Benefits August 29, 2022

California Expands State Retirement Savings Program

CalSavers access was boosted for an estimated 750,000 workers, according to the state of California.   

Reported by

The Golden State is expanding the mandate for businesses to provide access to retirement savings for employees where workers can save and invest for their golden years.   

California Governor Gavin Newsom has signed a state bill expanding the state sponsored retirement plan, CalSavers, to broaden access for private sector workers who do not have a retirement plan available through their employer. 

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

“This bill is a major step toward improving retirement security for all working Californians,” California State Treasurer Fiona Ma in a statement. “For the business community, this bill ensures the smallest employers will no longer be excluded from a valuable tool for employee recruitment and retention.”

Starting January 1, 2023, the legislation requires employers with at least one employee—who is not the owner of the business—to participate in the state program. Employers that are mandated, with less than five employees, have until December 31, 2025, before they must register.   

CalSavers is one among several state sponsored retirement plan arrangements that provides a retirement savings and investment avenue for private employees who are without one at work. Besides California, Connecticut, Illinois, Maryland, Massachusetts, Michigan and New York are among the other states in various stages of standing up retirement plans for private workers, according to the National Conference of State Legislatures.

A survey from ShareBuilder 401(k) found that 74% of small businesses do not provide employees with an option dedicated for tax-preferred retirement savings and investment at work, earlier this year. State programs like California’s and others including OregonSaves aim to fill this gap for private-sector workers.

Retirement plan deferrals made through state programs are similar to other defined contribution plans, with payroll deductions to individual retirement accounts, where employees select a certain amount from their paycheck to defer for retirement. The IRA tax-deferred savings limits of $6,000 per year apply to the auto-IRA programs, while employer-sponsored 401(k) and other DC plans have a savings limit of $20,500.

“SB 1126 will ensure that nearly every working Californian has access to a workplace retirement savings program,” Bill author state senator Dave Cortese, D-San Jose, said in a statement. “By assisting both employers and employees, this legislation will help millions of Californians save for their future so that they can retire with security and peace of mind.”   

According to the release, more than 106,000 California employers have signed up for CalSvers. The program comprises 331,000 funded accounts and $273 million in assets, a spokesperson says. 

Senate Bill 1126 was written Cortese and sponsored by Treasurer Ma. She is also chairperson of the CalSavers Retirement Savings Board.

Compliance August 26, 2022

UnitedHealth CFO Rex Is Named a Defendant in ERISA Lawsuit

Plaintiffs’ attorneys have filed an amended Employee Retirement Income Security Act complaint, adding two new claims. 

Reported by

Plaintiffs have filed an amended complaint against UnitedHealth Group, adding Chief Financial Officer John Rex as an individual defendant to the Employee Retirement Income Security Act lawsuit.

The amended complaint alleges Rex violated his plan fiduciary duties under ERISA when he intervened to retain the Wells Fargo Target Fund Suite on UnitedHealth’s retirement plan. The plaintiffs added two new ERISA violation claims against all defendants, including Rex, for breaching the fiduciary duty of loyalty by engaging in prohibited transactions and failing to adhere to plan documents and instruments, according to the complaint.

Get more!  Sign up for PLANSPONSOR newsletters.

“The UnitedHealth defendants kept on the plan one of the worst-performing investment suites in the entire market—the Wells Fargo Target Fund Suite—and made it the default investment for the plan’s participants for over a decade,” the complaint states. “Throughout its entire existence, the Wells Fargo Target Fund Suite delivered abysmal investment results, and any prudent fiduciary would have swiftly removed the Wells Fargo Target Fund Suite.”

UnitedHealth Group responded to a request for comment on the litigation by blasting the law firm.

“Enterprising lawyers may choose to pursue baseless claims, but nothing in the law supports using hindsight and apples-to-oranges comparisons to question good-faith investment decisions made in the best interests of retirement plan participants, which generated hundreds of millions of dollars in retirement income for our employees while reasonably aiming to protect them from outsize losses in bear markets,” a spokesperson says. “There is no basis for adding our CFO as an individual defendant, and the allegations against him are completely without merit.”

The complaint also alleges that UnitedHealth Group and Rex were informed that the underperforming target-date suite should be replaced.

The amended complaint’s additional allegations are based on documents obtained by the plaintiffs’ attorneys during discovery, according to a release from the firm Sanford Heisler Sharp.

The plaintiffs allege that the Minnesota-based insurer failed to put the interests of retirement plan participants and employees ahead of business interests by selecting underperforming target-date funds managed by Wells Fargo as the default investment option in the 401(k) plan. 

“After consulting with the plan’s independent investment consultant, Mercer, the Investment Committee itself recognized by 2016 that the Wells Fargo Target Fund Suite should be removed,” the complaint states. “But UnitedHealth’s executive leadership, led by CFO John Rex, focused on UnitedHealth’s lucrative business relationships with Wells Fargo and overruled the plan to remove the Wells Fargo Target Fund Suite.”

Plaintiffs further allege that UnitedHealth managed the retirement plan irresponsibly.   

“To justify keeping Wells Fargo, UnitedHealth sidelined the plan’s independent investment consultant from the decision-making process, threw out key findings that the investment committee had made about what type of target-date suite would best serve the plan’s participants, abandoned the investment committee’s established criteria for screening target-date managers, and concocted a pretext to justify retaining Wells Fargo’s target date funds on the plan,” the complaint states.

“Rather than acting with a singular focus on the needs of the plan’s participants and beneficiaries, the UnitedHealth defendants made the decision at least in part to curry favor with, and benefit, UnitedHealth’s key business partner, Wells Fargo, and advance UnitedHealth’s self-interests,” the complaint continues. “In doing so, the UnitedHealth Defendants flagrantly violated ERISA.”

The original complaint, made in 2021, was certified as a class action in February 2022. It was brought in the U.S. District Court for the District of Minnesota. The original complaint alleged two fiduciary breach violations for duty of prudence and duty to monitor the plan’s investments and performance.

The previously named defendants were United Health Group, its board of directors and the UnitedHealth Group employee benefits 

The lawsuit, Kim Snyder versus UnitedHealth Group; the board of directors of UnitedHealth Group; and its members David Wichmann; John Rex; and the UnitedHealth Group Employee Benefits Plan Investment Committee and its members is case 0:21-cv-01049-JRT-BRT.

«

Thank you so much for your interest in our content. Please register to access this complimentary archived content. By registering, you will receive our newsletter which can be opted out of at any time.

 

 

Already Registered? Click here to confirm.