Participants June 13, 2017

Competing Priorities Keep Participants From Saving What They Should

A Lincoln Financial survey finds a disconnect between participants’ confidence about retirement and their actions.
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Lincoln Financial Group’s 2017 Lincoln Retirement Power Participant Study showed that while most plan participants are confident and optimistic about their retirement savings, they acknowledge that they are saving less than they think they should to meet their retirement savings needs. The study shows that competing financial priorities are the culprit producing this conundrum of confidence.

In 2012, when Lincoln Financial conducted its first Retirement Power study, only 29% of respondents reported being confident and 45% said they were optimistic about their retirement savings. This year’s study found 39% of respondents saying they feel confident, and more than half (55%) feeling optimistic.

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Two-thirds of retirement plan participants understand they should be saving at least 10% of their salary to stay on track, and 45% believe they need to save 15% or more. However, only four in 10 savers are putting away what they think is necessary, and, among the savers saving less, the majority (68%) would need to up their savings by 5% or more to be on track.

The more competing priorities a participant reports, the less money he contributes to his retirement plan, the survey found. Only 36% of individuals with eight or more competing priorities contribute 10% or more to their retirement plan, but of those with two or fewer priorities fighting for a share of their wallet, 59% contribute at least 10%, and 40% put 15% or more away for retirement.

Student loan debt has a major impact on retirement savings, no matter how many competing financial priorities a participant reported. Six out of 10 people with student loan debt said it is keeps them from saving more for their retirement.

“Savers today face many financial pressures, and the reality is that the majority are going to be responsible for their own retirement,” says Jamie Ohl, president, retirement plan services, Lincoln Financial Group. “As an industry, we have helped people understand the importance of saving. Now, it’s up to us to help them save more so they can achieve the retirement they envision.”

Compliance June 13, 2017

Sponsor Settles Northrop Grumman ERISA Suit

A bench trial began this March 14, and the settlement was initially struck after three days of trial.

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Employees of Northrop Grumman have reached an agreement with their employer to resolve claims in the long-running matter of In re Northrop Grumman Corp. ERISA Litigation, a class action lawsuit initially filed back in 2006.

The parties reached a $16.75 million settlement amount, to be used to improve the administration of the retirement plans in question and to compensate employees and retirees. In the underlying suit, the plaintiffs alleged, among other claims, that Northrop fiduciaries violated their duties to employees in two 401(k) retirement plans by improperly causing those plans to pay Northrop for administrative services.

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The case was interpreted as a classic example of an Employee Retirement Income Security Act (ERISA) self-dealing challenge. This type of charge is often leveled against the retirement plans being run by investment providers and recordkeeping providers themselves, but increasingly non-investment-industry sponsors are accused of similar conflicts.

A motion for approval of the settlement was filed by the parties in the Court of Judge Andre Birotte Jr. of the U.S. District Court for the Central District of California. A bench trial began this March 14, and the settlement was initially struck after three days of trial. The settlement extends to conduct occurring between September 28, 2000, and May 11, 2009, according to the plaintiffs.

The settlement does not cover claims raised in Marshall v. Northrop Grumman Corp., a second case against Northrop last September. This second piece of litigation posits similar allegations on behalf of Northrop employees and retirees, for conduct occurring from 2010 to the present. That matter is also playing out in the Central California District Court.

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