ERISA Tag

https://www.kielichlawfirm.com > Posts tagged "ERISA"

College Retirement Plans under Fire for Excessive Investment Fees

The past ten to fifteen years has given rise to a set of lawsuits against 401k plan administrators over excessive plan fees and revenue sharing agreements between plan administrators and recordkeepers. We are probably approaching the end of this wave of excessive fee litigation against for-profit employers for 401k plans. A new wave of excessive retirement plan fee litigation arises against non-profit plan administrators. Recently nine class actions lawsuits were filed against several major universities for investment fees charged to retirement plan participants in the employees' 401k and 403b plans. The gist of the litigation is the same as the lawsuits filed...

Continue reading

Why is there a 10% early withdrawal penalty to cash out a 401k?

Before becoming an employment attorney I worked for one of the largest (maybe the largest) provider of 401k services. We provided various investment, customer service and recordkeeping services for 401k plans. Most people who call for information about their 401k plans will end up talking to my former employer or one of their competitors. Most 401k plan administration responsibilities outsourced to financial institutions that provide the infrastructure and staffing with expertise in plan issues. A common issue for 401k participants is: why is there a 10% early withdrawal penalty to cash out my 401k? A large number of calls about 401k...

Continue reading

Vanguard funds targeted in new 401k excessive fee litigation

401k excessive fee litigation has been an active area of ERISA litigation for over a decade with 401k participants arguing the plan administrator--along with various other plan fiduciaries--breached the duty to prudently manage the investment options of the plan. Most of these cases argue the plan administrator failed to select investments with reasonable fees, particularly in light of the buying power of the 401k plan to obtain lower fee share classes or to obtain access to lower fee funds in the market. Although this issue has been litigated for over a decade we still do not have a clear rule...

Continue reading

Employers struggling to win pension overpayment cases against retirees

The late 2000s and early 2010s saw a growth in litigation over 401k fees by employee-side ERISA attorneys. These often attacked large employers and major plan recordkeepers who profit from the kickback scheme known as revenue sharing. We're still not done with that wave of litigation but we're seeing a similar rise in litigation for pension overpayments. In these lawsuits employers pursue retirees for allegedly overpaid pension benefits based. The overpayments often arise due to shoddy recordkeeping, payment systems and benefit calculations. (Once again richly paid recordkeepers like Fidelity Investments and AONHewitt find themselves caught up in the plan administrator's problems.) Plan...

Continue reading

Unanimous SCOTUS decision in Tibble holds ERISA fiduciaries must continuously monitor 401k investment choices

A flurry of 401k litigation arose in the 2000s over the manner in which 401k plan sponsors select the investment choices and how those choices relate to the fees charged to the plan for various plan services and investments. 401k plan sponsors have fiduciary obligations to operate the plan prudently. 401k litigation asserts breaches of these fiduciary duties through relationships between the plan sponsor and outside service vendors. Most assert conflicts of interests or lack of due diligence in fee arrangements to pay outside service vendors. For example, selecting investments with high rates of revenue sharing to shift the cost of services from the...

Continue reading

Dissecting fact and fiction from a recent report on retirement savings

As somebody who spent a decade working in employee benefits and now practices employee benefits law, I have an understanding of the employee benefits industry. When I saw WFAA in Dallas covering a report about retirement savings I couldn't pass up the opportunity to fact-check. Predictably, the piece mixes a little truth with a lot of scare tactics and misdirection. (You can read the WFAA story here.) Let's get right into the thick of it. The first thing we should note is who conducted the study involved in this news story. The study comes from the Employee Benefits Research Institute (EBRI). Although...

Continue reading

It’s your pension. Who is your financial adviser helping?

This week I fielded a question from a soon-to-be-retiree regarding her pension that I thought was worth sharing. Her employer offers a defined benefit pension plan, which she is fortunate enough to receive. Her employer's pension plan offers the opportunity to receive benefits in the form of a single lump sum payment or various annuity payments that would pay out a fixed payment each month for the rest of her life and, if she chooses, for her husband's life. This lady wisely decided to seek out professional guidance and which payment option would best meet her financial plans. Several years ago...

Continue reading

DOL releases official guidance on ERISA and same sex marriage

In a highly important move, the Department of Labor released guidance on how ERISA-governed employee benefit plans will treat same-sex marriages following the Supreme Court's overruling of DOMA's definition of marriage as limited to one man and one woman. ERISA-governed benefit plans include private employer benefit plans like 401k plans, defined benefit pensions and health insurance plans. The guidance is significant because it affects how spousal benefits extend in retirement savings plans and health care. The guidance asserts administrators shall treat same-sex couples as married if the marriage is valid in the state where celebrated. Why the new DOL guidance matters The Employee...

Continue reading

Flexible Spending Accounts: Use It or Lose It

Flexible Spending Accounts, or FSAs, allow employees to make tax-advantaged contributions towards their health care costs for the year. The FSA is distinct from the employer's ERISA-governed health insurance plan; but the two operate closely. The employer's insurer may even administer the FSA. The employee, and possibly the employer as well, contributes each year which may then pay for qualified medical expenses. If the funds are not depleted at the year's end they become subject to "use it or lose it". How FSAs work Each plan year the employee elects a particular dollar amount he or she wants to set aside to the...

Continue reading

Can my employer change the 401k plan or make an exception for me?

Generally, no. The federal regulations that govern 401k plans require that 401k plans do not discriminate against employees. Plans must have uniform rules and the rules must apply in a uniform manner. For example, if your plan permits hardship withdrawals it must establish specific rules for those distributions. Plans can establish some variances in rules across different business units, but once the rules become effective they cannot change without amending the entire plan. In order to make an exception or change the rules, the plan has change for everybody. Even when a 401k plan desires to make a change, changes often require amending...

Continue reading

Should I be concerned about 401k fees?

401k fees have come into focus as one of many ways the financial services industry leeches money from the investors. That focus turned into litigation by participants against their plans (and plan service providers). Eventually the Department of Labor instituted fee disclosure rules that require plan service providers to break down fees charged to the plan and participants. Although most of the litigation has been unsuccessful in recovering awards for participants, the fee disclosure rules did force the financial service industry to better expose the relationships between the plan, participants, investments and fees. That way the plan can assess the fees paid...

Continue reading

Retirement Plan Participant Disclosures

By now you received fee disclosure statements on your 401k, ESOP, 403(b) and profit sharing plans. These fee disclosure statements, known as 404a5 Participant Disclosures, ensure these retirement plans provide plan participants with a minimum amount of information about the fees charged by plan investments and fees paid by the plan (often from those investment fees) to companies that provide services to the plan, such as auditing, accounting and investment management. These disclosures provide participants with information necessary to adequately assess the investment options within your plan. Why these retirement plan disclosures began In the 1990s mutual fund and insurance companies realized the...

Continue reading

Can I sue my Texas broker for investment losses?

It depends. Generally you cannot hold anybody else responsible for market losses on your investments. However, there are some situations where another party may be responsible for your investment losses. Some claims against brokers do not relate to market losses but to other negligent or fraudulent acts by a broker or adviser. When considering lawsuits against a broker or adviser one must consider: (1) the liability issues; (2) the value of any lawsuit or other claim; and (3) the cost to prosecute claims with a consumer attorney in Texas. Often claims against brokers have to be filed in a specific forum....

Continue reading

What is the difference between a 401k plan and a deferred compensation plan?

Generally, both plan formats defer compensation because the employee has elected to defer taking cash in hand to obtain some additional benefit, such as deferring taxes on the money or investing on a tax deferred basis. Under more specific legal definitions, there is a distinction between how these different plans work. Today's post will discuss some of the key differences between these types of employer-sponsored retirement plans through the eyes of an employment law attorney. 401k plans and ERISA 401k plans are governed by the Employee Retirement Income Security Act (ERISA) along with other defined contributions plans like ESOPs. They must be available to...

Continue reading

ERISA Retirement Plan Participant Disclosures

By now you received fee disclosure statements on your 401k, ESOP, 403(b) and profit sharing plans. These fee disclosure statements, known as 404a5 Participant Disclosures, ensure retirement plans provide participants with a minimum amount of information about the fees charged by plan investments and fees paid by the plan (often from those investment fees) to companies that provide services to the plan, such as auditing, accounting and investment management. These disclosures provide participants with information necessary to adequately assess the investment options within your plan. Confused about the disclosures? Talk to an employment lawyer near you. Why these 401k fee disclosures began In the...

Continue reading

Benefits of staying in your 401k after you leave an employer

When employees leave employment, the common response is to want to sever ties and move on, especially if the employee left involuntarily or on bad terms. However, withdrawing or rolling over your 401k may not be the best decision in every case. There are important financial and legal considerations. Before making decisions about your 401k benefits you should consider talking to a financial adviser and lawyer near you to discuss financial and legal concerns. Financial Considerations for employees and retirees Many financial considerations can come into play in this decision. If you leave one employer to go to a next, you may...

Continue reading

How are pensions calculated?

Defined benefit pension benefits are calculated in a variety of ways, depending on what formula your plan has adopted. ERISA requires defined benefit pension benefits expressed in the normal form of payment at the plan’s normal retirement age. (Often referred to as the accrued benefit.) This is normally a monthly annuity benefit paid out over the lifespan of the employee-participant. That does not necessarily mean the benefit must pay out either in that payment method or at that time. The benefit pays in the payment options at ages defined in the plan document and summary plan description. Even cash balance plans, typically expressed as...

Continue reading

What is an Summary Plan Description?

SPD is a Summary Plan Description. It is the employee benefit plan documentation that must be provided to all participants and beneficiaries that explains the basic rules of the plan in layperson’s terms. It contains descriptions of the rules for eligibility, participation, vesting, benefit calculation, benefit availability and how to file a claim for benefits. An SPD can be an important tool to understand your 401k or other retirement plan. According to the Department of Labor: The summary plan description is an important document that tells participants what the plan provides and how it operates. It provides information on when an employee...

Continue reading

How secure are my pension payments?

A common concern posed by pension participants is how secure those payments will be in the future. Given the economic turmoil in the past few years, it is certainly a worthwhile question. The good news is that the vast majority of retirement benefits are more secure than you might think. As a Dallas employment attorney experienced with pension issues I can tell you this is a legitimate concern for employees and retirees. Pension benefits are not an easily understood issue. Plan rules are complex. The benefit formula for a pension plan is just as complex. The legal issues around pensions and...

Continue reading

401k Plan Fees – What Are They and Do They Matter?

Employers operate 401k plans at a cost. Like other labor expenses (hiring process, salary, vacation pay, etc.) employers have to pay for compliance with labor and employment laws. Benefit plans are somewhat unique. Under ERISA employers can shift the cost of plan administration from the plan sponsor to plan beneficiaries. 401k plan fees often are handled through revenue sharing with the financial institution operating the plan in which the administrator selected funds that would absorb the costs of the plan. After years of federal litigation challenging whether employers could select higher fee funds to absorb plan costs, many 401k plans...

Continue reading
error: Content is protected !!