5th Circuit Again Dismisses Verizon Pension Buyout Lawsuit

Reconsidering its previous decision in light of a Supreme Court ruling, the appellate court again found a lead plaintiff did not allege an injury-in-fact.

The 5th U.S. Circuit Court of Appeals has reaffirmed its previous dismissal of a class-action lawsuit that arose from the decision by Verizon Communications in October 2012 to purchase a single premium group annuity contract from The Prudential Insurance Company of America to settle approximately $7.4 billion of Verizon’s pension plan liabilities.

The case includes two classes of pension plan participants: those whose benefit liabilities were transferred to Prudential and those whose liabilities remained in the plan. The appellate court agreed with the dismissal of claims of the non-transferee class by a district court because the class did not prove individual harm and, therefore, lacked standing to sue.

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Its affirmance was driven, in part, by the determination that plaintiff-appellant Edward Pundt lacked Article III standing to sue for purported fiduciary misconduct pursuant to the Employee Retirement Income Security Act (ERISA). Specifically, the 5th Circuit previously held that “standing for defined-benefit plan participants requires imminent risk of default by the plan, such that the participant’s benefits are adversely affected,” and it noted that Pundt failed to “allege the realization of risks which would create a likelihood of direct injury to participants’ benefits” in this case. The court also rejected Pundt’s argument that “he directly suffered constitutionally cognizable injury through invasion of his . . . statutory rights [under ERISA] to proper [p]lan management,” concluding that standing based on invasion of a statutory right must still “aris[e] from de facto injury, which is not alleged by a breach of fiduciary duty.”

Pundt then filed a petition for writ of certiorari in the United States Supreme Court. Subsequently, the Supreme Court decided Spokeo, Inc. v. Robins, which clarified the relationship between concrete harm and statutory violations for purposes of assessing Article III standing. After deciding Spokeo, the Supreme Court granted Pundt’s petition for writ of certiorari, vacated the appellate court’s judgment in the case, and remanded the case for further consideration in light of Spokeo.

NEXT: Reviewing the Verizon case in light of Spokeo

In its new opinion, the appellate court noted that the Supreme Court reaffirmed in Spokeo that violation of a procedural right granted by statute may in some circumstances be a sufficiently concrete, albeit intangible, harm to constitute injury-in-fact without an allegation of “any additional harm beyond the one Congress has identified.” However, the Supreme Court also took care to note that “Congress’[s] role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” Rather, “Article III standing requires a concrete injury even in the context of a statutory violation.”

In Spokeo, the Supreme Court held that a bare allegation of a Fair Credit Reporting Act violation based on inaccurate reporting of consumer information was insufficient to establish injury-in-fact, as “not all inaccuracies cause harm or present any material risk of harm.” In the same way, the 5th Circuit recognized that Pundt’s allegation of an “invasion of [a] statutory right[] to proper [p]lan management” under ERISA was not alone sufficient to create standing where there was no allegation of a real risk that Pundt’s defined-benefit-plan payments would be affected.

In short, because Pundt’s “concrete interest” in the plan—his right to payment—was not alleged to be at risk from the purported statutory deprivation, Pundt had not suffered an injury that was sufficiently “concrete” to confer standing. “A bare allegation of improper defined-benefit-plan management under ERISA, without concomitant allegations that any defined benefits are even potentially at risk, does not meet the dictates of Article III; concluding otherwise would vitiate the Supreme Court’s explicit pronouncement that ‘Article III standing requires a concrete injury even in the context of a statutory violation,’” the appellate court wrote.

It reinstated and published its prior opinion.

Financial Wellness Programs Need More Than Just Education

If a financial wellness program isn’t producing results, try getting personal.

It’s no surprise that financial wellness programs are trending. The shift has been on the rise, recently with 56% of employers reporting a commitment towards their workers’ financial well-being, according to an Aon Hewitt study. Programs are grabbing employees’ attention too. In a TIAA survey, 71% of Americans expressed an interest in receiving financial advice.

As growth in appeal increases, the question still remains: Why do some programs continue to flop?

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“One big reason financial wellness programs fail is that they focus on ‘education’ and financial literacy, which simply do not inspire or empower behavioral change,” says Carla Dearing, CEO of financial planning service SUM180. “It’s very tempting to think, ‘If we just show people the steps, they’ll be able to do them.’”

Whereas financial literacy focuses on specified concepts and how-to’s, Dearing recommends offering programs that incite principles of behavioral finance such as privacy, control and feedback to help employees succeed.

One tool Dearing suggests can improve financial wellbeing is a personalized assessment, where workers’ needs are pinpointed to then offer detailed solutions. Whereas many may feel uncomfortable speaking about finances in a group setting, personalized assessments offer key resolutions tailored to an employee’s vulnerabilities and lifestyle. “They really need to start where the employee is. And they can’t know without asking for information,” says Dearing.

Like Dearing, Liz Davidson, CEO of Financial Finesse, believes these assessments give employers’ the ability to better assist workers. “What they’re [employers] doing is really targeting the specific groups with the right type of topics and the right kind of messaging, so it’s much more relevant and focused.” says Davidson. “Once you know more about your different employee groups and what those points of intimidation or vulnerability are, you can develop a strategy around how you take down those walls.”

Employees seem to be supporting fans of the tool as well. Surveys have reported workers prefer personalized assessments and one-on-one advice that study unique conditions to then offer detailed solutions.

These assessments take a worker’s financial challenges, priorities, family structure, investing confidence, retirement preparedness and more into account. As a result, employees acquire habits and strategies that result in success, rather than study new ideas through traditional educational means.

“It’s something that you do each and every single day, and it’s something that you control, says Davidson. “Versus education, it is a way to assist with making specific decisions or understanding concepts.”

NEXT: Education is still important

Although personalized assessments provide insightful material to employees, this does not mean education should be completely thrown out the window, Davidson adds.

“In areas like investing or deciding to choose either a target-date fund [TDF] or allocate your assets, education actually works very well there because people don’t really have to make a personal sacrifice, they’re just making a different decision than they would otherwise make,” she says.

Additionally, Davidson says financial literacy may enhance confidence for employees making informed financial choices, and then lead them to take the right steps in protecting themselves.

While privacy and personalization are large contributors in crafting the best financial wellness program, benefit prices also play a significant role. Workers may feel unconvinced in paying for a plan intended to assist financial challenges, and therefore Davidson recommends employers offer fully-funded programs, in order to surge participation and lessen biasness.

“One of the major objectives is to help employees maximize not only their pay, through savings and investing that properly, but their benefits so that the employer becomes the partner in employee financial security,” says Davidson.

Once workers are immersed in the program, Davidson and Dearing urge employers to utilize a ‘gamification’ approach that can motivate employees and inspire a financial change. At this point, more employees are addicted to the ‘small wins’ achieved, and therefore cultivate lifestyle changes to continue their progress. Similar to physical wellness, these financial modifications develop into a process, not solely an event.

“The psychological way to do that is you show them what their immediate next steps are, what you need to do to address some things that will help you,” says Dearing. “Feedback is all about keeping it alive.”

One distinctive method includes touching base with those who have benefited from financial wellness programs, in order to share personal testimonials with those either skeptical or motivated to continue.

Dearing and Davidson recommend working with human resources, as well as key thought leaders, who can provide positive feedback and inspiration on multiple touchpoints, including digital media, workshops, open forums and more.

“Mobile, Web, even print in the right circumstances can still work. It’s really pulling all of these together, making it a cohesive benefit,” says Davidson. “Workshops, webcasts―the employer might be offering from any source that is accurate in doing it the right way.”

As more programs are adopted, it is imperative to understand how employer-support can cause such high financial achievement. Not solely through paid programs, but in providing quality services to their employees. “They can do everything in their power to enable it and partner with their employees to get there,” says Davidson. “And that’s the next best thing.”

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