Earlier this month, another of the higher education institutions serving as defendants to a slew of class action suits relative their 403(b) plans settled. John Hopkins reached a settlement with their plaintiff group in an amount totaling $14 million.
In addition to the payment of the settlement amount, John Hopkins agreed to a number of non-monetary stipulations. While in a settlement the agreed upon settlement remedies should in no way be considered required, or even a best practice, plaintiffs’ firms frequently present them as such in an attempt to raise the “fiduciary bar.”
Under the settlement, John Hopkins agreed to work with the plaintiffs’ counsel for a period of three-years to monitor compliance within the terms of the settlement, including:
- To provide a complete list of investments including fees and the plan’s investment policy (if any)
- Retention of an investment consultant to aid in menu development and monitoring
- Issue an RFP for a recordkeeper
- Receive a recommendation from the consultant as to whether the plan should consolidate recordkeepers
- Communicate in writing to participants within 18-months of the settlement, the results of any changes in providers and menu
I find the details of two of these stipulations particularly interesting. Under the RFP requirement, John Hopkins has agreed to designate in the RFP for a recordkeeper that the responding providers “will not solicit current plan participants for the purpose of “cross-selling.” This requirement seems to be in keeping with the more recent trend of criticizing fiduciaries for not adequately monitoring or communicating to participants about potential cross-selling. (See our White Paper on Fee Compression).
The other area of interest regards the 18-month communication to participants. The sponsor must communicate with participants about any frozen annuities and how participants’ accounts may be impacted by the transition away from frozen annuities to the “approved fund menu.”
These two settlement provisions highlight potential areas for committees of defined contribution plans to focus on in the years ahead.
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