TIAA faces class action over rollovers

ERISA litigator Schlichter Bogard & Denton is pursing a proposed class-action case against TIAA over that company’s sales tactics for its Portfolio Advisor managed-account service.

In July, TIAA agreed to pay $97 million to settle claims brought by the SEC and New York state attorney general over similar issues. For five years, the company misled retirement plan participants about individual retirement account rollovers, with sales reps making rollover recommendations that were rife with conflicts of interest that were not disclosed, according to the settlement notice. The firm’s wealth management advisers told clients that they were acting as fiduciaries for the rollovers, although they had compensation incentives and were subjected to disciplinary pressures, the notice indicated.

The lawsuit filed this week alleges that the company used “fear selling” to encourage participants to agree to rollovers into products that were financially inferior to their employer-sponsored retirement plans.

“As a result of this scheme, TIAA reaped massive and unlawful profits at the expense of employees and retirees who were charged higher fees for products and services that underperformed those available through their employers’ tax-favored plans,” the complaint stated.

TIAA refutes the allegations.

“We believe this suit is without merit and intend to vigorously defend against these claims,” a company spokesperson said in a statement. “TIAA remains steadfast in our commitment to helping our clients create secure, successful retirements and long-term financial success, as we have for more than 100 years.”

At the time the settlement was announced, the company stated that it cooperated with regulators and made changes to its disclosure practices before the investigations. TIAA “learned some valuable lessons” and said that it regretted “the times that we did not live up to our clients’ expectations of us.”

The company agreed to internal reforms, such as a fiduciary standard for its rollover recommendations, halting compensation related to managed-accounts sales and disclosing conflicts of interest to clients.

The class could include thousands of former plan participants, according to the complaint.

The lawsuit includes claims of breach of ERISA fiduciary duty, engaging in prohibited transactions and receipt of ill-gotten profits.


Law firm Capozzi Adler on Wednesday brought a class-action 401(k) lawsuit against Deloitte.

According to the complaint filed in U.S. District Court in the Southern District of New York, the consulting and professional services firm breached its fiduciary duties under the Employee Retirement Income Security Act by allowing excessive administrative and investment management costs within the plan.

The plan, which included more than 89,000 participants in 2019 and a total of $7.3 billion in assets, had a per-participant record-keeping fee of about $66 paid to Vanguard in 2019 and a fee of more than $221 per participant in its profit-sharing plan, according to the complaint. Those fees were more than double what some comparable plans have paid, the plaintiffs stated.

The law firm, which has targeted numerous large 401(k) plan sponsors during a spree of litigation over more than a year, also takes aim at the investment costs within Deloitte’s plan. Some of the investments on the menu had fees that were multiples of industry medians, with one fund being as much as 420% higher than the median in its category identified by the Investment Company Institute, according to the complaint.

Deloitte did not respond to a request for comment.


Aon Hewitt Investment Consulting did not violate ERISA in connection with its own products in a 401(k) plan sponsored by Lowe’s Cos., a federal judge ruled on Tuesday.

The order followed a five-day bench trial in June and July. Lowe’s, which was also named as a defendant in the lawsuit, settled the claims against it in September. Aon, the plan’s investment consultant, had allegedly breached its duties under ERISA for recommending its own line of collective investment trusts, one of which had a short history of poor returns.

However, the judge found Aon free of fault, while noting that had Lowe’s still been a party in the case, “the court would have found that Lowe’s bears substantial responsibility for any damages suffered by plan participants,” the order read. “First and foremost, Lowe’s failed to perform any real due diligence or comparison of alternatives before selecting Aon to be the plan’s delegated fiduciary investment manager.”

Aon did not breach its duty of loyalty to plan participants, the court found, as its “‘operative motive’ … was to benefit plan participants through a consolidated menu of investment choices that was easier to understand and led participants to more broadly diversified investments.”

Further, the evidence showed that Aon did not suggest a sense of urgency to the Lowe’s plan committee in making changes to the investment menu, the judge noted.

The court also found that Aon did not violate ERISA with any cross-selling of products or services.

Regarding the selection of the Aon Growth Fund in particular, “even where a fiduciary has a direct financial incentive to select an affiliated fund for a plan menu, courts have rejected claims of disloyalty based on that fact alone — including where there is no indication that the fiduciary considered specific unaffiliated alternatives,” the order read.

Although Aon prevailed in the case, the court did not grant it any relief for its legal costs.

The plaintiff “has not acted in bad faith,” and “it appears unlikely that plaintiff, a former Lowe’s non-executive hourly employee, has the means to satisfy a significant award of attorneys’ fees or costs.”

Congress takes aim at mega-IRAs

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Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.

Andrew Vincent
Andrew is half-human, half-gamer. He's also a science fiction author writing for BleeBot.
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