Compliance July 13, 2022

Parties File Settlement Agreement in MEP ERISA Lawsuit

The gross settlement amount tops $1 million, of which a third can be used to pay the plaintiffs’ attorneys’ fees.

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A settlement agreement has been filed in an Employee Retirement Income Security Act lawsuit involving the professional employer organization Nextep Inc., its board of directors and investment committee for a multiple employer plan the organization operates.

The complaint in the case alleged excessive investment and recordkeeping fees, stating that, as a large plan, the MEP had substantial bargaining power regarding the fees and expenses that were charged against participants’ investments. They alleged the defendants, however, did not try to reduce the plan’s expenses or exercise appropriate judgment to scrutinize investment fees or negotiate better rates for recordkeeping and administration services.

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The plaintiffs in the case are represented by the highly active law firm Capozzi Adler, which has been involved in an extensive amount of ERISA litigation over the past several years. The settlement agreement, which includes a gross settlement amount of $1.1 million, stipulates that as much as a third of these funds can go to pay the plaintiffs’ attorneys’ fees, leaving about $680,000 (less admin costs/expenses) to be distributed among the sizable class of plaintiffs.

The full text of the settlement agreement is available here.

Data and Research July 13, 2022

Biggest Investor Worries Are Inflation and Recession Risk

Investors put heavier weight on retirement income protection than financial professionals.

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Top retirement income concerns for investors are inflation and recession anxiety, a new report reveals.

The Alliance for Lifetime Income and CANNEX research from the “Protected Retirement Income and Planning Study” found that four out of five U.S. workers age 45 to 75 cited concerns that high inflation will reduce their spending power in retirement (81%) and that a recession will drive the economy downward and may reduce the amount of retirement income they can expect (79%).

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Retirement income anxiety is fueling workers to examine alternatives to traditional asset allocation strategies, according to the study. The study also found that 60% of consumers have reduced their spending because of inflation.

“Against the backdrop of record inflation, a bear market and global economic uncertainty, the misalignment in what financial professionals are relying on to create retirement income, and what clients are looking for, is a problem,” Jean Statler, CEO of the Alliance for Lifetime Income, said in a release.

The research comprises two studies: one among investors age 45 to 75 with $100,000 or more in investable assets, and another among financial professionals. Both studies examine how several protected retirement income tactics could fit with approaches to retirement planning and the frequency with which investors and financial professionals consider or use annuities to address various retirement income needs.

The first study found that 71% of investors age 45 to 54 —whether or not they own annuities—have some interest in purchasing an annuity. Among investors, 36% are not very interested, 37% are somewhat interested, 14% are extremely interested and 13% already own an annuity, the study found.

Investors under the age of 55 are also more interested in annuities as part of their retirement income than Baby Boomers, as 58% of those age 45 to 54 have considered the product to provide retirement income, the study found. The share of investors protected by an annuity or pension does decline significantly by age.

Among investors 45 to 64, 45% of the cohort does not have a source of protected income from a pension or annuity expected to be set aside for retirement, and 56% of investors who have a 401(k)-type account are at least moderately interested in investing in annuities via their employer plan.

While 66% of investors are protected with an annuity or pension, 87% of investors are confident that they will have sufficient income to cover all expenses throughout retirement.

“The chasm between consumers and financial professionals when it comes to protecting and spending money in retirement continues to confound in this latest survey,” Statler added. “Ninety-two percent of financial professionals are worried about inflation reducing client spending power, and so it’s good that many of them have changed their retirement planning approach this past year. But for those financial professionals who tell their clients to simply ride out the risks and are not considering protected income options like annuities, don’t be surprised if you find them going elsewhere for advice.”

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