Compliance March 24, 2023

ERISA Suit Against SeaWorld Advances

A federal judge rebuffed SeaWorld's motion to dismiss, but a second defendant was dismissed from the case.

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A class action lawsuit brought by former SeaWorld employees that alleged participants in the retirement plan—the SWBG LLC 401(k)—were harmed by the defendants’ imprudent conduct will proceed, following the ruling of a federal judge in California.

The plaintiffs’ arguments supported the fiduciary breach of the duty of prudence allegations, count one, and the second charge, a related count, for the breach of the duty to monitor plan investments and covered service providers, the court order stated. The case is Fernando Coppel et al. v. SeaWorld Parks & Entertainment Inc., et al.

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“The court finds plaintiffs sufficiently state a claim in Count I by alleging that SeaWorld and OCOG, through their Board of Directors,” had a related fiduciary duty to monitor and supervise the appointees to the investment committee, wrote U.S. District Judge Robert S. Huie in U.S. District Court for the Southern District of California, in the ruling. “The parties do not dispute that plaintiffs’ second imprudence claim for failure to monitor is predicated on their first imprudence claim. Because the court has determined that plaintiffs have stated a claim as to Count I, dismissal of Count II is not warranted here.”

The former employees allege harm to their retirement investments stemmed from high-cost, underperforming investments plan fiduciaries included in the plan when lower-cost options were available. They also allege the plan paid excessive administrative and recordkeeping fees and imprudently selected and retained actively managed target-date funds from American Century, according to the amended complaint. The plaintiffs allege harm under the Employee Retirement Income Security Act.

Huie’s order did grant part of the SeaWorld defendants’ motions to dismiss the amended complaint, including the motion by Alliant Insurance Services, which has served since 2014 as a consultant to the plan and provided financial advice and assistance with fiduciary oversight responsibilities.  

“The court: grants in part the SeaWorld Defendants’ motion to dismiss as to the American Century target-date funds and the actively managed funds in Count I; but DENIES the SeaWorld Defendants’ motion in all other respects,” the order stated. Huie also granted Alliant’s “motion to dismiss and dismisses all of plaintiffs’ claims against Alliant without prejudice; and denies as moot the defendants’ two motions for oral argument.”  

The judge also gave the plaintiffs until April 23 to file a motion with amended allegations against Alliant or the court will dismiss the action against the defendant.

The plaintiffs’ amended complaint alleged fiduciary breach charges against SeaWorld Parks & Entertainment; SWBG Orlando Corporate Operations Group, LLC; the Board of Directors of SeaWorld and SWBG; the investment Committee of SeaWorld Parks and Entertainment 401(k) plan and the SWBG, LLC 401(k) plan; CEO Mark G. Swanson; CFO Elizabeth Gulacsy; Alliant Insurance Services Inc., and 50 unnamed individuals. 

The initial complaint was filed by the plaintiffs in August 2021, and an amended complaint was brought in December.   

The plaintiffs are represented by Christina Humphrey Law PC, based in Santa Barbara, California, and Tower Legal Group PC, based in Gold River, California.  

SeaWorld defendants are represented by attorneys from Groom Law Group, based in Washington, D.C., and Scale LLP, of San Francisco. Attorneys with Philadelphia-based law firm Morgan, Lewis & Bockius LLP represented Alliant.    

SeaWorld and Alliant did not return requests for comment on the litigation.   

Compliance March 24, 2023

SECURE 2.0 Makes 529s an Appealing Financial Wellness Option

Offering a 529 plan benefit can appeal to a multigenerational workforce and may be easier to implement than a student loan match.

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The SECURE 2.0 Act of 2022 introduced the student loan matching provision, which will allow employers to match participants’ student loan payments with retirement plan contributions starting in 2024. But this was not the only noteworthy change for those interested in higher education-related financial benefits.

SECURE 2.0 also permits excess 529 plan assets to be rolled over into a Roth IRA, subject to the normal IRA annual contribution limits.

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The 529 plans are qualified educational expense programs that permit contributions to tax-advantaged accounts that can be invested and used to pay for the qualified education expenses of the beneficiary. SECURE 2.0 allows certain assets in a 529 plan maintained for at least 15 years for a designated beneficiary to be rolled over on a tax-free basis to a Roth IRA for the benefit of the beneficiary.

This makes the risk an individual of being unable to access excess savings in a college savings plan without incurring the 10% withdrawal penalty (a deterrent to starting a 529 in the first place), less likely. This also makes 529 plan benefits potentially more attractive as a workplace benefit and tool for recruitment and retention.

Improved access to tax-preferred college savings plans, or 529s, can be offered as a “low-cost and effective” benefit for a multigenerational workforce, says Barrett Scruggs, the vice president of workplace financial wellbeing at SoFi at Work. Financial wellness for people paying back student debt is important for sponsors. College expenses are not just important for students and recent graduates. They are also important for employees with or planning to have children or grandchildren, since many in those groups want to begin saving for their higher education.

Employers can offer 529 plan benefits as part of a comprehensive financial wellness program that is appealing to employees from different age groups and with different financial wellness needs, says Scruggs.

But what is the point of offering a 529 benefit program if employees can invest in 529 plans on their own time?

Scruggs answers that, “529s can be confusing,” and employers can simplify the process for employees. An employer can also set up automatic payroll deductions for a 529, which makes saving automated and therefore easier to manage. Additionally, employers can opt to add their own contributions to a 529 plan, similar in some ways to a 401(k) match.

Employers “know they have to do something” as it relates to college savings and financial wellness in light of changes made by SECURE 2.0. Though the student loan match has taken much of the attention, offering a 529 is a more appealing investment now that SECURE 2.0 allows excess savings to be rolled over into Roth IRAs.

 

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