Compliance March 8, 2012

Court Dismisses Claims of Improper Investment Selection

March 8, 2012 (PLANSPONSOR.com) – A federal court dismissed a 401(k) plan participant’s claims that plan fiduciaries inappropriately selected plan funds and allowed excessive fees.
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The U.S. District Court for the Southern District of New York found that Bruce Laboy’s claim of inappropriate selection of the plan’s default fund was time barred, and that Laboy failed to specifically allege that other plan investments underperformed or to compare their performance to any comparable funds. U.S. District Judge Harold Baer, Jr. said Laboy failed to state a claim that either the default fund or the alternative funds were imprudently selected or monitored.  

According to the opinion, Laboy’s claim of excessive fees for the funds also fails. Even among Laboy’s handpicked group of funds, the fees charged by the default fund are not outliers: one fund has higher management fees, a second has identical management fees, with the remaining six funds charging fees that are lower by varying amounts, the court found. Laboy also failed to allege facts indicating that the default fund fees were excessive in light of the services rendered, and as to the other funds, Laboy failed to provide any evidence of their expenses at all.   

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Baer noted that decisions in which courts have allowed allegations of imprudence to go forward rested on allegations that the defendants selected certain funds out of self-interest or demonstrated clear incompetence. In the present case there is no similar allegation that defendants chose funds with high fees based on affiliation with the defendants or the plan sponsors.   

Though he dismissed the claims, Baer granted Laboy leave to amend the complaint within 30 days. 

According to the opinion, Local 32BJ is a union with more than 120,000 members within the Service Employees International Union. After a qualifying period, members of 32BJ are eligible to participate in a defined contribution 401(k) plan. Putnam Investments provided investment services to plan participants from January 1, 2001, until June 2011. Participants had the option of self-directing investments among 14 alternative funds or allowing their funds to be invested in the default fund, Putnam Asset Allocation: Conservative Portfolio.  

The opinion in Laboy v. Board of Trustees of Building Service 32BJ SRSP is here.
Benefits March 8, 2012

March Madness to Cost Employers $175M

March 8, 2012 (PLANSPONSOR.com) - The 2012 NCAA basketball tournament will result in millions of hours in lost work productivity, as workers watch games, check scores and manage office pool brackets at work.
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According to a survey from Challenger, Gray & Christmas Inc., based on last year’s data, online March Madness coverage could attract more than 2.5 million unique visitors per day, each spending an average of 90 minutes watching games. With private-sector workers earning an average of $23.29 per hour, Challenger estimates that employers will end up paying distracted workers approximately $175 million for the first two full days of the tournament.

Challenger states that a survey by MSN indicates 86% of respondents said they plan to devote at least some time during their work day to follow games, scores and updates, showing a 5% increase from last year (81%).

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A more detailed breakdown of the MSN survey data revealed that more than half (56%) plan to dedicate at least one hour of work during the first two days of the tournament to watching games or following scores, with 11% saying they will do the same for at least five hours and 6% saying they take the first two days off.

In the MSN survey, 31% of respondents said they planned to enter at least two betting pools. That is down from 58% who entered two or more pools last year. That may provide some relief for department managers, but the survey shows that 58% still plan to enter at least one pool.

This year’s tournament will begin on Tuesday, March 13 and the 32 second-round games take place on Thursday, March 15 and Friday, March 16, with games starting at noon Eastern time, right in the middle of the workday. 

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