Financial News

Voya Offers Financial Planning for Special Needs Participants and Caregivers - Thu, 03/22/2018 - 17:07

Voya Financial, Inc.’s retirement business has enhanced Voya’s myOrangeMoney online, interactive educational participant experience with new financial planning features to support people with special needs and their caregivers.

As the latest addition to the company’s suite of digital, educational retirement-planning tools and resources, plan participants who are part of the special needs community now have access to information that can help address the unique planning circumstances they may face when preparing for the future.

All retirement plan participants will have access to the new functionality through Voya’s award-winning myOrangeMoney website. Based on a few questions that are presented to them, individuals are prompted to consider their eligibility for certain government benefits, such as Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI). In addition to these specific government programs, participants can also learn more about a number of other important topics for their planning needs such as, broader special needs planning guidance; specialized legal and financial resources; additional government benefits including Medicare and Medicaid; as well as background on special needs trusts and the important role they can play within one’s financial strategy.

To help bridge the gap of where people can go for help, educational resources are made available through the Voya Cares resource center, which provides further information and support for those with a disability or their caregivers.

“As part of our commitment to being the retirement industry’s leading resource for special needs planning, integration into our participant experience online is critical,” added Christine Lange, senior vice president, Retirement Digital Solutions for Voya Financial. “Caring for a family member when you are no longer working is something that most people do not often consider. By providing access to key information and resources, we can help educate participants to make better planning decisions and choices.”

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Categories: Financial News

Aon Hewitt Defeats ERISA Claims Regarding Financial Engines Partnership - Thu, 03/22/2018 - 16:56

The United States District Court for the Northern District of Illinois, Eastern Division, has ruled for the defendants in an Employee Retirement Income Security Act (ERISA) lawsuit filed by participants in the Caterpillar 401(k) plan against Aon Hewitt.

A number of Aon Hewitt companies were named as defendants in the lawsuit, including Aon Hewitt Financial Advisors, Hewitt Financial Services and Hewitt Associates. Another provider, Financial Engines, was also named in the text of the suit but was not actually challenged as a defendant.

The central claim in the proposed class action was that plaintiffs were forced to overpay significantly for advisory services provided by Financial Engines, with the excess payments essentially amounting to kickbacks returned to Hewitt defendants. As the text of the lawsuit laid out, for periods prior to 2014, Financial Engines provided services directly to plaintiffs and other Caterpillar plan participants and was paid directly from participants’ accounts. But the fee for those services was significantly higher than it should have been because the agreement between defendants and Financial Engines required Financial Engines to kick back to defendant Hewitt a significant percentage of the fees charged by Financial Engines, plaintiffs claimed, even though Hewitt and its sister company co-defendants did not perform any investment advisory or other material services in exchange for the payment they received.

Responding to these allegations, the defendants denied wrongdoing and argued that the plaintiffs failed to state any legally cognizable claims—and that the complaint should be summarily dismissed. Defendants argued they are not a fiduciary of the plan for the purposes in question here, and that they did not act as a fiduciary with respect to Hewitt’s receipt of fees from Financial Engines or the firms’ retention of Financial Engines as subadviser.

Beyond this, defendants argued that plaintiffs’ prohibited transaction and self-dealing claims should collectively fail because they “do not allege their essential elements.” Additionally, defendants asserted plaintiffs’ non-fiduciary liability claims should be dismissed because the plaintiffs “fail to allege a predicate prohibited transaction.”

The text of the decision includes detailed argumentation on all of these points, with the court broadly siding with defendants throughout.

For example, the decision states clearly that “nowhere in her complaint does [the lead plaintiff] allege that Hewitt is identified as a fiduciary in any plan documents, and [the plaintiff’s] conclusory allegations that Hewitt controlled Caterpillar’s decision to engage Financial Engines are contradicted by the Hewitt/Financial Engines Master Service Agreement.”

The decision goes on: “The language of the Hewitt/Financial Engines Master Service Agreement makes it clear that Caterpillar, and not Hewitt, retained the sole and final authority to decide whether to hire Financial Engines. [Plaintiff’s] allegations that (1) Hewitt gave Caterpillar no choice but to accept Financial Engines if Caterpillar wished to provide investment advisory services, and that (2) Hewitt hired Financial Engines on the Plan’s behalf are conclusory and not plausible in light of the parties’ agreement. In light of the language of the Hewitt/Financial Engines Master Service Agreement, and nothing to the contrary in the record except Scott’s bald allegations of ‘control,’ the court concludes Caterpillar had sole authority to select and hire Financial Engines, and it is not plausible on this record that Hewitt had any final authority or control over the selection and hiring of Financial Engines.”

As the court points out, similar claims have recently been rejected by other district courts.

“Even construing the facts in her favor, as the court must do at the motion to dismiss stage, nowhere in her complaint does [the lead plaintiff] allege any facts to support a claim that Hewitt provided individualized investment advice to the plan on a regular basis pursuant to a mutual agreement that its advice would serve as a primary basis for the plan’s investment decisions,” the decision further explains. “There is nothing to indicate, other than bare and conclusory allegations, that Hewitt exercised discretionary authority over the plan or its assets, and those bare and conclusory allegations are not enough to survive a motion to dismiss.”

Importantly, the dismissal was handed down “without prejudice,” and the plaintiff may, if she chooses to do so, file an amended complaint consistent with the court’s opinion and order. There is a 30-day deadline assigned for this purpose.

Another important caveat pointed out in the dismissal decision is that “it is not disputed that Aon Hewitt Financial Advisors [AFA] is a fiduciary to the plan for the purpose of providing investment advice to the plan participants, but that does not make AFA a fiduciary for all purposes.” This is important because the plaintiff here alleged that AFA breached its fiduciary duties by receiving an excessive fee from Caterpillar. “However, it is well-established that a service provider who negotiates its own compensation with a plan fiduciary at arm’s length is not a fiduciary for that purpose,” the decision concludes. “Courts have held that a fiduciary’s negotiation of its own compensation is a non-fiduciary act as a matter of law.”

The full text of the decision includes significantly more detail arguments as to why the plaintiff has broadly failed to state an actionable claim and is available in full here.

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Categories: Financial News

Study Suggests Millennials Are Better Health Care Consumers - Thu, 03/22/2018 - 16:46

New research by the Employee Benefit Research Institute (EBRI) finds material differences between how Millennials interact with their health care providers and how other generations do so.

Analysis of the EBRI/Greenwald & Associates Consumer Engagement in Health Care Survey (CEHCS) reveals how Millennials—who now outnumbers Baby Boomers—are more comfortable with non-traditional engagement with their health care providers, and are more likely to apply shopping habits commonly found in the online retail realm to their health care decisions.

Millennials are more likely than other generations to have researched health care options, such as checking the quality or rating of a doctor or hospital (51% Millennial vs. 34% Gen X and 31% Baby Boomers); using an online health cost tracking tool (28% Millennial vs. 17% Gen X and 10% Baby Boomers); or otherwise finding health cost information (72% Millennial vs. 65% Gen X and 64% Baby Boomers).  They are also more likely to participate in wellness programs. For example, Millennials are more than twice as likely than Baby Boomers to participate in counseling on stress management, mindfulness classes, and resiliency training (33% Millennial vs. 21% Gen X and 15% Baby Boomers).

Millennials are also leading the way in using innovative strategies employers are implementing to manage health coverage costs. They are more than twice as likely as Baby Boomers to use a walk-in clinic. Thirty percent of Millennials have used a walk-in clinic, compared to 14% of Baby Boomers and 18% of Gen Xers.  Millennials are also more than twice as likely to be interested in telemedicine than Baby Boomers. Forty percent of Millennials are interested in telemedicine compared with 19% of Baby Boomers and 27% of Gen Xers.

“Interestingly, Millennials’ health care consumption habits correspond to being significantly more satisfied with their health plan choices,” notes Paul Fronstin, Director of the Health Research and Education Program at EBRI. “This perhaps reflects their comfort in researching consumer decisions online, and applying the same consumer habits they use on Amazon or other retail online cites to the health care arena.”

The full report is published in the March 5 Issue Brief, and is available online here. A related EBRI Fast Fact is located here.

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Categories: Financial News

Investment Products and Services Launches - Thu, 03/22/2018 - 15:51

AlphaCore Capital has announced the launch of factorE—a wealthtech tool built for intelligent investing. Powered by machine learning, factorE uncovers the risks and exposures of multi-asset portfolios through visual simulations on a single interface. AlphaCore designed factorE to help advisers, portfolio managers and analysts better understand the factors impacting today’s diverse portfolios.


“Our team at AlphaCore searched for a solution to effectively manage complex portfolios that may hold a combination of mutual funds, ETFs, stocks, commodities, and alternative investments,” says Dick Pfister, CEO and founder of AlphaCore. “When we couldn’t find one, we partnered with a team of developers who have worked with Qualcomm for decades to create a new proprietary wealth analytics tool.”


The factorE tool allows advisers to build and analyze portfolios with easy to digest visuals that illustrate the risk factors of a portfolio and expose risks that previously may have been hidden.


Understanding risk factors is especially important for the financial adviser seeking to incorporate alternative investments. “The market volatility we’ve seen so far this year combined with the potential for a continued rise in interest rates highlights the importance of diversification,” says Jonathan Belanger, director of Research at AlphaCore and architect of factorE.” factorE helps to evaluate factor exposures and can empower users to create an effective allocation strategy for achieving long-term portfolio objectives.”


factorE allows users to look at a variety of risk factors including equity, duration, momentum, value, and credit, along with alternative risk factors like trend following, illiquidity, and hedge fund crowding. This new tool augments more traditional returns-based analysis with machine learning capabilities, enabling users to handle traditional strategies alongside alternative strategies such as long/short equity, relative value, event driven, managed futures and option-writing.


Franklin Adds to Fixed Income Group 


Franklin Resources, Inc., which operates as Franklin Templeton Investments, announced the acquisition of Random Forest Capital, LLC (Random Forest), an investment firm with expertise in data science and non-bank marketplace lending. Following the acquisition, the Random Forest team will join the Franklin Templeton Fixed Income Group investment team. Terms of the transaction were not disclosed.


Jenny Johnson, president and COO of Franklin Templeton Investments, says, “We continue to make strategic investments and acquisitions in emerging investment-related technologies to augment and support Franklin Templeton’s global offerings. The Random Forest team will complement our existing fundamental fixed income research with their expertise in private lending and bring the capability to support the firm’s broader information technology and data science initiatives.”


Random Forest approaches investment management from the perspective of data science, in which machine learning and statistical algorithms are applied to solve for expected gains in financial investments using complex models. They have built cloud infrastructure that enables them to take massive amounts of unstructured data to not only gain key insights, but also to find new predictive power in the data.

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Categories: Financial News

Matchmaker for 3(38) Fiduciary Services Talks Market Trends - Thu, 03/22/2018 - 15:47

Phil Edwards is principal of Curcio Webb, a unique firm that helps both defined contribution (DC) and defined benefit (DB) plan sponsors identify the most appropriate service providers for 3(38) fiduciary investment management.

As PLANSPONSOR has previously reported, Edwards says the marketplace for 3(38) fiduciary investment management services is expanding for a variety of reasons—and it will very likely continue to do so as complex new market pressures emerge.

“We have been serving in this role of 3(38) matchmaker for about 10 years and over the last three years alone have completed about 30 of these projects, involving about 45 providers,” Edwards explains. “Our clients range from plan sponsors with $100 million to $8 billion in assets across defined contribution, defined benefit and endowment/foundations.”

Use of Curcio Webb 3(38) provider search support has moved up market over time, Edwards adds. Initially the firm was serving plans in the $100 million to $300 million range pretty exclusively.

“Today the demand for 3(38) search support and monitoring has moved up market into the range of plans with billions of dollars in assets,” he notes. “The big emphasis from many of the smaller plan sponsors is pursuing cost savings. These clients have an understanding that working with an outsourced chief investment officer [OCIO], as we tend to describe the 3(38) relationship, can help them purchase investments with far greater economies of scale.”

Over time the average client has climbed up to probably $500 million, and recently the firm has worked with clients with assets north of $8 billion.

“I mention this less to boast about our success and more to highlight that larger and larger plan sponsors are resonating with the idea of getting 3(38) support,” Edwards says. “As you move up market the opportunity for cost savings is not as big a deal, because these sponsors can achieve pretty good leverage on their own to negotiate better pricing. So why are they pursuing 3(38) support? A lot of it is a resource and staffing issue on the part of the plan sponsor.”

Even though they might have the legacy of having the pension plan and/or a large DC plan in place, as the organization changes and personnel move out of the firm, there can be an emerging sense that expertise is being lost and that more support is needed. And as the competition and quality of the 3(38) marketplace has improved, even the largest plan sponsors see it as increasingly attractive and reasonable to pursue this course.

“We very commonly hear from the larger clients that managing the pension plan is just taking too much time and too much expertise—and it just one day starts to make a lot of sense to look for that outside support,” Edwards notes. “And the other trend as you move up market is that you find that the circumstances and goals facing each plan, especially on the DB side but also with DC plans to some extent, really start to become quite different from sponsor to sponsor. They can find it hard to maintain a strong direction and orientation for their plans.”

Looking across a pool of $100 million plan sponsors, the goals and challenges are often more homogeneous, Edwards explains, because the plans are still just getting started and they are likely focused on implementing all the best practices and features that one commonly hears about in the industry trade publications. But as the plans mature and become more sophisticated, the conditions will become less homogeneous, and the nature of the support the plan needs can really change.

“Against this background we have a crop of about 45 or 50 3(38) service providers that we have gotten to know quite well through our request for information and monitoring processes,” explains Uma Kolluri, a lead consultant with the Pennington, New Jersey-based firm. “It is important to highlight that these firms provide very different ranges and styles of services. Some are very high touch or very low touch and they can really bring different services and solutions to bear that can really benefit plan sponsors in quite different situations.”

This is where the real leg work comes in from firms like Curcio Webb: “We work to get to know the plan sponsor and its needs and goals, and then we look across our book of providers that we know, and we work together to reach a recommendation,” Kollure notes. For example there are some providers out there who might specialize in helping an underfunded pension plan at an employer with high cash flow more aggressively purse full funding through tactical risk-taking in the markets, whereas another provider that emphasizes liability-driven investing would be a better fit for a sponsor that has only a slight deficit and wants to ensure that they do not slide backwards on the funded status.

“We have done cases where we have helped plan sponsors specifically find a provider that is good at establishing pension plan hibernation, and others where we have connected providers and sponsors that are interested in moving down the road towards pension risk transfer,” Edwards observes. “I would point out that in many of the searches, it is just as much about the plan sponsor gaining back-office administrative support as it is about finding them new expertise in investment management. There is a lot that we can help plan sponsors do.”

Importantly, each new search starts with a formal kick-off meeting.

“The data that we collect in advance of that meeting is certainly informative, but it is also crucial to have that early meeting in person so that we can get to know the personality and history of the plan sponsor,” Kollure says. “As you know, in the retirement plan services field, yes it is about technical capabilities and the optimal alignment of resources—but successful projects are also very much about aligning the right philosophies and personalities. These cultural factors matter quite a bit when ultimately selecting and working with a 3(38) provider.”

The firm will do this first meeting with the plan sponsor and then go back and run its analysis to come up with a short list of between five and ten providers that might be a good fit. The firm strives to present a variety of providers and approaches that could fit the plan sponsor’s needs.

“We have come to see that it is not really helpful to present the plan sponsor with five or ten different flavors of vanilla, so to speak, and ask them to pick one,” Edwards says. “It’s the same idea as trying to present plan participants with a more rational and simplified choice architecture. Plan sponsors really value seeing the different approaches and comparing what the value of each might be.”

The final short list will generally contain some very large global firms, which take one approach to the outsourced chief investment officer business, and then some mid-sized regional providers with their own strengths—and then finally smaller independent firms that purposefully focus on very specific services or on serving a limited number of clients. All of these approaches have their relative merits, and it’s really up to the plan sponsor to decide what will be the best fit, based on both technical capabilities and culture. Beyond these basic factors, there are different service models that each provider can bring to the sponsor.

“In some service models you have the hub-and-spoke approach, for example, where a centralized portfolio management team is on one side doing its work and the sponsor is served by a distinct client support team,” Edwards concludes. “Other providers have a service model where the portfolio manager is very much directly involved in the client relationship. And of course you have very different investment philosophies out there, with some firms being more strategic and others more tactical. They all believe in diversification, but they all define and implement diversification in different ways. There are different definitions of liability driven investing and different philosophies about what it means to de-risk and how you should go about doing that. So it’s a very dynamic and active and evolving marketplace.”

More information about Curcio Webb and its services is available here.

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Categories: Financial News

Hueler Adds to Income Solutions Platform - Thu, 03/22/2018 - 14:29

Hueler Companies has expanded its Income Solutions platform to include a new offering.

The additional service is designed to meet the needs of plan sponsors whose defined contribution (DC) plans include a qualified plan distributed annuity (QPDA) as a normal form of distribution. Now, employers who have DC plans with an annuity as a normal form of distribution, oftentimes referred to as a qualified joint and survivor annuity (QJSA) option, will be able to facilitate qualified annuity quotes and purchasing for participants covered under the plan.

“We are excited to deliver a long overdue solution to the many plan sponsors seeking a prudent process for meeting their fiduciary duties related to a QPDA option. This new QPDA program, offered in conjunction with the Income Solutions rollover program, creates a comprehensive lifetime income platform for meeting the needs of both in plan and out of plan distribution options,” says Kelli Hueler, founder and CEO of Hueler Income Solutions, LLC.

Hueler’s new offering embodies the same prudent fundamentals that its Income Solutions lifetime income platform offers. Plan sponsors now have access to a universe of high quality insurers offering annuity quotes at a low cost through comparable competition with the goal of producing better outcomes for participants. The program is designed to provide participants with a simple, streamlined process to request and review quotes from multiple insurers based upon the annuity distribution options outlined by their employer-sponsored plan.

The Income Solutions platform is a web‐based lifetime income annuity purchase system.

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Categories: Financial News

MetLife Partners with Ernst & Young for Financial Wellness Solution - Thu, 03/22/2018 - 14:06

MetLife has formed a strategic alliance with Ernst & Young LLP (EY) that will drive the creation and delivery of a workplace financial wellness solution.

Launching in spring 2018, PlanSmart Financial Wellness will focus on behavioral change, giving employees the tools, guidance and support they need to improve their financial wellbeing.

The offering builds on MetLife’s PlanSmart workplace financial education program, which has offered workshops and one-on-one consultations for more than 20 years to over 2,000 group customers. PlanSmart Financial Wellness will bring together MetLife’s decades of experience in delivering workplace benefit solutions and financial education with EY’s high-tech approach to offering financial education and counseling. The result will be a customized, goal-oriented approach to financial wellness that will meet employees where they are, offering the tools via channels they prefer. This will include online and phone support, both offered by EY.

“We’ve designed a hybrid digital/human financial wellness service that supports users as they manage the twists and turns of their financial life journeys,” says Lynn Pettus, national director of employee financial services, Ernst & Young LLP. “PlanSmart Financial Wellness will be an exciting new change in our ability to service and engage employees with varying levels of comfort with financial concepts and new digital technologies.”

“Employees are stressed about their finances—MetLife research has found just over a third (38%) feel in control of their finances, compared to 44% in 2015—and they are looking to their employer for help,” says James Reid, executive vice president, MetLife. “The combination of MetLife’s understanding of employee needs and EY’s leading employee financial wellness services uniquely positions us to give employers the robust program they need to help empower employees to take action.”

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Categories: Financial News

District Court Rejects Racketeering Claims Against Prudential, Morningstar - Wed, 03/21/2018 - 17:43

The U.S. District Court for the Northern District of Illinois, Eastern Division, has dismissed a lawsuit filed against Morningstar and Prudential.

Technically speaking, the court has ruled on Morningstar’s motion to dismiss Green vs. Morningstar et al pursuant to Federal Rule of Civil Procedure 12(b)(6) and the Prudential defendants’ motion to dismiss pursuant to Rule 12(b)(6), or in the alternative for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c).

For the reasons set forth below, defendants’ motions were granted and the complaint was dismissed without prejudice. Importantly, the judge has determined the plaintiff “shall have one more time to re-plead the cause of action in conformity with this opinion.”

The lead plaintiff in the failed class action suit is an employee of Rollins Inc. and a participant in the Rollins retirement plan. The Rollins plan is a defined contribution retirement plan with assets of roughly $500 million and more than 10,000 participants and beneficiaries, case documents show. Specifically, the challenge focused on the behavior of various groups that manage the plan participant-level automated investment advice program marketed under the tradename GoalMaker.

The crux of the charges leveled by the lead plaintiff is that “both the Prudential defendants and Morningstar, through concerted racketeering action, including but not limited to consulting meetings and joint GoalMaker-related asset allocation computer modeling work, arranged for GoalMaker to influence plan investors including plaintiff to invest in high-cost retirement funds that kick back unwarranted fees to the Prudential defendants by limiting the investment choices otherwise available to participants in the plans that would be included in the GoalMaker asset allocation program.”

Against these allegations, defendants first challenged whether the plaintiff has standing to bring this action, particularly with regard to the fact of whether the alleged injury was directly and proximately caused by their conduct. In particular, Morningstar argued that its provision of GoalMaker to is too remote from the alleged injury to make it a proper defendant. For their part, the Prudential defendants argued that the lead plaintiff failed to allege both “but-for” and “proximate” causation because he failed to allege that he would have paid lower fees if Prudential had not received revenue-sharing payments and also that the “independent actions of Rollins (as the sponsor) and the plaintiff himself with regard to his investment decisions make his injury too attenuated from Prudential’s actions.”

Considering these matters, the court has ruled that the “complaint does not sufficiently plead that the defendants were engaged in the conduct of an association-in-fact enterprise or that each defendant engaged in a pattern of racketeering activity.” As such, the court “does not reach the issue of causation here, but cautions that the matter is not free from doubt.”

Digging into the Racketeer Influenced and Corrupt Organizations Law (RICO) claims, the court explains that pursuant to Section 1962(c), it is “unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity.” In order to establish a violation of 1962(c) a plaintiff must allege and prove: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.”

The text of the complaint includes detailed argumentation on all of these points, ultimately ruling strongly against the plaintiff.

As the judge lays out, the complaint does not directly address the duration of the enterprise in question; it only conclusively mentions the concept in passing, alleging that the facts indicate “longevity sufficient to permit these associates to pursue the enterprise’s purpose sufficing to make the instant RICO enterprise actionable.”

The decision continues: “Relevant documents submitted in connection with the motions to dismiss indicate that [Prudential] began providing services to the Rollins Plan in 2007 and Morningstar began providing services to [Prudential] in 2012. But even these documents do not indicate when the alleged scheme began, and the further complaint lacks allegations regarding when [plaintiff] himself utilized the GoalMaker software that eventually led to his injuries. Second, the complaint fails to sufficiently allege a common purpose among the RICO defendants. The existence of a common goal or purpose is an essential ingredient of an association-in-fact enterprise. Not only must there be a common purpose or goal, a plaintiff must allege the existence of an organization with a structure and goals separate from the predicate acts themselves.”

According to the complaint, the ultimate goal of the alleged scheme was to procure revenue-sharing payments made directly to the Prudential defendants.

“As is clear, plaintiff has not alleged—even conclusively—that the defendants were organized for any purpose other than procuring revenue-sharing payments. In other words, if the alleged predicate acts are removed, there is nothing left in the complaint to sustain the allegation of an ongoing, structured enterprise among defendants,” the decision explains. “This is not sufficient.”

Following further considerations of ruling precedents, the decision concludes that the “complaint does not present a single factual claim asserting that each RICO defendant had any interest in the outcome of the alleged scheme beyond their own individual interests. For example, there is no indication in the complaint that the RICO defendants shared in the profits of the alleged enterprise as opposed to merely taking their own respective profits from their respective actions related to the scheme.”

The decision continues: “Specifically, Morningstar performed consulting and design work and received consulting and design fees in return. [Prudential] performed general marketing for the GoalMaker program and then received revenue-sharing payments from investment funds later down the line. [Prudential] took the GoalMaker software and actually managed its operation as to the plans and plans’ participants, and [Prudential] is the only defendant specifically alleged to have received revenue-sharing payments from specific investment funds. Still, it is true that all of the defendants are alleged to have received fees and/or payments, but the shared goal of financial profit, by each party conducting its own business, does not qualify as a ‘common purpose’ under RICO.”

For similar reasons, the judge explains, even if the complaint sufficiently alleged the existence of an enterprise, it fails to adequately allege that each member of the alleged enterprise participated in the enterprise’s affairs as opposed to simply pursuing their own affairs.

The full text of the decision is available to download here.

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Categories: Financial News

Institutional Investors See Chance for Alpha in Focused Strategies - Wed, 03/21/2018 - 15:40
In the past 12 to 18 months, 56% of institutional investors have increased their exposure to focused strategies, defined as 50 or fewer holdings, according to a report from Alger in partnership with Greenwich Associates. The report, “The Power of Focus: Looking for Alpha in a Sea of Beta,” is based on a study of more than 90 executives at leading institutions, consultants and broker/dealers.

Additionally, 62% of intermediaries expect increased interest in focused equity products in the next 24 months. Ninety-five percent of intermediaries and 84% of institutional investors believe that a focused portfolio can achieve the majority of the risk-reduction benefits generated by a diversified portfolio, and 76% of intermediaries believe focused strategies have a better chance than diversified strategies of delivering alpha.

“Investors agree that active managers may generate alpha by concentrating assets in their highest conviction investments,” says Davis Walmsley, a managing director at Greenwich Associates and coauthor of the report. “The study demonstrates that there is a shift of assets to focused strategies, given investors’ need to find more sources of alpha.”

Dan Chung, CEO and CIO of Alger, adds, “Alger has expanded its suite of focused portfolios over the past five years because we believe active managers with proven track records who invest in their highest conviction ideas are uniquely positioned to deliver alpha. We are pleased to see that the survey data aligns with our position that focused portfolios with high active share positively affect alpha generation and overall returns.”

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Categories: Financial News

BlackRock Unveils Retirement Income Planning Solution - Wed, 03/21/2018 - 15:23

BlackRock revealed a new retirement income planning solution that relies on internal modelling and two participant inputs, age and current savings, to help individuals make a plan for the decumulation phase.

As the firm explains, the LifePath Spending Tool’s projections are based on BlackRock’s long-term capital market assumptions, including life expectancy. Using the solution, savers can “easily see a retirement spending estimate for the current calendar year, as well as track estimated retirement spending until age 95 and see the potential impact on savings over time.”

The launch of the solution comes just a few weeks after BlackRock published its latest update to its Defined Contribution (DC) Pulse Survey. That research shows increased optimism among plan participants coming at the same time that plan sponsors are growing more concerned about the so-called “decumulation challenge.”

According to BlackRock’s research, the most commonly used retirement spending advice over the last thirty years was likely some variant on the so-called “4% rule”. In its simplest form, the rule suggests that retirees over a thirty-year period can sustainably meet their retirement income needs by investing in a 50% stock/50% bond portfolio and withdrawing 4% of their savings balance the first year of retirement as a baseline. The baseline would then be adjusted for inflation each subsequent year, researchers explain.

“There are a number of issues with the 4% rule, including current low bond yields rarely experienced during the period underlying development of the rule. We believe that the issues are more fundamental,” BlackRock warns. “To understand why, we need to step back and redefine the retirement income problem.”

Rather than rely on a simple 4% withdrawal rule, the new BlackRock model seeks to sustain the consumption pattern once labor income ceases (at retirement) and wealth and investment returns become the source for future spending. The model assumes labor income ends at retirement and makes assumptions about Social Security or pension income, which may be closer to the experience of the next generations of retirees.

“Viewed in this way, the retirement income solution can be defined as producing the income and returns needed to sustain retirement spending; minimizing volatility; and aligning asset withdrawals with mortality expectations,” researchers explain. “The culmination for managing all these factors, behind the scenes for investors, should be a smooth, uneventful ability to spend in line with the consumption curve.”

According to BlackRock, turning retirement savings into income is a three-part problem based on the savings balance, market returns and risks, and longevity. The latter two—returns and longevity—are difficult, if not impossible, for an individual to understand and solve on his or her own, BlackRock says. Hence the introduction of the LifePath Spending Tool.

“The tool is designed to provide information for retired individuals, 63 and older, about how to estimate retirement spending,” the firm explains. “The tool takes into account BlackRock’s long-term capital market assumptions and, based on an individual’s current age and savings balance, provides an estimated dollar amount and a percentage-based withdrawal for the current calendar year. It is assumed to be invested in a 40% equity/60% fixed income portfolio.”

The tool also provides a range of spending estimates depending on whether the markets are stronger or weaker than current expectations. Near-retirees and current retirees are encouraged to return to the tool annually to get an updated spending withdrawal estimate and a refreshed spending projection.

“The challenge of retirement spending has changed,” BlackRock concludes. “It requires a new set of expectations on behalf of retirees, and new tools and information to help them enjoy the full benefit of their retirement savings. BlackRock’s LifePath Spending tool is here to assist the next generation of retirees.”

More information is available here.

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Categories: Financial News

Study Supports Use of Auto Features in Public-Sector 457 Plans - Wed, 03/21/2018 - 14:55

A follow up to a study done in 2010 finds automatic enrollment and automatic escalation can help public-sector 457(b) plans increase participation and savings rates for employees.

Public-sector employees are typically enrolled in a defined benefit (DB) plan, and this often leads to low participation rates in supplemental defined contribution (DC) plans. In 2009, the South Dakota legislature passed a bill allowing for automatic enrollment in the state’s Supplemental Retirement Plan (SRP). An initial study found that eight months after the passage of automatic enrollment legislation, 91% of new, eligible employees whose units chose to implement automatic enrollment participated in the plan and remained in it. The study found only 1% of employees in government units that had not implemented automatic enrollment voluntarily enrolled in the SRP.

The new research from the Center for State and Local Government Excellence shows that the proportion of workers contributing to the SRP among those automatically enrolled declines with additional years of employment. For example, for those hired in 2010 who were automatically enrolled, the participation rate fell to 80.5% in 2016.  However, this is still significantly higher than for workers in agencies that did not adopt the auto enrollment policy.

From the initial passage and implementation of the SRP automatic enrollment law, most of the stakeholders involved viewed the default $25 per month deferral as an initial starting point but not enough to generate necessary, meaningful savings, even over a longer term. A bill was passed unanimously by both chambers of the South Dakota legislature in January and February 2015 and signed into law by Governor Dennis Daugaard, becoming effective on July 1, 2015. For any government entity that adopts the escalation policy, it applies to all automatically enrolled members and increases the employee contribution rate to the SRP by $10 per month each year of employment. As of November 2017, of the 50 employers who adopted automatic enrollment, 20 also opted for automatic escalation.

According to the study, in both 2015 and 2016, approximately 75% of employees that were automatically enrolled were also covered by automatic escalation. Further analysis of the hiring data reveals that of the 4,948 hires in fiscal year 2015 who were still employed in 2016, 2064 (41.7%) were automatically enrolled and of those, 1,523 (73.8%) have automatic escalation. Of the new hires in 2015 who have automatic escalation, 95.2% kept making a contribution in 2016. The percentage decreases to 93.6% for the new hires automatically enrolled but who do not have automatic escalation.

The Center notes that the results highlight the positive response of individuals to automatic plan features even when they participate in a primary DB plan and Social Security. The full study report is here.

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Categories: Financial News

Firms Partner to Provide Health Care Cost Transparency - Wed, 03/21/2018 - 14:08

Alegeus, provider of consumer-directed health care (CDH) solutions, has partnered with ZendyHealth to help consumers better manage their health care finances by providing cost transparency and access to local providers for medical and dental procedures.

Consumers can access ZendyHealth’s network of pre-screened and certified providers through the Alegeus virtual marketplace, an online consumer portal that curates a wide range of HSA (health savings account) and FSA (flexible spending account) eligible products and services for purchase using tax-advantaged benefit account dollars. Once consumers pick their price or their preferred provider for a service or procedure, ZendyHealth identifies available appointments and connects the consumer directly to the provider.

“We hope the transparency and empowerment this offering brings will open new avenues for consumers to receive the best quality health care for the dollars they spend,” says Dr. Vish Banthia, founder, ZendyHealth. “By understanding all costs up-front, consumers are empowered to make smarter purchasing decisions that maximize their health care dollars.”

“Our clients look to us for more than technology—we are their trusted partner to help engage and educate health care consumers,” says Steven Auerbach, CEO, Alegeus. “Without meaningful consumer engagement, our clients will not be able to fully unlock the tremendous potential of the CDH market opportunity. We have a long history of delivering industry-leading engagement capabilities through our best-in-class online consumer portal, and adding these expanded direct-to-consumer engagement capabilities is the next frontier.”

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Categories: Financial News

Americans’ Appreciation for Guaranteed Retirement Income on the Rise - Wed, 03/21/2018 - 14:07

Seventy-three percent of people surveyed for the Guaranteed Lifetime Income Study from Greenwald & Associates and CANNEX said they view guaranteed income as a valuable addition to Social Security, up from 61% a year ago. The survey was conducted among 1,003 pre-retirees and retirees between the ages of 55 and 75 with more than $100,000 in household assets in February.

The survey found that two primary reasons why people value guaranteed income are to cover health care costs (cited by 54%) and to prevent running out of money (46%). Fifty-two percent said they view guaranteed income as a hedge against a market downturn.

“The perceived need for guaranteed lifetime income products continues to rise with fewer retirees being able to count on pension plans,” says Doug Kincaid of Greenwald & Associates, who oversaw the survey. “In this year’s data, we found many respondents confident they’ll be able to maintain their lifestyle through their own projection of their life expectancy, but the less affluent and women, in particular, are concerned about their ability to meet their needs if they live beyond this. Other research has shown that more than half will wind up living longer than they expect.”

While only 17% of those with more than $1 million in assets are highly concerned about meeting their financial needs in retirement, for those with assets between $100,000 and $249,000, 43% share this concern. While 25% of those with a pension are concerned about outliving their retirement savings, this can be said of 38% of those without a pension. Greenwald & Associates said this is a key finding, as pension plans continue to be a thing of the past.

Additionally, 37% of women are highly concerned about outliving their savings, while only 22% of men share this concern. On average, people expect to live to age 85, and roughly 80% of people are confident they will have enough money to reach that point. In fact, 53% are highly confident they will have enough money until age 85. However, for those with assets between $100,000 and $249,000, only 43% have this high level of confidence, but for those with more than $1 million in assets, this rises to 74%.

Should they live five years beyond their expected longevity, only 38% are confident they will be able to maintain their lifestyle, and should they live an additional 10 years, this drops to 31%. The respondents indicated they expect a substantial drop in income when they retire, but that it will remain steady afterward. Roughly 40% of pre-retirees said they expect annual income of less than $50,000. Twenty-three percent expect income of $50,000 to $75,000, and 16% expect to receive $75,000 to $99,000. Less than 20% expect to receive more than $100,000 in retirement income.

While 25% expect their expenses will be higher in early retirement, 38% expect they will increase in later retirement. Fifty-three percent of respondents between the ages of 65 and 69 believe the value of their assets will grow in 10 years, as do 48% of those between the ages of 70 and 75. Only 19% and 13%, respectively, think their assets will be lower in value.

“Respondents are optimistic that market growth in their savings, along with a lower level of expenses, will enable them to maintain their quality of life in retirement,” says Gary Baker, president of CANNEX USA. “Given limited savings and rising costs, drawing down assets will be a necessity for most retirees, making the risk of running out of funds a question of time without lifetime income strategies.”

Evaluating guaranteed lifetime income products

Asked about the main benefits of guaranteed lifetime income products, 66% said it is the protection against longevity risk, peace of mind and making it easier to budget. As for the negatives, respondents said ease of understanding, and excessive terms and conditions of the contract.

Thirty-nine percent of respondents said they had heard about annuities from an adviser, while 23% pointed to financial institutions. Seventy-percent think their adviser has a responsibility to discuss guaranteed lifetime income products with them. If they don’t, the respondents would consider switching to another adviser. Among those with an adviser, 66% are highly satisfied with the advice, and when retirement income strategies are discussed, the level of satisfaction rises. Nonetheless, only 50% of those with an adviser have had a conversation about retirement income strategies.

Sixty-two percent said their adviser had said positive things about guaranteed lifetime income products and annuities, but 37% said their adviser’s assessment was either neutral or negative. They also said that media coverage of annuities and lifetime income products is largely negative.

“There are significant operational challenges the financial services industry still needs to overcome to broaden access to annuities, in addition to addressing negative perceptions around them,” Baker says. “The study shows that the conversation really starts and ends with adviser discussions.”

Among those who own a guaranteed lifetime income product, 63% said they are highly satisfied, and 73% said the product is highly important to their financial security.

Kincaid says that advisers need to consider each individual’s risk tolerance when working with them on selecting a guaranteed income product.

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Categories: Financial News

Tough Process Questions Raised by Fifth Circuit Fiduciary Rule Decision - Tue, 03/20/2018 - 19:13

Steven Rabitz is a compensation and benefits partner with Stroock in New York; his firm provides transactional and litigation guidance to investment advisory corporations, banks and venture capital firms.

Like many other attorneys whose work regularly touches on the Employee Retirement Income Security Act (ERISA), Rabitz has been hard at work this week fielding questions about the fate of the Department of Labor (DOL) fiduciary rule expansion. As readers likely already know, the decision that emerged this week out of the Fifth U.S. Circuit Court of Appeals threw a dramatic new element of confusion into the epic regulatory saga that has been the rollout of the Department of Labor fiduciary rule. The Fifth Circuit’s two-to-one majority ruling wholly rebukes the long-running fiduciary rule expansion as an abusive overreach of the DOL’s authority—this after numerous district courts have strongly upheld the DOL’s rulemaking process.

To help ease the immediate concerns and confusion of clients, Rabitz and his firm have published a helpful guide that dissects the latest fiduciary rule developments. On his assessment, it actually is not that likely that the U.S. Supreme Court will get involved.

“While there has been some discussion that other recent decisions in other circuits addressing the fiduciary rule may now result in a ‘split,’ no decision appears more sweeping or broad concerning the underlying legality of the fiduciary rule than the decision from the Fifth Circuit,” Rabitz explains. “Moreover, because of the Constitutional nature of the decision, future administrations—regardless of party—may have difficulty resurrecting the fiduciary rule or similar sweeping changes to the original fiduciary rule, absent Congressional action.”

But don’t get the wrong idea. As Rabitz sees it, this week’s Fifth Circuit action is “not necessarily the end of the story—at least not yet.”

“There are a number of additional considerations that clients and friends will continue to need to pay attention to. The Department of Labor could challenge the decision, and there are other actions that could be taken that at a minimum would prolong the process of finality,” Rabitz observes. “With any such delay, already taxed financial services institutions trying to change business models and compliance approaches to meet the changes occasioned by the fiduciary rule may feel even more under the gun.”

Based on his interactions with clients, Rabitz points out that some institutions doing business in jurisdictions where other circuit courts have weighed in on prior challenges to the fiduciary rule—for example in the Tenth Circuit—may feel compelled to approach the Fifth Circuit decision with caution. He notes that caution is a reasonable response here, but he also says firms can and should take the Fifth Circuit decision seriously. The court has strongly rebuked the DOL and cast the whole future of the rulemaking process in serious doubt.

“What Happens Next? While the Fifth Circuit has vacated the fiduciary rule, the rule is still technically in effect as the case continues to be under the jurisdiction of the Fifth Circuit until it issues a ‘mandate’ opening a limited period during which the Department of Labor can choose to contest the decision under applicable rules of procedure,” Rabitz says. “The mandate would generally be expected to be issued several days following the decision, which opens a window for any such challenge that is expected to close by May 7, 2018, or 45 days from the Fifth Circuit’s decision.”

As Rabitz lays out, during that period, the decision may be appealed by the Department of Labor—either en banc, meaning the Fifth Circuit would be called on to rehear the case, or potentially to the Supreme Court—during which time the Fifth Circuit’s decision may be stayed.

“Of course, should the Department of Labor in fact seek review by the Supreme Court, additional delays would be likely,” Rabitz says. “In addition, there is a pending appeal in the District of Columbia Court of Appeals that has been on hold pending the outcome of this Fifth Circuit case. While other circuits have upheld challenges concerning aspects of the Fiduciary Rule, most recently in the Tenth Circuit, given the sweeping nature of the decision of the Fifth Circuit, those cases can be distinguished and likely do not create a split.”

According to Rabtiz, the earlier cases should be regarded as having a more narrow focus than the issues addressed by the Fifth Circuit case—weighing against the likelihood of a Supreme Court decision here.

“Nevertheless, there are some competing views that may cause institutions doing business in circuits that have previously upheld challenges to aspects of the fiduciary rule to proceed with greater caution pending additional clarity,” Rabitz continues. “Rightly or wrongly—and at this stage, we believe more wrongly—these institutions may be concerned that the fiduciary rule will continue to be in effect in these jurisdictions, notwithstanding the Fifth Circuit’s decision. Assuming that the fiduciary rule is in fact extinguished on or about May 7, the original rule’s ‘five part’ test would be reinstated.”

Of course, Rabitz warns, returning to status quo ante may not be as simple as it first appears—at least in the short term.

“While many may point to President Trump’s pre-election rhetoric criticizing the fiduciary rule, and his February 3, 2017, directive to the Department of Labor to reconsider the fiduciary rule as an indication of what is to happen next, it is not preordained that the Department of Labor will not seek a rehearing, or perhaps even a challenge to the United States Supreme Court in light of the several other circuits that have upheld challenges related to the fiduciary rule,” Rabitz notes.

Still far from a certain outcome, Rabitz hedges that the Department of Labor’s acquiescence to the Fifth Circuit decision, should it occur, would clear the way for the Securities and Exchange Commission (SEC) to “adopt a more fulsome rule that would likely have the advantage of applying more broadly across retail accounts.”

“Such acquiescence would likely be more in line with the President’s previously stated objectives about regulatory overreach generally, and the fiduciary rule specifically,” he explains. “Nevertheless, were the Department of Labor to challenge the decision in defending a regulation of the predecessor Democratic administration, it would likely need to consider that a majority of the judges on the Fifth Circuit were Republican appointees. Another case pending before the District of Columbia U.S. Court of Appeals brought by the National Association of Fixed Annuities [NAFA] has been on temporary pause pending the outcome of this case in the Fifth Circuit. It would be interesting to see what happens if NAFA simply dropped its appeal given the Fifth Circuit’s broad ruling.”

Until these questions are addressed, the picture for the short term is likely to remain unclear, Rabitz concludes.

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Categories: Financial News

Voluntary Benefits Can Be Part of Overall Financial Wellness Strategy - Tue, 03/20/2018 - 18:15

As more employers consider offering financial wellness programs to employees, they can reframe many types of employee benefits as broader financial wellness help, said Heather Coughlin, the U.S. solution leader for financial wellness at Mercer, in a webcast sponsored by Mercer and hosted by the Society for Human Resource Management (SHRM).

Student loan debt, overall debt, health care costs and retirement savings are just a sample of the financial issues and stresses that employees are dealing with, she noted. “How, outside of defined contribution [DC] plan loans, have employers helped with employee debt and other financial issues?” she asked.

Coughlin pointed to Mercer’s Healthy, Wealthy and Work-Wise study that found 70% of employees say benefits they receive at work help relieve their financial anxiety.

Brian Russell, a principal consultant with Mercer Health & Benefits and the national leader for the Voluntary Benefits Solution Development Center, said employers are leveraging voluntary benefits to address employee financial needs. Voluntary benefits provide an expanded option of low-cost benefits to help employees get where they need to be financially, to help protect them from major cost exposures and keep them from tapping into retirement accounts.

Mercer found 90% of employees consider voluntary benefits to be a part of a comprehensive benefits package. Russell said these benefits can be positioned as financial protection in employee communications and tied to a “peace-of-mind” value.

Examples of voluntary benefits include supplemental health coverage, such as accident insurance, critical illness insurance, and hospital indemnity plans. These help employees mitigate cost exposure. Russell noted that these are excepted benefits from the Affordable Care Act (ACA) and are not tied to a health plan offering. Financial protection may include identity theft protection, disability, long-term care and life insurance. Overall wellbeing benefits may include a student loan refinancing/repayment benefit, auto/home insurance, financial coaching, online discount and purchase programs and legal services.

Russell said there are three fundamentals to a successful benefits strategy:

  • Valued services and products—He said the key is to align employers’ benefits offering with the unique fingerprint of their employee base to meet employees where they are and as they move through various stages of life;
  • Communications—He said employers should pay attention to digital evolution and distinct preferences of today’s multigenerational workforce for how they want to be educated, leveraging a blend of communication channels in addition to traditional open enrollment booklets, such as emails, texts, websites, etc.;
  • Simplified employee experience—He said employees typically only spend 14 minutes on enrolling in benefits, so some may not even see what valuable benefits are being offered, so employers should provide meaningful decision support and a way to take action.

Though voluntary benefits are typically employee-paid, Russell said employers should consider paying for voluntary benefits. He noted that since passage of the Tax Cuts and Jobs Act, nearly 33% of employers plan to redirect tax savings to employee rewards. In addition to one-time bonuses or an increase in DC plan contributions, employers are planning to pay for the cost of additional benefits. Russell said employers can pay for supplemental health coverage, and it only costs about $60 per employee per year for identity theft protection.

Coughlin added that financial concerns vary by generation, and employers should ask whether their benefits strategy delivers on those various needs.

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Categories: Financial News

IRS Reduces Fee for Terminating Plan Determination Letter - Tue, 03/20/2018 - 17:57

In Revenue Procedure 2018-19, the Internal Revenue Service (IRS) announced a change in the Schedule of User Fees, with respect to applications on Form 5310, Application for Determination for Terminating Plan.

When the agency ended its determination letter program for individually designed plans, it stated that a plan can only apply for a determination letter in three cases—one of which is when a plan is terminating.

The IRS explains that Appendix A of Revenue Procedure 2018-4 sets forth the specific fee applicable with respect to each category or subcategory of submission under the revenue procedure.  Section .06 of Appendix A sets forth the fees applicable to determination letters.  The user fee applicable to a determination letter request submitted on Form 5310 provided in section .06(1)(c) of Appendix A was increased from $2,300 for 2017 to $3,000 for 2018.

However, the new Revenue Procedure reduces the fee back to $2,300, effective January 2, 2018.  The agency says applicants who paid the $3,000 user fee listed in Revenue Procedure 2018-4 will receive a refund of $700.

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Categories: Financial News

Three in Ten Baby Boomers Haven’t Prepared a Retirement Budget - Tue, 03/20/2018 - 16:31

Seventy-three percent of non-retired Americans aged 50 and older expect to delay retirement, The NHP Foundation, a not-for-profit provider of affordable housing, learned in a survey of 1,000 Americans in that age group.

Thirty-one percent haven’t prepared a retirement budget. Among those that have tried to figure out a retirement budget, 62% say that Social Security will comprise half or more of their monthly income. Sixty-five percent have not budgeted for unforeseen health-related expenses. Among those who have no retirement budget and plan on Social Security to provide half or more of their retirement income, 72% said they haven’t accounted for unforeseen health-related expenses.

There is a disconnect between what kind of lifestyle Boomers expect to lead in retirement and how poorly they are preparing for retirement, NHP says. Seventy percent said they are at least confident they will experience the retirement they aspire to, and among the 73% who are planning to delay retirement, 63% are at least somewhat confident in the retirement lifestyle they will be able to enjoy.

“There is a disconnect between Baby Boomers’ current financial status and where they perceive themselves in retirement,” says Richard Burns, president and CEO of The NHP Foundation. “This wishful thinking carries potential consequences that will likely have a large impact throughout all areas of the economy.”

Citing data from the Consumer Financial Protection Bureau, NHP noted that older homeowners owe almost double on their current mortgage that the same group did 10 years ago. Nonetheless, 60% said the most essential housing aspect of retirement is affordability. Asked what worries them the most about retirement, 36% said the ability to afford quality health care, 28% said having to be dependent on their children, and 22% said being forced to live in an inferior living situation. Eighty-five percent said they would like to continue living in their current home.

Of the 66% who rent or have a mortgage, 76% either have no retirement budget or will rely on Social Security for at least half of their monthly income. Displaying another disconnect, 83% will believe they will be able to age in place, and only 17% of those with no retirement budget or who expect to rely on Social Security for at least half of their income think they will have to move.

“Renting quality affordable senior housing may be the best answer for many older Americans,” Burns says. “NHP and the entire affordable housing industry have made it a priority to create an adequate supply of affordable senior rental housing for Boomers entering the market now and in the future.”

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Categories: Financial News

Court Denies Participant Second Chance at Voya ERISA Suit - Tue, 03/20/2018 - 14:34

The U.S. District Court for the Southern District of New York has denied a 401(k) plan participant a second chance at filing a lawsuit claiming Voya Financial and Voya Retirement Advisors (VRA) engaged in prohibited transactions in violation of the Employee Retirement Income Security Act (ERISA) through a service arrangement with Financial Engines.

U.S. District Judge Lorna G. Schofield said that while the plaintiff’s first amended complaint (FAC) elaborates on the defendants’ alleged conduct in the original complaint that was dismissed, the essence of the allegations are unchanged.

The plaintiff filed the lawsuit on behalf of all participants and beneficiaries of the Nestle 401(k) Savings Plan and all other similarly situated individual account plans. Nestle pays VRA fees in association with advice services; however, Financial Engines actually provides the advice under an agreement with VRA. She claims that, by structuring the investment advice program this way, VRA and the other defendants breached their fiduciary duties and engaged in prohibited transactions in violation of ERISA. Schofield dismissed the original lawsuit because the plaintiff failed to show the defendants were acting as ERISA fiduciaries with respect to fees and the complaint did not allege that Nestle knew the compensation under the Nestle-VRA Agreement was excessive, either overall or as to the portion retained by VRA.

Schofield denied the plaintiff leave to file the FAC based on futility. She found the FAC still does not adequately allege that the defendants were plan fiduciaries with respect to the alleged conduct in the complaint. She reiterated that any claim based on VRA’s allegedly excessive fee arrangement lies against only Nestle, which retained ultimate authority to accept or reject the proposed terms of the agreement. Similarly, she held that the defendants were not acting as fiduciaries when paying or accepting payment for services rendered under the agreement because they had not discretion or control over the amount of fees that were set.

The plaintiff claimed that Voya Institutional and VRA were fiduciaries because each played a role in the appointment of a fiduciary—specifically that both engaged Financial Engines and Voya Institutional played a role in the appointment of VRA. Schofield said again that Voya Institutional and VRA did not owe a duty to the plan during the negotiation of the administrative services agreement or the Nestle-VRA agreement and cannot be held liable for any role they played in the appointment of Financial Engines or VRA in the agreement. “Even if Voya Institutional and VRA were fiduciaries by virtue of their appointment of another fiduciary, the challenged conduct—their payment and/or receipt of excessive fees—is not sufficiently related to give rise to fiduciary liability,” Schofield wrote.

Finally, the plaintiff claimed Voya Institutional and VRA leveraged the difficulty and expense of switching plan recordkeepers to influence Nestle’s decision to engage VRA and Financial Engines, but Schofield said the FAC does not allege any facts to support the inference that the decision to engage VRA and Financial Engines was not ultimately Nestle’s to make.

Schofield concluded that none of the claims alleged in the FAC could survive a motion to dismiss, so she directed the close of the case.

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Categories: Financial News

Proposed Legislation Would Address Student Loan Debt and Social Security Solvency - Mon, 03/19/2018 - 17:01

A bill has been introduced in the House of Representatives to provide loan forgiveness to borrowers of Federal student loans who agree to delay eligibility to collect Social Security benefits, and for other purposes.

The Student Security Act of 2017​ would grant $550 in student loan forgiveness for each month a student debtor was willing to raise his or her full retirement age, or $6,600 per year. The proposed legislation establishes a maximum level of student loan forgiveness of $40,150, or forgoing six years and one month of Social Security benefits.

The Social Security Administration’s Office of the Chief Actuary projects that such a program would save $725 billion over 75 years. In addition to this, countless student loan borrowers would have their debt burden either significantly reduced or completely eliminated. The Social Security Board of Trustees announced the combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds are projected to become depleted by 2034.

LendEDU surveyed 943 ​Americans with student loan debt to find out their thoughts about the proposal. The plurality (46.13%) would be willing to delay collecting Social Security benefits for complete or partial federal student loan forgiveness, while 36.37% are unsure, and 17.5% said they would not be willing to participate in the program. The average respondent had $29,356.25 in student loan debt and would be willing to postpone Social Security benefits by 22 months—giving them $12,100 of student loan forgiveness.

Asked whether they think it is more important to take out student loans to get a college education or to have access to Social Security so they can retire comfortably, 51.75% of respondents answered, “Taking out student loans to get a college education,” while 24.71% chose, “Having access to Social Security to retire comfortably,” and 23.54% are not sure.

“At a time when a minimum of a bachelor’s degree is almost always a prerequisite for any entry-level job, getting a college education is paramount for so many younger Americans, even if that means getting buried in student loan debt,” Mike Brown with LendEDU says.

Full survey results are here.

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Categories: Financial News

Washington Financial Group Revamps Website - Mon, 03/19/2018 - 16:02

Washington Financial Group (WFG), a provider of retirement plan and wealth management services, launched a new company website designed to enhance client engagement by adding several new features.

Recognizing that clients desire ongoing education and valuable content to help them make financial decisions, WFG’s website offers information on upcoming educational events, infographics, webinars and newsletters addressing key topics centered around retirement plans and wealth management.

“In the area of retirement planning, we will utilize our new website to provide ongoing education and content designed with the goal to enhance our client’s employees’ retirement readiness and impact savings rates in a positive way,” says Joe DeNoyior, WFG’s managing partner. “We are focused on providing our clients with the necessary resources, tools and technology they need to pursue successful retirement outcomes for every employee.”

WFG provides education, resources, tools and research to help its clients pursue their financial objectives. It is a member of Global Retirement Partners (GRP), enabling it to serve as investment fiduciaries under the Employee Retirement Income Security Act (ERISA) to help ensure retirement readiness and enhancing the overall effectiveness of retirement plans. WFG was honored to be named the 2017 PLANSPONSOR Retirement Plan Adviser Small Team of the Year.

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