Compliance June 14, 2024

$30B in U.S. Savings Bonds are Unclaimed, House Urges More Data Sharing

SECURE 2.0 requires the Treasury to share data with states to facilitate the claiming of abandoned bond assets.

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A total of 25 members of the House of Representatives, led by Representatives Sean Casten, D-Illinois, and Ann Wagner, R-Missouri, wrote to the Treasury Department on Thursday, urging them to share more data to help unclaimed savings bonds to be claimed. There are approximately $30 billion in unclaimed federal bonds.

Section 122 of the SECURE 2.0 Act of 2022 requires the Treasury to share information with state governments so that they can use that data to locate the bond owners in accordance with their standards for abandoned property recovery.

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In October 2023, Treasury proposed a rule on how to share relevant data. The letter argues that many of the restrictions in the proposal are unreasonably burdensome: “The proposed rule includes restrictions that would require states to rely solely on Treasury’s redemption processes, which would make it difficult for them to support claims. The proposal also prohibits states from releasing information to the public without written approval [from Treasury], a condition that seems unlikely to be granted.”

The letter then urged the Treasury to modify the proposal to “allow states to share information online and collaborate to align the bond program and states unclaimed property laws to maximize bond recoveries and redemptions.”

Many states use unclaimed property web pages to help their residents, and so not permitting them to share information online would undermine this “proven and trusted reunification tool.”

Bond owners can become unaccounted for if they die, move and do not update contact information, or lose relevant documents and are unable to prove ownership of the savings bonds.

Compliance June 14, 2024

DOL Argues That Class Action Waivers in Plan Agreements Are Unenforceable

Most appeals courts have so far agreed with them.

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The Department of Labor filed an amicus brief to the U.S. 6th Circuit Court of Appeals in May which argued that a mandatory arbitration provision in a 401(k) plan document is unenforceable if it is tied to a class-action waiver.

The case in question is Tanika Parker et al. v. Tenneco, Inc., et al. First brought in April 2023, the suit alleges that Tenneco and its affiliates maintained a plan with excessive fees. Tenneco argued that the case should be sent to arbitration individually, per their plan documents.

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The district court disagreed, because the combination of mandatory arbitration and a class action waiver compels the participant to forfeit a statutory right, namely to secure plan-wide relief for fiduciary misconduct.

The defendants then appealed to the U.S. 6th Circuit Court of Appeals. The DOL filed an amicus brief for the case in December 2023 at the appeals court. The department argued that “the district court correctly refused to compel arbitration because the Arbitration Procedure includes a non-severable provision precluding Plaintiffs from obtaining in arbitration the very relief that ERISA expressly allows them to seek in court,” that being plan-wide remedies.

The DOL asked the court to uphold the ruling that “the Representative Action Waiver is unenforceable because it prevents the effective vindication of Plaintiffs’ statutory right to seek plan-wide relief.”

In May, DOL sent a supplementary amicus brief to the 6th Circuit. This was in reaction to a decision of the U.S. 2nd Circuit Court of Appeals, which ruled in another case, Cedeno v. Sasson, on May 1 that the class action waiver was unenforceable. The DOL wrote that the plaintiff’s “avenue for relief under ERISA is to seek a plan-wide remedy, and the specific terms of the arbitration agreement seek to prevent Cedeno from doing so,” which renders the agreement unenforceable.

The U.S. 3rd and 10th Circuit Courts of Appeal have also previously ruled this way in similar cases.

The Supreme Court in October 2023 declined to hear two cases concerning the enforceability of mandatory arbitration and class action waivers in plan documents. Those cases, from the 10th and 3rd Circuit Courts of Appeals, the defendants’ moves to force individual arbitration and prevent a class action remedy were denied.

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