Data and Research January 30, 2017

Employer Benefits Can Play Key Role in Decision to Retire

Retirees who based their retirement decision on eligibility for employer benefits or other employer incentives seemed to be enjoying retirement more than retirees with other motivations, and they were less likely to regret their decision to retire, a survey found.
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For most people, the decision to retire was prompted by both personal and professional circumstances, according to a survey of 4,049 retirees age 65 and older by Willis Towers Watson.

More than one-quarter of surveyed retirees cited employer incentives—such as eligibility for retirement and retiree health benefits—as their main motivation to retire. Among more recent retirees, however, the relative importance of employer programs has declined, while workplace environment and eligibility for Social Security and Medicare play larger roles.

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Retirees who based their retirement decision on eligibility for employer benefits or other employer incentives seemed to be enjoying retirement more than retirees with other motivations, and they were less likely to regret their decision to retire.

As more people delay retirement, the work environment is assuming a larger role in retirement decisions, with workers’ feelings about their jobs becoming increasingly instrumental. More than one in five retirees (23%) cited disengagement with their job as a key reason for deciding to retire. This is signaling that changing the work environment could open up alternative ways for employers to influence employees’ retirement timing, counterbalancing the receding impact of direct employer incentives.

This is important for employers. Those who retired because of dissatisfaction with their workplace had more negative experiences: 31% felt they had retired too soon, 24% had difficulty adjusting and 23% worried about whether they could afford retirement. Towers Watson says this is likely to become more problematic in the future, as more employees continue working because they can’t afford to retire, despite feeling disappointed and less engaged with their jobs.

More findings from “Why Workers Retire When They Do: A Survey of U.S. Retirees” may be found here.

Compliance January 30, 2017

Edward Jones’ Attempt to Dismiss Self-Dealing Suit Denied

A federal judge denied defendants’ motions in part because the plaintiff’s complaint states viable claims.
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A federal court judge has denied most of Edward Jones’ motions to dismiss a lawsuit alleging the company favored its own investments and those of its “preferred partners” in its 401(k) plan, at the expense of performance.

The Edward Jones defendants argue that the breach of fiduciary claims should be dismissed because they fulfilled their duties by offering an array of investment options. Plaintiff Charlene F. McDonald’s complaint asserts that defendants violated their fiduciary obligations and affiliated themselves with funds which benefited defendants at the expense of the plan participants. U.S. District Judge Rodney W. Sippell of the U.S. District Court for the Eastern District of Missouri Defendants’ found Edward Jones’ defense that they offered an array of investment options does not insulate them from McDonald’s claims.

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Edward Jones defendants argue that the complaint fails to state a claim for a breach of fiduciary duties and for a failure to defray plan expenses, but Sippell found the complaint, when read as a whole, has provided sufficient facts to plausibly state these claims. Defendants dispute the complaint’s factual allegations and argue that they acted within the Employee Retirement Income Security Act’s (ERISA) standards. “In deciding a motion to dismiss I must determine whether the complaint states a claim for relief. Defendants’ arguments in support of their motion to dismiss challenge the factual allegations of the complaint and are premature at this stage of the litigation,” Sippell wrote in his opinion.

NEXT: Lack of standing and claims are time-barred

The court rejected defendants’ argument that McDonald does not have standing to challenge the defendants’ duties regarding the plan funds in which she did not personally invest. Sippell noted that in addition to bringing claims on her own behalf, McDonald is seeking relief on behalf of the plan. In a suit brought pursuant to ERISA, a plan participant may seek recovery for the plan even where the participant did not personally invest in every one of the funds that caused an injury to the plan, he concluded.

Sippell also rejected Edward Jones’ argument that McDonald’s breach of fiduciary duty claims are time-barred. McDonald’s complaint alleges that defendants breached their fiduciary duties by making imprudent investments. Section 1113(2) of ERISA provides that a limitations period to bring an action runs from three years after the earliest date on which the plaintiff had actual knowledge of a breach of the statute. In her complaint McDonald alleges that she did not discover the “substance of deliberations, if any, of defendants concerning the plan’s menu of investment options or selection of service providers during the class period” until shortly before commencing the action. Sippell noted that for purposes of a motion to dismiss, a plaintiff’s factual allegations are deemed true. “It appears from the face of the complaint that this action was timely filed,” he wrote.

Finally, the defendants argue that defendant Jones Financial, Edward Jones parent, should be dismissed from this action because it was not a plan fiduciary. Sippell found that McDonald’s complaint does not allege that Jones Financial was a plan fiduciary nor does it assert any facts which would establish Jones Financial was a plan fiduciary, so he granted the motion to dismiss as to Jones Financial.

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