 conducted in February and March using the Qualtrics Insight Platform with a panel sourced from Lucid Marketplace.

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