PLANSPONSOR - October-November 2022 - 8

RULES & REGULATIONS
COLA Increase in 2023
As
the economy continues to grapple
with record-high inflation, the Social
Security Administration has announced
beneficiaries will get an 8.7% increase to
their benefits in 2023, the largest in 40
years. The changes to Social Security and
Supplemental Security Income benefits
affect around 70 million Americans.
This jump follows the 5.9% increase
that beneficiaries saw this year. On
average, Social Security benefits will rise
by more than $140 per month.
The news comes as the Bureau
of Labor Statistics has announced the
Consumer Price Index increased 0.4%
for the month of September, as inflation
continues to pressure the economy. Over
the past 12 months, prices increased 8.2%.
Misused Profit-Sharing Assets
The Department of Labor and the fiduciaries
of the New Jersey design firm
InterArch Inc. have agreed to a settlement
following an investigation from the
department's Employee Benefits Security
Administration.
EBSA determined that InterArch,
its CEO, Shirley Hill, and her husband,
Vernon Hill, must pay to restore mismanaged
assets to the company's retirement
plan, plus penalties, as part of the settlement,
says a release from the agency.
The pair were accused of violating their
fiduciary duties under the Employee
Retirement Income Security Act, leading
to the mismanagement of plan assets,
which allegedly caused significant losses.
According to EBSA, from at least
August 2016 through the plan's
June
2020 termination, the fiduciaries
invested as much as 70% of the plan's
assets in the stock of Metro Bank PLC,
where Vernon Hill was the chairperson.
Additionally, the defendants allegedly
invested at least 13% of the plan's assets in
the stock of Republic First Bancorp Inc.,
where Vernon Hill was a senior leader.
The defendants were accused of
failing to diversify the plan's holdings
during this period, even as the share
8 PLANSPONSOR.COM October - November 2022
prices for both Metro Bank and Republic
Bank fluctuated significantly before
falling drastically in value, resulting in
millions of dollars in losses to the plan.
Following EBSA's investigation, its
office of the solicitor in New York filed a
complaint in the U.S. District Court for
the District of New Jersey alleging that
InterArch and the two individual fiduciaoffered
imprudent investment options in
its retirement plan and failed to monitor
their performance in violation of ERISA
over a period beginning in April 2012.
Specifically, the complaint alleged
that the Home Depot plan had higher fees
than did similar plans: Some of the funds
the plan offered charged fees as high as
0.5%, when similar funds charged as little
as 0.07%. The higher fees also bore no
relation to the services rendered, argued
the plaintiffs, because the fund adviser,
Financial Engines Advisors LLC was a
robo-adviser, offering " cookie-cutter " portfolios,
and therefore had minimal operating
costs. Plaintiffs noted that even small
fee differences can add up significantly
over the course of a participant's life.
In September's decision, the judge
ries engaged in self-dealing and violated
their duties of loyalty and prudence and
their duty to diversify, which caused the
plan to take part in prohibited transactions.
The court entered a consent judgment
and order on September 23, demanding
that InterArch and the Hills pay plan
participants
along with paying penalties
to resolve the allegations, the release
states. The judgment also bars the Hills
from serving as fiduciaries of any ERISAcovered
employee benefit plans.
Home Depot Suit Rejected
A federal judge for the U.S. District Court
for
the Northern District of Georgia,
Atlanta Division, ruled, on September
30, for The Home Depot Inc., its 401(k)
plan and the plan's administrative and
investment committees in an Employee
Retirement Income Security Act lawsuit.
Plaintiffs brought the class action suit
reiterated the prior district court findings:
that the Home Depot defendants inadequately
monitored the plan's investment
options; did not conduct a market survey
of plan fees nor engage in a competitive
bidding process; and neglected to
discuss the fees that Financial Engines
had assessed. However, the plaintiffs had
failed to provide a fair comparison against
the funds managed by Financial Engines
on either fees or performance and to
thereby prove they actually suffered any
loss, the judgment said. " Plaintiffs point to
competitor professional managed account
services providers and insist that Home
Depot Defendants 'could have achieved
lower fees for the same services' FE ...
provided, " the judge wrote. " However, as
Home Depot Defendants asserted at oral
argument, 'plaintiffs mistake competitors
for comparators.' "
The judge noted that the fees the plainin
April 2018 alleging that the company
For in-depth coverage of these topics and more, go to PLANSPONSOR.com/compliance.
tiffs paid were lower on a per-capita basis
than those paid by most other Financial
Engines clients. And, even though Home
Depot did not monitor its options closely,
they were still those a prudent fiduciary
would have kept. Home Depot did not
respond to a request for comment. -PS
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PLANSPONSOR - October-November 2022

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