Participants November 4, 2014

Employers Fight Stress Through Financial Education

Employees provided with financial education programs are less stressed, more prepared for retirement, and have better understanding of their finances, according to a report from the International Foundation of Employee Benefit Plans.
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Of the 397 organizations surveyed for the foundation’s new report, “A Closer Look: What’s Working in Workplace Financial Education,” 270 say they offer financial education programs to employees. Of those offering financial education, one-third report their workforce is somewhat or very highly stressed about financial issues, compared with 43% of those that do not offer financial education. More than two-thirds of employers currently offering financial education state their initiatives are somewhat to very successful for their employees.

Not surprisingly, the report shows employers with more advanced financial education strategies are more likely to say they are successful at promoting employee financial wellness compared with organizations with basic programs. For example, while 50% of financial wellness programs rated as successful by the sponsoring employer provide financial education to participants’ spouses, only 31% of financial wellness programs deemed to be unsuccessful do so. And while 35% of successful financial wellness offerings shape and adjust their curriculum based on employees’ input, only 8% of unsuccessful programs do the same. 

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“The survey found that while the benefits of financial education may take a few years to emerge as employees learn about their positions, the rewards are long-term,” says Julie Stich, certified employee benefit specialist and director of research at the International Foundation of Employee Benefit Plans. “Over time the staff becomes smarter about their future and more focused during work.”

The survey also collected data on why employers provide financial education to employees. Sixty-one percent of employers with successful programs simply say it is important to improve participant/employee retirement investment decisions. Forty-five percent of these employers believe it is the organization’s ethical responsibility to educate staff on benefit options, encourage retirement savings, and improve employees’ money management.

The report reveals that organizations with successful financial education programs cover more topics on average, at seven topics, than organizations with unsuccessful programs, which cover only four topics. Organizations with successful programs also use a wider variety of educational methods and pathways on average, the report finds.

“To increase a program’s impact, it’s critical to reach as many employees as possible,” Stich explains. “Organizations with programs they consider to be successful experience double the average participation rate in initiatives compared with organizations with unsuccessful programs.”

The full survey results are available here.

Compliance November 4, 2014

MassMutual Agrees to Settle Revenue Sharing Lawsuit

Massachusetts Mutual Life Insurance Company (MassMutual) has agreed to settle a lawsuit brought by a 401(k) plan sponsor alleging the company breached its fiduciary duties when it received certain revenue sharing payments.
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MassMutual has agreed to pay $9,475,000 to 401(a) and 401(k) plan clients it serviced via group annuity contracts to settle charges that it violated the Employee Retirement Income Security Act (ERISA) when it received revenue sharing payments from mutual funds and investment advisers. Plaintiff Golden Star Inc. alleged these payments were essentially “kickbacks” that constituted prohibited transactions under ERISA.

MassMutual had previously moved for summary judgment on the case, saying it was not an ERISA fiduciary. However, U.S. District Judge Patti B. Saris, of the U.S. District Court for the District of Massachusetts, found MassMutual exercised discretionary authority to determine its own compensation by setting separate investment account management fees (up to a maximum), which in combination with revenue sharing payments (RSPs), make up the provider’s compensation package. She ruled this makes MassMutual a “functional fiduciary.”

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The settlement agreement also calls for MassMutual to notify clients 60 days ahead of time of planned fund changes and to get consent from clients to change the funds. MassMutual is also to disclose expense ratios and any other fees for each fund, as well as any revenue sharing payments it receives.

A joint statement from MassMutual and the plaintiff provided to PLANSPONSOR says, “Both parties are pleased to have reached an agreement to amicably resolve this matter.  While Golden Star is confident of its claims, and MassMutual continues to deny any wrongdoing and believes that its actions fully complied with the law, this settlement helps to avoid the additional expenses, distraction and uncertainties associated with continued litigation, while providing substantial and meaningful benefits to the members of the class, including a cash payment of $9,475,000.”

The settlement agreement in Golden Star v. Massachusetts Mutual Life Insurance Company is here.

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