Break from the Grind November 14, 2019

FRIDAY FILES – November 15, 2019

And now it's time for FRIDAY FILES!

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A dancing Nana, problems on the road in Thailand, and more.

In Ottawa, Canada, a Canadian teacher has successfully claimed a canoe trip as a moving expense, public broadcaster CBC reported. The Canada Revenue Agency (CRA) allows Canadians who move more than 40 kilometers (25 miles) for work or school to deduct eligible expenses from their taxable income. The teacher taught in his hometown of Whitby, Ontario, during the regular academic year and for decades made the annual trip to Ottawa by train, plane or automobile for the July job. But his moving expenses were suddenly rejected by CRA in 2011. The decision was upheld by a tax court that ruled his Ottawa stays did “not constitute a change in ordinary residence,” but rather working vacations. So, in June 2018, he loaded up a battered fiberglass canoe and set out for Ottawa, he told the CBC. The move took him through five provincial parks and up the Rideau Canal. He collected receipts for park admission fees, campfire wood and ice and submitted a claim for almost Can$1,000. Last week, he learned that the CRA had accepted his expenses.

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In Singapore, an airport baggage handler has been jailed for 20 days for swapping tags on nearly 300 suitcases at the city-state’s airport, causing them to end up at wrong destinations around the world. The court was told he made the swaps between November 2016 and February 2017 out of “frustration and anger” after his request for additional staff at his work section was ignored. It was also told he was suffering from major depressive disorder when he committed the offences. But state prosecutors said evidence presented at a hearing showed his condition “did not contribute significantly to his commission of the offences” as he continued to have control over his actions.

In Iowa, an inmate serving life for murder offered a novel legal appeal, saying he should be released because he “died” four years ago. He became gravely ill in March 2015 when large kidney stones led to septic poisoning. After he was rushed unconscious to a hospital, doctors had to revive the “dead” man five times. They then operated to repair damage done by the kidney stones. He was eventually returned to prison. According to the AFP, in a court filing in April 2018, the man claimed that because he had momentarily died, his life sentence had technically been completed. His lawyer argued that the inmate had been sentenced to life without parole “but not to life plus one day.” The Iowa Court of Appeals found the argument “unpersuasive.”

Love this dancing Nana.

If you can’t see the below video, try https://youtu.be/sCq2KZULNI8.


A problem we thankfully don’t have while driving in the U.S.

If you can’t see the below video, try https://youtu.be/4ZSSMsy3ztE.
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Compliance November 14, 2019

Plaintiffs Say AutoZone Breached ERISA Through Prudential’s GoalMaker

AutoZone plan fiduciaries are accused of permitting Prudential to steer an excess of assets towards its own proprietary products via the GoalMaker asset-allocation solution.

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AutoZone Inc. is the latest national employer to face an Employee Retirement Income Security Act (ERISA) fiduciary breach lawsuit alleging imprudence and disloyalty in the operation of the company’s retirement plan.

Plaintiffs filed their proposed class action in the U.S. District Court for the Western District of Tennessee. While the complaint does not name Prudential as a defendant, the fiduciary breach allegations discuss Prudential’s GoalMaker investment solution, which was offered by AutoZone to its employees during the period at question in the lawsuit.

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“Plaintiffs bring this action because of AutoZone’s extraordinary breaches of its fiduciary duties under ERISA, including the approval, maintenance and recommendation of an abusive ‘GoalMaker’ asset allocation service furnished by Prudential Insurance Company that served Prudential’s interests,” the lawsuit states.

According to the complaint, AutoZone described GoalMaker to participants as a service that would “guide you to a model portfolio of investments available, then rebalance your account quarterly to ensure your portfolio stays on target.” AutoZone also represented, according to plaintiffs, that GoalMaker’s allocations “are based on generally accepted financial theories that take into account the historic returns of different asset classes.”

“The representations were and remain false,” the lawsuit states. “Here, GoalMaker served Prudential’s interests by funneling participants’ retirement savings into Prudential’s own shamelessly overpriced proprietary investment products and into investments that paid kickbacks to Prudential. GoalMaker brazenly excluded the reliable, low-cost index funds in the plan’s investment menu available from reputable providers that did not pay kickbacks to Prudential. This resulted in the participants paying excessive investment management fees, administrative expenses, and other costs, which over the class period cost participants more than $60 million in retirement savings.”

Plaintiffs suggest that AutoZone “could have easily stopped these abuses at any time,” by replacing the “high-fee, chronically underperforming GoalMaker funds with reliable, low-fee Vanguard index funds already in the plan’s investment menu.”

“Year after year, AutoZone chose to retain GoalMaker, ignoring the abusive fees and costs of the GoalMaker funds, the conflicts of interest inherent in Prudential’s asset allocation scheme, and the misrepresentations repeatedly made to participants on behalf of the plan,” the complaint states. “From a fiduciary standpoint, AutoZone’s GoalMaker was not a model of asset allocation but a model of plan mismanagement.”

The complaint goes on to suggest that, although AutoZone “cloaked GoalMaker in Morningstar’s credibility in recommending the service,” Morningstar itself did not assume any responsibility for Prudential’s GoalMaker service.

“In fact, Morningstar specifically disclaimed any responsibility for the review or approval of the information provided to the participants in the AutoZone plan,” the complaint says. “Participants enrolled in Prudential’s GoalMaker service were told they could not change the recommended allocations without being dis-enrolled in the service. Moreover, AutoZone made GoalMaker the plan’s default investment option. This combined with AutoZone’s touting of the service resulted in a large portion of participants’ retirement savings being allocated by GoalMaker.”

Plaintiffs conclude that AutoZone “did not have the competence, exercise the diligence, or have in place a viable methodology to monitor the GoalMaker allocation service and investment options. AutoZone knew, or would have known had AutoZone implemented a prudent investment methodology, that GoalMaker was designed to steer plan participants’ retirement savings to investment options that paid investment management fees and kickbacks to Prudential. AutoZone did not need to scour the marketplace to find prudent investments. AutoZone needed only to look to the Vanguard funds included in the Plan’s investment menu that did not pay kickbacks or investment management fees to Prudential and were therefore excluded from GoalMaker.”

The full text of the complaint is available here.

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