PLANADVISER - March/April 2018 - 14

compliance news
Legislative and Judicial Actions
Lawsuit Targets
Georgetown University
A new Employee Retirement
Income Security Act (ERISA) fiduciary
breach lawsuit filed in the
U.S. District Court for the District
of Columbia names as defendants
Georgetown University and several
officials tasked with overseeing the
school's defined contribution (DC)
retirement plans.
Matching almost verbatim the
charges filed previously against
many large universities' 403(b)
plans, plaintiffs here suggest that
instead of leveraging the Georgetown
plans' substantial bargaining
power to benefit participants and
beneficiaries, defendants failed to
adequately evaluate and monitor
plan expenses and caused the plans
to pay unreasonable and excessive
fees for investment and administrative
services.
According to the text of the
investment returns even though
no additional services were being
provided to plaintiffs as their fees
went up. "
" Plaintiffs paid
complaint, defendants' first breach
of duty " was to fail to select a suitable,
single service provider to
provide administrative and recordkeeping
services to the plans in
exchange for a reasonable amount
of compensation. " Instead of negotiating
a separate, reasonable and
fixed fee for recordkeeping with a
single administrative provider to the
plans, plaintiffs argue, defendants
continuously retained three different service providers:
TIAA, Vanguard and Fidelity.
Plaintiffs argue it was inappropriate to allow all of
these recordkeepers to supply the plans with, respectively,
a separate menu of investment choices, including mutual
fund share classes that charged higher fees than did other
alternatives offering the same investment strategies, or
less expensive share classes of the exact same investment
fund-or both.
" Fees for administrative services were charged and
paid to these three companies as a percentage of the
overall expenses paid for investing in the various investment
options offered within the plans (including expensive
choices and/or share classes), " the challenge contends. " As
a result, plaintiffs paid asset-based fees for administrative
services, which continued to increase as the value of their
accounts increased through additional contributions and
asset-based fees
for administrative
services, which
continued to
increase as
the value of
their accounts
increased ... "
SunTrust Settles Stock Drop
Suit for $4.75mm
SunTrust Banks has agreed to settle
a long-running Employee Retirement
Income Security Act (ERISA)
lawsuit for $4.75 million. According
to the proposed settlement agreement,
which a federal court is
expected to rule on in June, the
company denies " any fault, liability
or wrongdoing. "
The case, originally filed in
2008, alleged that SunTrust Banks
breached its fiduciary duty by
keeping company stock as an investment
option in its 401(k) plan after
doing so was no longer prudent.
The suit charged that the company
said publicly it was tightening its
underwriting standards for certain
types of mortgages but actually had
substandard procedures in place
that allowed it to grant loans to
undeserving borrowers.
The plaintiffs also alleged the
company led investors to believe
it had scoured its portfolio and
found its loss exposure was " virtually
zero " on loans known as " Alt A "
transactions, when that was untrue.
The participants argued that they
lost money when the company's share price dropped during
the mortgage meltdown as part of the 2008 economic crisis.
In other terms of the settlement agreement:
* All participants whose date of hire was on or before
December 31, 2010, are now 100% vested in matching
contributions.
* Those hired on or after January 1, 2011, or who resumed
employment after that date and were not fully vested, shall
be 100% vested in matching contributions the earlier of the
date of completion of two years of vesting service, disability
or death.
* SunTrust will not amend the vesting schedule to a
less generous one for a period of three years from the date
the settlement agreement is executed unless otherwise
required by fiduciary obligations or changes in law.
* SunTrust currently funds matching contributions in
the form of cash or cash equivalents-not shares of SunTrust
14 | planadviser.com march-april 2018
Art by Julie Benbasset
http://www.planadviser.com
PLANADVISER - March/April 2018

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