ABB latest 401(k) plan to face lawsuit over fees

KANSAS CITY, Mo. — Five participants in the 401(k) plan of ABB Inc., Norwalk, Conn., filed suit against the company and its trustee, Fidelity Management Trust, claiming they violated their fiduciary obligations under ERISA by charging excessive fees.

The lawsuit, filed Dec. 29 in U.S. District Court in Kansas City, Mo., claims "the fees and expenses paid by the (ABB Personal Retirement Investment and Savings Management Plan), and thus borne by plan participants … are unreasonable and excessive; not incurred solely for the benefit of the plan and their participants" and that plan administrators did not adequately disclose the fees to participants, the lawsuit said. ABB has a subsidiary located in Jefferson City, Mo. The suit seeks unspecified monetary damages. The plan had $1.47 billion in 401(k) assets as of December 2003, the latest data available, according to Money Market Directory.

Schlichter, Bogard & Denton PC, which represents the ABB participants, has also targeted at least 10 other top corporations with similar complaints since September. Those companies are: Boeing, with $23.7 billion in defined contribution assets; Lockheed Martin Corp., Bethesda, Md., with more than $14 billion in defined contribution assets; United Technologies Corp., Hartford, Conn., with nearly $14 billion in defined contribution assets; Northrop Grumman Corp., Los Angeles, with more than $11 billion in assets; Caterpillar Inc., Peoria, Ill., with $4.5 billion; General Dynamics Corp., Falls Church, Va., with $6 billion; International Paper Co., Memphis, Tenn., with $4.4 billion; Bechtel Corp., San Francisco, $3.9 billion; Exelon Corp., Chicago, with more than $3 billion; and Deere & Co., Moline, Ill, with $2 billion as of May 2005.

Vin Loporchio, a spokesman for Fidelity Investments, parent of Fidelity Management Trust, said Fidelity disagrees with the "factual and legal assertions and intends to defend vigorously" against the lawsuit. "We believe the fees charged and the compensation collected were reasonable," he said.

Ronald Kurtz, a spokesman for ABB, declined to comment.

HOUSTON — Continental Airlines Inc., Houston, plans to contribute $300 million to its pension plans in 2007, according to an 8-K filing. The company's estimated minimum contribution for 2007 is $180 million. Continental has contributed $246 million to its pension plans in 2006. The company had $1.4 billion in pension assets as of Dec. 31, according to its 2005 annual report.

SACRAMENTO, Calif. — California Gov. Arnold Schwarzenegger established the Public Employee Post-Employment Benefits Commission to study the growing cost of funding state public pensions, according to a news release in late December. The 12-member commission will identify the extent of unfunded liabilities and review and weigh options for addressing them. The commission will recommend a plan to the governor by Jan. 1, 2008. Calls to the governor's Sacramento office were not returned.

Unfunded pension liabilities for the $228.4 billion California Public Employees' Retirement System and the $156.1 billion California State Teachers' Retirement System, both in Sacramento, total $49 billion as of Sept. 30. The annual cost to California's state budget for pensions rose from $160 million in 2001 to $2.6 billion in 2006. A large portion of that $2.6 billion payment went toward paying off previous pension commitments that had gone unfunded.

HOUSTON — Former lenders to Enron Corp. agreed to pay Ohio state pension funds — led by the $69 billion Ohio Public Employees Retirement System, Columbus — a total of $4.5 million as part of a settlement in federal court in Houston, according to court documents. The former lenders included Citigroup, Canadian Imperial Bank of Commerce and JPMorgan Securities. The class-action suit was filed against the lenders in 2003, about a year after Enron filed for bankruptcy.

TACOMA, Wash. — Russell Investment Group will consider including largely domestic companies that are incorporated outside of the United States for inclusion in its domestic equity indexes, confirmed spokesman Steve Claiborne. Companies incorporated outside of the U.S. have been excluded from Russell's indexes. The rule change, which would go into effect in June 2007, will "better reflect U.S. investment manager behavior," according to the release, which adds that more U.S. investment managers are now including these types of companies in their U.S. equity portfolios.

HARRISBURG, Pa. — The Pennsylvania Public School Employees' Retirement System generated a total return of 14.17% on its investments for the year ended Sept 30, according to a posting on the $58 billion system's website. Fund officials attributed the gain to strong performance in the retirement system's international equity portfolio, which returned 20.96% during the period, as well as real estate, which returned 35.53%, and alternatives, 26.88%. The system had 31.1% of its assets in international stocks; 6.8% in real estate; and 8.8% in alternatives.

WASHINGTON — The PBGC sold almost 9.3 million of the 12.6 million shares of UAL Corp. stock the agency received when it took over United Airlines' four pension plans, according to an SEC filing.

The plans had assets of $7 billion but were underfunded by $9.8 billion when the PBGC announced that it was taking over United's pension plans in 2005, according to the PBGC.

WASHINGTON — Financial Accounting Standard 158 won't affect the regulatory capital of banking organizations, according to an interim determination announced in a news release by the Federal Reserve Board of Governors. The accounting rule, which took effect Dec. 15, requires unfunded liabilities of defined benefit and other postretirement plans — as well as overfunded assets of plans — to be moved to the corporate balance sheet from financial statement notes.

"After a banking organization initially applies FAS 158, changes in the benefit plan asset or liability reported on the organization's balance sheet will be recognized in the year in which the changes occur and will result in an increase or decrease in accumulated other comprehensive income," a component of equity capital, the statement said.

"Until the Federal Reserve Board, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision determine otherwise through rule making, banks, bank holding companies and savings associations should exclude from regulatory capital any amounts recorded in accumulated other comprehensive income," a component of equity capital, "resulting from the adoption and application of FAS 158," the statement said.

PITTSBURGH — Mellon Capital Management is offering its first 130/30 equity strategy, said spokesman Mike Dunn. The new 130/30 Enhanced Equity Strategy is starting with $25 million in client funding. Mr. Dunn declined to identify the clients or discuss the fees Mellon Capital is charging.

CINCINNATI — UNIFI Companies Retirement Plans and Union Central Retirement and Investment Services rolled out UNIFI Retirement Advantage Series, an investment platform with 60 investment options from 21 fund families offered to 401(k) plans, said Jessie Waller, spokeswoman. Coinciding with the platform, UNIFI hired Ed Deeds as vice president for sales and marketing, a new position. Mr. Deeds was a vice president with Automatic Data Processing Retirement Services. Jackie Savage, spokeswoman for ADP, did not return calls seeking further information.

NEWARK, N.J. — Prudential Retirement, a division of Prudential Financial, introduced Prudential IncomeFlex, a new annuity for defined contribution plans, said Darrell Oliver, spokesman. IncomeFlex is an option within a 401(k) plan, not a distribution option. Plan participants can select from five investment funds, ranging from conservative to aggressive, and can transfer all or part of their DC plan assets into the chosen fund.

TACOMA, Wash. — Russell Investment Group has added 47 recent initial public offerings to the Russell 3000 index, according to a news release. The IPOs include nine financial services, seven technology and six consumer discretionary firms. Seven of the new IPOs also will move into the Russell 1000 index, while the remainder will be included in the small-cap Russell 2000 index and/or the Russell Microcap index. Inclusion in the various indexes is determined by market capitalization. Russell does not delete existing index members to make room for new IPOs; instead, it fully reconstitutes each index at the end of the second quarter each year.

WELLESLEY HILLS, Mass. — Among U.S. workers who have been forced to retire several years before they had anticipated, 69% believe their overall retirement plans have been affected, forcing them to reduce expenses, according to a Sun Life Financial survey.

The average respondent planned to accumulate $1 million in retirement savings but had only half of that amount when forced to retire because of layoffs, company mergers or health problems. The gap was most acute for respondents under the age of 55, who expected to retire with an average of $1.4 million in savings but had only $314,000 when forced into retirement.

The average expected retirement age among respondents was 64, but those who were forced to retire did so an average of eight years earlier than expected.

Harris Direct assisted Sun Life in the online survey, conducted May 16-30, of 701 individuals who had experienced involuntary retirement.

WASHINGTON — The nation's mutual funds had combined assets of $10.281 trillion as of Nov. 30, up 2.6% from the previous month, according to a news release from the Investment Company Institute. An ICI report of mutual funds also showed that assets in equity mutual funds totaled $5.83 trillion on Nov. 30, up 2.9% from the month before, while taxable bond funds were up 1.6% to $1.12 trillion.

Equity mutual funds inflows totaled $11.3 billion in November, compared with $12.73 billion in October, according to the report. Equity funds investing primarily overseas had inflows of $11.47 billion in November, compared with $11.92 billion in October. Funds that invest primarily in the U.S. had outflows of $169 million in November, compared with inflows of $808 million in October.

RICHMOND, Va. — Nathan Chapman Jr., a former money manager who ran assets for the $34.4 billion Maryland State Retirement & Pension System, Baltimore, could have his prison sentence reduced by more than a year under a decision by the U.S. Court of Appeals in Richmond. Mr. Chapman was sentenced to a 7%BD;-year prison sentence in 2004, when he was convicted on charges of defrauding the Maryland pension fund and shareholders in his companies.

In a Dec. 8 decision, the appeals court affirmed Mr. Chapman's convictions, rejecting his request for a new trial. But the appeals court held that Mr. Chapman, who has remained free pending his appeal, could have his sentence reduced by a year or more under existing sentencing guidelines. A date for a hearing to consider a new sentence for Mr. Chapman has not been set.

Mr. Chapman pleaded guilty Oct. 2 to separate fraud charges stemming from use of his investment company's funds for a real estate purchase. Mr. Chapman will pay $40,000 in restitution and was sentenced to a year of probation for that offense.

SAN FRANCISCO — Institutional investors expect to substantially increase their commodity holdings in the next few years, according to a survey by Barclays Capital. About a third of the 100 Barclays clients polled at the firm's annual U.S. Commodities Investor Conference in New York last month said they expected commodities assets under management to grow by more than $60 billion to $150 billion by the end of 2008.

About 53% of respondents said they would have more than 10% of their portfolio invested in commodities over the next three years, compared with 19% of respondents last December. The survey also showed that investors are looking at broader commodities investment options, including active management and structured products.

Diversification is the primary reason for investing in commodities, the survey found.

DENVER — INTECH introduced an international equity strategy that tracks the MSCI EAFE index and will target an annualized average gross return of 2.75 to 3.25 percentage points above the benchmark, according to a news release. The quant manager added the strategy to meet institutional demand for an active, risk-managed offering. INTECH, a subsidiary of Janus Capital Group, had $55.6 billion in assets under management as of Sept. 30.