Compliance June 27, 2019

Employees’ Plans to Work Longer Could Be Thwarted by Age Bias

Two more age bias cases were filed recently by the Equal Employment Opportunity Commission, and an agency report says age discrimination can thwart employees’ plans to work longer and could affect retirement plan drawdown strategies.

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Increasing longevity and inadequate retirement savings have many employees planning to work past the traditional retirement age, either by choice or out of necessity.

Northwestern Mutual’s 2019 Planning & Progress Study found 46% of Americans expect to work past the traditional retirement age of 65. Nearly one out of five Baby Boomers (18%) and an equal percentage of Generation X (18%) expect to work even longer—past the age of 74. Of Americans who expect to work past age 65, 47% say it will be out of necessity.

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Another study found women have lower retirement savings and are saving less than men, and more women than men report planning to retire later because they’ll need to.

Yet the Equal Employment Opportunity Commission (EEOC) continues to find age bias among employers. Most recently, it sued the State of New Mexico, Corrections Department (NMCD), alleging it discriminated against several employees by denying them promotions and job assignments as well as in other terms, conditions, or privileges of employment because of their ages, as well as suing Liberty Support Services, Inc. in North Carolina for laying off and not rehiring employees because of their age.

According to the EEOC’s lawsuit, the rest area attendants—all older than age 40—were laid off during renovations but were not told that they were being discharged. They expected to return to their jobs after the renovations were completed but learned they had been discharged and replaced with employees younger than age 40.

A report by Victoria A. Lipnic, then acting chair of the EEOC, says age discrimination can thwart employees’ plans to work longer and could affect retirement plan drawdown strategies. During a hearing in 2017, witnesses made suggestions about how regulators and employers can reduce age discrimination and help people work longer.
Compliance June 27, 2019

Gucci Settles Excessive Fee Suit

The company will pay $1.2 million, of which, $395,000 goes to class counsel.

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Gucci will pay $1.2 million to settle a lawsuit alleging the company and its benefits committee breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA) by offering plan investments with excessive fees, among other things.

The defendants were accused of charging excessive administrative and investment fees to plan participants. In particular, the plaintiff claimed the defendants failed to “fully disclose to participants the expenses and risks of the Plan’s investment options; breached their fiduciary duties under ERISA by allowing unreasonable expenses to be charged to participants for administration of the Plan; and breached their fiduciary duties under ERISA by selecting and retaining opaque, high-cost, and poor-performing investments instead of other available and more prudent alternative investments.”

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The complaint also stated that Gucci America was “particularly egregious” in regards to offering proprietary funds from its service provider Transamerica Retirement Solutions as investment options for participants.

Of the gross settlement amount, $395,000 will go to class counsel and $5,000 will go to the plaintiff as compensation for class representation, upon final approval of the court.

The settlement agreement says the defendants admit no wrongdoing or liability with respect to any allegations in the complaint.

There were no conditions of change to plan design or processes in the settlement agreement as has been seen in a few other cases that have settled.

The lawsuit against Gucci is an example of the trend of excessive fee lawsuits moving to smaller plans. A lawsuit filed by a participant in the Checksmart Financial 401(k) Plan was time-barred by a federal district court, and a $500,000 settlement was reached in a lawsuit alleging that fiduciaries to the $500 million 401(k) program offered by Pioneer Natural Resources USA breached their ERISA duties regarding investments and investment fees.

More recently, a participant in the Greystar 401(k) Plan filed a proposed class action excessive fee lawsuit against the firm. In 2017, the Greystar plan submitted financial information and other forms to the federal government under plans with assets between $100 million to $250 million.

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