Experiential Wealth

Carfora v. TIAA Summary

Jun 2, 2024 | Everything Else, Regulations

This case was first filed in 2022 which was dismissed by the Court and provided Plaintiffs with leave to file an amended complaint. Plaintiffs have done so in November 2023, and now before the Court is Defendants’ motion to dismiss Plaintiffs’ Second Amended Complaint.  On May 31, 2024, the Court denies Defendants’ motion. Defendants shall file their answer to the Amended Complaint on or before June 21, 2024.

The purpose of this summary is to lay out the Plaintiffs’ basic case and to examine if (1) there are any issues that a plan sponsor or a plan advisor/consultant should be concerned about regarding underlying Claims; and (2) there is validity that this case sets a new path in future litigations along similar fact pattern pertaining to cross selling and conflicted revenue enhancements.

Plan sponsors, advisors, recordkeepers, and other intermediaries should keep a close eye on the outcome of this case. It not only impacts recordkeepers as to how cross selling is scrutinized but also how plan sponsors should select and monitor service providers and have a clear understanding of “controlling plan expenses” and conflict of interest.  Fee compression has been a real positive for plan participants. On the other hand, plan sponsors are expecting more services from service providers. As such, service providers, including plan advisors and consultants, are looking for ways to expand their services, through cross selling, to realize more or to make up lost revenue.  These services may be necessary, appropriate, or important, but it is the plan fiduciary’s responsibility to develop a prudent process to understand and monitor the services and the service providers in the sole interest of participants.

Click here for the full summary.