Data and Research March 3, 2015

Investing Public Feels Retirement Crisis Is Real

New research from the National Institute on Retirement Security finds nearly nine in 10 Americans believe the nation faces a serious retirement readiness crisis.
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The National Institute on Retirement Security’s (NIRS) sixth annual national retirement security poll shows many Americans would be willing to take lower salary increases in exchange for a pension benefit in retirement.

Nearly 75% of Americans are concerned about their ability to achieve a secure retirement, NIRS says, and support for steady and reliable retirement income from pensions and annuities is growing.

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Some 82% of Americans say a pension is worth having because it provides steady income that won’t run out, while 67% indicate that they would be willing to take less in salary increases in exchange for more guaranteed income in retirement, according to the NIRS report “Retirement Security 2015: Roadmap for Policy Makers | Americans’ Views of the Retirement Crisis.”

Poll results also reveal that Americans feel their leaders in Washington don’t understand their struggle to save for retirement (cited by 87% of respondents), despite significant retirement-related regulatory and legislation action in recent years. Americans also generally want national policymakers to give more attention to retirement issues (84%). Regarding state-based efforts to improve retirement security, 71% of Americans agree that government-sponsored plans aimed at giving more private sector workers access to tax-advantaged retirement savings vehicles via payroll deductions are a good idea.

“The data evidence is irrefutable that the nation faces a retirement crisis,” says Diane Oakley, NIRS executive director. “This poll reveals that Americans understand the severity of crisis, and they want action and reform. We also learned how Americans plan to cope with retirement insecurity: 77% intend to cut back spending in retirement while 72% plan to stay in their current job as long as possible.”

These coping mechanisms clearly have broader implications, according to NIRS. “That is, older workers staying on the job crowds out younger workers, and decreased retiree spending has negative economic consequences,” Oakley explains. 

The research goes on to suggest that Americans see retirement benefits as a job feature that is almost as important as salary. Salary is viewed as important by 75% of Americans, while retirement benefits are close behind at 72%.

Also a telling result from the survey: Americans still express strong support for pensions for public employees. Some 87% of Americans say pensions are a good way to recruit and retain qualified teachers, police officers and firefighters. But, “only one-fourth of Americans understood that public employers pay for 25% or less of public pension costs,” NIRS claims, with the remainder being covered by employee contributions and investment returns.

Turning to the fraught topic of Social Security benefits, nearly three in four (73%) Americans say it is a mistake to cut government spending in such a way as to reduce Social Security benefits for current retirees, up from 67% in 2013. When it comes to benefits for future generations, 69% oppose cutting government spending that reduces Social Security benefits, NIRS says. Americans are divided when it comes to increasing the amount of Social Security benefits by delaying the withdrawal of benefits at an older age: 42% agree with a delay while 52% disagree.

Polling for the research was conducted by Greenwald & Associates as a nationwide telephone interview of 801 Americans age 25 or older. The data was balanced to reflect U.S. demographics for age, gender, and income. The margin of error is plus or minus 3.5%.

The full research results can be downloaded here.

Compliance March 3, 2015

Sanofi Potentially Faces Stock Drop Suit

Multinational pharmaceutical company Sanofi is being investigated for possible ERISA violations after continuing to offer company stock as a retirement plan investment option, despite alleged knowledge that it was violating federal anti-kickback laws.
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An investigation of Sanofi’s U.S. Group Savings Plan is underway, in light of possible violations of the Employee Retirement Income Security Act (ERISA), according to employee stock drop case litigator Jake Zamansky, leader of Zamansky LLC.

Zamansky says his firm has commenced an investigation to determine if fiduciary duties to prudently manage and invest plan assets were violated by Sanofi, which continued offering its company stock while it allegedly knew it was violating federal anti-kickback laws.

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The investigation stems from a whistleblower lawsuit filed against Sanofi by a former paralegal, Diane Ponte, as reported by Bloomberg on December 4, 2014. At the time, Ponte alleged that in an attempt to get the company’s diabetes drugs prescribed and sold, Sanofi’s senior officers and executives, including former CEO Christophe Viehbacher, conducted an illegal kickback scheme. In addition, she alleged that she was fired in retaliation for raising questions about the legality of the scheme.

Zamansky says these allegations come two years after similar claims that Sanofi gave doctors free samples of arthritis medicine to encourage prescriptions. It paid $109 million to settle illegal kickbacks claims with the U.S. Justice Department in that case.

Zamansky claims the Sanofi’s Board knew of the most recent allegations for some time before disclosing in October 2014 that it had commenced an investigation. On October 29, 2014, the board dismissed CEO Viehbacher, resulting in Sanofi’s stock falling from $56 per share to less than $45. Additionally, the company was the subject of shareholder lawsuits under federal securities laws.

Zamansky says employees who purchased and held company stock through the plan since at least December 19, 2012, have suffered losses to their retirement savings which could have been at least partially avoided had plan fiduciaries prudently dropped the company stock as an investment option. He further alleges Sanofi’s dismissal of its CEO and the whistleblower allegations raise serious issues over the prudent monitoring and oversight of the plan under ERISA for artificial inflation of the stock price.

The path forward for stock drop litigation against Sanofi could be impacted by the U.S. Supreme Court’s 2014 decision in Fifth Third Bancorp v. Dudenhoeffer, which determined fiduciaries offering employer stock as an investment option do not have any special presumption of prudence. The decision also instructed the 6th U.S. Circuit Court of Appeals to review on remand whether plan participants alleging stock drop violations can state a legitimate claim by applying the pleading standard as discussed in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly, considering that where an employer’s stock is publicly traded, allegations that a fiduciary should have recognized on the basis of publicly available information that the market was overvaluing or undervaluing the stock are generally implausible and thus insufficient to state a claim. 

The pleading standard requires that to state a claim for breach of the duty of prudence, a complaint must plausibly allege an alternative action that the defendant could have taken, that would have been legal, and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.

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