English-Language SPDs May Not Violate ERISA

August 20, 2014 (PLANSPONSOR.com) – A court has dismissed a claim that a company violated federal law by not sending a Spanish-language retirement plan document to Hispanic participants.

U.S. District Judge Ellen Lipton Hollander of the U.S. District Court for the District of Maryland, noted that the Employee Retirement Income Security Act (ERISA) provides: “A summary plan description of any employee benefit plan shall be furnished to participants and beneficiaries…” and the “summary plan description … shall be written in a manner calculated to be understood by the average plan participant.” The plaintiffs in the case claim that the “average participant in the Defendant Plan speaks and reads Spanish as his primary language, and requires translation assistance with reading or speaking English.”

According to the court opinion, ERISA contains no express requirement that a summary plan description (SPD) be provided in multiple languages, but a section of the law provides, “In the case of either (1) A plan that covers fewer than 100 participants at the beginning of a plan year, and in which 25% or more of all plan participants are literate only in the same non-English language, or (2) A plan which covers 100 or more participants at the beginning of the plan year, and in which the lesser of (i) 500 or more participants, or (ii) 10% or more of all plan participants are literate only in the same non-English language, so that a summary plan description in English would fail to inform these participants adequately of their rights and obligations under the plan, the plan administrator for such plan shall provide these participants with an English-language summary plan description which prominently displays a notice, in the non-English language common to these participants, offering them assistance.”

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Hollander pointed out that the regulation does not require that documents be provided in a foreign language, but rather, the documents must include a notice of assistance in the foreign language. But, she said it was more important to the case that the regulation applies only if a certain number or percentage of participants are “literate only in the same non-English language.”

Hollander found the plaintiffs in the case did not allege facts sufficient to demonstrate the applicability of the regulation. They allege that they are “40 Spanish-speaking employees” whose “first language” is Spanish, but their complaint contains no allegation regarding the number of total plan participants, the percentage of total plan participants who are only literate in Spanish, or even that they are only literate in Spanish. Therefore, Hollander found they do not state a claim for relief. Though she dismissed the claim, she allowed for the plaintiffs to file an amended complaint within 17 days following the submission of her order, “[b]ecause plaintiffs may be able to remedy the shortcomings of the Amended Complaint.”

Hollander also ruled the plaintiffs’ second allegation—that they were not provided summary plan descriptions within 90 days of becoming participants—even if true, does not give rise to a private cause of action under ERISA because the plaintiffs did not allege that they suffered any harm as a result.

One plaintiff also claimed he was not provided requested plan documents within the time requested by ERISA. He sent a request for plan documents to the plan’s recordkeeper, and the recordkeeper responded via letter that it was not the plan administrator, and any requests should be sent to the plan administrator. The plaintiff argued that the plan administrator was notified of his request by the recordkeeper’s reply, but Hollander pointed out that the reply did not specifically mention that he requested plan documents. Separately, the plaintiff sent a request to the plan administrator and received the documents four days past the 30-day ERISA deadline for responding to document requests, so Hollander ordered that the plaintiff was entitled to statutory damages of $100 per day, for up to four days, depending on when the documents were sent.

The opinion in Melendez v. Hatfield’s Equipment & Dedication Services, Inc. is here.

A New Employee Benefit Is Evolving: Financial Wellness

August 20, 2014 (PLANSPONSOR.com) - Employee financial education is moving from a product-driven model to a true planning model.

“When I first started [in this business], there was a model of financial education in which financial planners were focused on capturing assets and the investing strategies for those assets, so the business was focused on those with higher incomes and assets to invest,” noted Linda Robertson, certified financial planner with Financial Finesse, during a webcast hosted by the firm. “Most employees were financially stressed and so they were not targeted for financial planning. They had no help with basic financial and savings habits.”

Robertson pointed out that now regulators and plan sponsors want employees to have unbiased help from people or companies with no sales focus and no hidden agendas. In addition, there is a bigger focus on financial wellness—looking at the basics of budgeting and saving—which encompasses all employee benefits and focuses on positive savings habits to help employees reach all their financial goals.

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Liz Davidson, founder and CEO of Financial Finesse, added that employees need different financial lessons (and different benefits and insurance products) at different points in their lives. “We should get employees to a point where they have investable assets, then we can help them decide how to invest,” she said.

According to Robertson, financial wellness is becoming a new employee benefit. She cited an Aon Hewitt study that found 76% of employers indicated they plan to implement financial wellness programs or extend existing programs to more employees. Robertson also said more employer inquiries to Financial Finesse are about total financial wellness programs, rather than just retirement education.

According to Davidson, financial wellness programs are increasingly marketed as an additional employee benefit. Information about the programs are included in all benefits communications—on company Intranet sites and benefits handbooks. “Employers want employees to see it as an important overall component of pay, the culture of the company, and the employer’s concern for them,” she said. The approach to financial wellness and benefits is more personalized now; communications speak to employees about their own financial goals instead of a general “here are all employee benefits and the considerations for choosing them.”  

Employers are also highlighting how the financial wellness help is unbiased and how it will benefit employees. As a result, according to Davidson, there is a personal connection employees make with employers, and almost 100% appreciation by employees of this benefit.

Financial wellness programs continue to evolve. According to Robertson, in 2011, 54% of Financial Finesse clients used personalized financial coaching, while 46% used group sessions in their financial wellness programs. Last year 71% used personalized coaching and 29% used group sessions. “Technology has helped with this,” she noted.

Financial Finesse offers clients an online financial wellness center for employees. Robertson pointed out employees can use it on their own time. They select priorities for the self-assessment, and the program tells them key vulnerabilities. For example, someone may have serious debt or not have an emergency fund; the program would tell that person actionable next steps to improve their situation, such as to contact creditors to request lower interest rates or how to find room in their budget to set a small amount aside monthly for savings. Thanks to technology, employers can use online tools for their wellness programs, and use web chats and electronic communications to reach employees more easily and at times more convenient for employees, Robertson said.

Financial Finesse can customize its platform for employers, Robertson noted. For example, it can include a link to an employer’s retirement plan website when suggesting an employee start saving, or it could link to other employee benefits. Davidson added that it can list the contact information for employers’ employee assistance programs (EAPs), if credit counseling is recommended.

Davidson said employees get so much information—from employers, banks or credit unions, the Internet—that it is important to make it personalized. “Pull together all benefits and resources to create something relevant and cohesive for employees.”

The Financial Finesse financial wellness platform also aggregates employee assessment data, which can help employers design financial wellness programs, according to Robertson. The tool compiles data about different employee demographics and suggests initiatives based on the most–identified financial issues for employee groups. For example, for employees ages 30 to 44, the main financial focus may be money management or cash flow. The platform may suggest a financial basics workshop or workshop about handling debt for this group. For employees ages 55 and older, the main financial focus may be retirement, so the platform would suggest retirement readiness education.

Davidson gave an example of a time the platform revealed a problem with an employer’s retirement plan benefit. The client’s employees were highly paid, but showed concern about saving for retirement and asset allocation. Financial Finesse discovered the employer had a generous retirement plan, but it was too complicated in design, so the firm helped the employer rethink its plan design.

Robertson said financial wellness programs can help employees maximize the value of their benefits, increases their awareness of their benefits, and in turn, their appreciation of benefits. A key component of a financial wellness program is making sure employees are not selecting benefits in a disjointed way, but are instead selecting them based on overall financial wellness goals. Life-event considerations should be incorporated into the program, added Davidson. For example, if an employee is expecting a child, she can turn to the financial wellness program for a to-do list. It would include adding the baby to health care coverage and increasing health care or day care flexible spending account (FSA) savings, as well as non-benefit related items, such as reevaluating her budget or drawing up a will.

"A financial wellness program starts with employees’ needs and folds in benefits and other resources to help them meet those needs,” Davidson said. “Financial wellness is a process, not an event, that employees can use at various points in their lives or careers.”

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