PLANSPONSOR - August/September 2020 - 10

The Push and Pull of CITs
UPFRONT
SEVERAL legal battles involving the use
of collective investment trusts (CITs) have
begun in the past few months and act as
a reminder to plan committees that a
prudent review of fee costs is essential.
In June, participants in The Estée
Lauder Companies 401(k) Savings Plan
filed a proposed class action lawsuit
alleging that, in 2018, more than $1 billion
in plan assets were invested in private label
collective trust target-date funds (TDFs)
offered by J.P. Morgan. The complaint
explains that CITs are less expensive than
mutual funds; however, it says, while the
TDFs in the plan are CITs, they are private
label CITs with much higher expense
ratios than other CITs J.P. Morgan offers.
And, in July, former employees of
pharmaceutical manufacturer Astellas US
LLC sued the company and Aon Hewitt
Investment Consulting for investing in
CITs, claiming that the funds benefited
only Aon Hewitt. Aon Hewitt had been
cited in a similar suit, brought by participants
in the Schneider Electric 401(k)
plan, in May.
Yet, on the flip side, also in July,
plaintiffs filed a lawsuit against Biogen for
neglecting to exercise a prudent process
when reviewing investment fees. Plaintiffs
claim the defendants failed to utilize the
lowest-cost share class for mutual funds
or to consider available collective trusts
as alternatives to the mutual funds in the
plan, despite the CITs' lower fees.
CITs are a popular alternative to
mutual funds for several reasons-
including cost-despite the recent lawsuits.
As investment fees are the biggest-ticket
item in retirement plans, employers have
recognized how cost-effective these investment
vehicles can be. However, they are
10 PLANSPONSOR.COM August - September 2020
Art by Mar Hernández
less transparent than are other options-
they have no ticker symbols, are not regulated
by the Securities and Exchange
Commission (SEC), and are not subject to
the Investment Company Act of 1940 ('40
Act) fund rules, all of which makes some
plan sponsors unsure of them.
They also are relatively unknown to
participants, so are less appealing than
the very familiar mutual funds, says
Patrick Menasco, partner and co-chair of
the ERISA [Employee Retirement Income
Security Act] and executive compensation
practice at law firm Goodwin.
" Historically, mutual funds were
go-to options for defined contribution
[DC] plans, " Menasco says. " They have the
name recognition, they have their values
in the paper every day, and there are just
a lot more of them than CITs. Participants
have been comfortable with them. "
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PLANSPONSOR - August/September 2020

Table of Contents for the Digital Edition of PLANSPONSOR - August/September 2020

2020 Plan Sponsor of the Year Winners
New Support for HR Teams
Social Security Demystified
An Unstable Time for Funding
Rethinking Fixed Income
Winning Ways in the Pandemic
PLANSPONSOR - August/September 2020 - Cover1
PLANSPONSOR - August/September 2020 - Cover2
PLANSPONSOR - August/September 2020 - 1
PLANSPONSOR - August/September 2020 - 2
PLANSPONSOR - August/September 2020 - 3
PLANSPONSOR - August/September 2020 - 4
PLANSPONSOR - August/September 2020 - 5
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PLANSPONSOR - August/September 2020 - 8
PLANSPONSOR - August/September 2020 - 9
PLANSPONSOR - August/September 2020 - 10
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PLANSPONSOR - August/September 2020 - 12
PLANSPONSOR - August/September 2020 - 13
PLANSPONSOR - August/September 2020 - 14
PLANSPONSOR - August/September 2020 - 15
PLANSPONSOR - August/September 2020 - 2020 Plan Sponsor of the Year Winners
PLANSPONSOR - August/September 2020 - 17
PLANSPONSOR - August/September 2020 - 18
PLANSPONSOR - August/September 2020 - 19
PLANSPONSOR - August/September 2020 - 20
PLANSPONSOR - August/September 2020 - 21
PLANSPONSOR - August/September 2020 - 22
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PLANSPONSOR - August/September 2020 - 25
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PLANSPONSOR - August/September 2020 - 27
PLANSPONSOR - August/September 2020 - 28
PLANSPONSOR - August/September 2020 - 29
PLANSPONSOR - August/September 2020 - 30
PLANSPONSOR - August/September 2020 - 31
PLANSPONSOR - August/September 2020 - 32
PLANSPONSOR - August/September 2020 - 33
PLANSPONSOR - August/September 2020 - 34
PLANSPONSOR - August/September 2020 - 35
PLANSPONSOR - August/September 2020 - New Support for HR Teams
PLANSPONSOR - August/September 2020 - 37
PLANSPONSOR - August/September 2020 - Social Security Demystified
PLANSPONSOR - August/September 2020 - 39
PLANSPONSOR - August/September 2020 - An Unstable Time for Funding
PLANSPONSOR - August/September 2020 - 41
PLANSPONSOR - August/September 2020 - Rethinking Fixed Income
PLANSPONSOR - August/September 2020 - 43
PLANSPONSOR - August/September 2020 - 44
PLANSPONSOR - August/September 2020 - 45
PLANSPONSOR - August/September 2020 - 46
PLANSPONSOR - August/September 2020 - 47
PLANSPONSOR - August/September 2020 - Winning Ways in the Pandemic
PLANSPONSOR - August/September 2020 - Cover3
PLANSPONSOR - August/September 2020 - Cover4
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