Compliance August 2, 2005

Employer Provided Prompt Reemployment Under USERRA

August 2, 2005 (PLANSPONSOR.com) - A US District Court judge has ruled in favor of Sykes Enterprises Inc. saying the company met the requirements for prompt reemployment of two employees returning from Iraq under the Uniformed Services Employment and Reemployment Act (USERRA).
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In his opinion, Chief District Judge Daniel Hovland of the US District Court for the District of North Dakota found that Ron Vander Wal’s employment on the day he first said he was available and Michael Vender-Dahl’s employment seven business days after he reapplied with the company constitutes prompt reemployment under USERRA.

Upon returning from National Guard duty in Iraq in March 2004, Vander Wal went to his former employer and asked to speak to the Human Resource Administrator, Cassie Thompson.   She was not available, but Vander Wal filled out an application at that time.   According to the court document, on his application he noted he was not available to return to work until May 4, 2004 because he needed time to get his personal affairs in order.   When he did speak to Thompson on April 6, she indicated that there were no jobs available.   Vander Wal learned through his attorney that Sykes had advertised for two vacant positions that spring.   Vander Wal did not mention his veteran status and assumed Thompson knew he was a returning veteran.  

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On April 23, Vander Wal’s attorney faxed a letter to Ken Cass, Sykes Director of Employment Compliance, demanding the immediate rehire of Vander Wal.   The letter gave Sykes a deadline of April 27 to return him to work.   Cass did not receive the letter until April 27 due to problems with the company’s fax machine.   The court document states that he called the attorney to ask for more time to review the situation, but the attorney denied the request.   Within 48 hours Vander Wal was offered a position beginning on May 4, the first day he said he was available to work.

Around April 23, Vender-Dahl, who had also returned from National Guard duty in Iraq, went to Sykes to inquire about his former position.   He was told that in the previous year he had been laid off, but should reapply.   The court document notes that he was offered a position four business days after he applied and was told to return to work on May 4.

Hovland conceded that USERRA does not clearly define what constitutes prompt reemployment, but said, “It is clear that USERRA does not require immediate reemployment but instead “prompt reemployment” which depends on the facts and circumstances of each particular case.   He noted that in a prior case the US 5 th Circuit Court of Appeals decided that “prompt reemployment” means as soon as practicable under the circumstances of the case.  

Hovland noted that there was no denial of reemployment and that there was nothing to contradict Vander Wal’s note on his application that he was not available to work until May 4.   He also said that Vender-Dahl’s return to work within seven business days of applying was reasonable to allow the company to prepare for his return to work; organizing training and setting up his computer.

The opinion in the case of Vander Wal v. Sykes Enter. Inc., D.N.D., No. A1-04-49, 7/21/05 can be found  here .

Benefits August 1, 2005

Study: DC Default Option Choice Important

August 1, 2005 (PLANSPONSOR.com) - Even though eight in 10 defined contribution plan sponsors currently feature a fixed-dollar mutual fund as their retirement plan default investment option, a new research study suggests that choice may not be the best one.
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The reason, according to the study from the Vanguard Center for Retirement Research: such investments are primarily designed for short-term savings goals and not for long-term objectives such as funding one’s retirement.

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“The choice of a fixed-dollar fund seems inconsistent with two main investment principles underlying participation education programs: the existence of a positive equity-risk premium and the inverse relationship between age and risk-taking ability,” the Vanguard researchers wrote.

Instead, the researchers asserted, plan sponsors should consider a balanced fund or a balanced fund of funds investing in both equities and fixed income. “For participants who are unsure of how to make investment choices, often the simplest and lowest-cost solution is a balanced investment fund,” the Vanguard researchers wrote. “Yet the law does not encourage employers and providers to communicate this simple fact.”

Focusing on 1,900 defined contribution plans administered by The Vanguard Group, the researchers found that 53% of plan sponsors had designated a money market fund while 27% listed an investment contract fund and 1% a bond fund as their default. The researchers said the data, as of December 2004, reflects a slight movement to balanced or equity options as defaults.

Among 15 plans featuring auto enrollment, however, 40% of plan sponsors chose a balanced or equity fund and 60% opted for a money market or investment contract fund.

The default fund decision can be an important one, the Vanguard researchers emphasized. In a Vanguard simulation, researchers found that over 30 years, a participant in the balanced fund default ended up with a median value of $469,000 while one in the fixed-collar default ended with $287,000.

By educating participants that the default option exists, plan sponsors would be giving considerable help to a particular group of employees. “The active use of default funds would meet the needs of participants unable or unwilling to make investment decisions,” the Vanguard researchers wrote. “Moreover it would be an easy way for sponsors to encourage long-term investment decisionmaking.”

The study report is here .

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