Guam Sued for USERRA Violations

The Justice Department alleges that military employees who used ‘donated leave’ to avoid losing pay were denied pension contributions and credits that were due them.

The U.S. Department of Justice has filed suit against the Territory of Guam and the Guam Retirement Fund (GRF) alleging they violated the Uniformed Services Employment and Re-Employment Rights Act of 1994 (USERRA) when they refused to properly provide pension credit to service members who used leave from Guam’s leave-sharing program while on active military duty.

USERRA is a federal statute that protects the civilian employment rights of non-career individuals who serve in the U.S. armed forces. Among its protections, USERRA requires employers to treat an employee’s time in military service as service with the employer when determining pension benefits.

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According to the complaint filed in the U.S. District Court for the District of Guam, the territory provides a “leave sharing” program, which allows employees to voluntarily transfer a portion of their sick or annual leave to a leave bank. Employees who have exhausted their sick leave, annual leave and compensatory time may draw donated leave from the leave bank to remain in paid-leave status rather than enter leave-without-pay status. Guam and the GRF do not give employees credited service for the time covered by donated leave.

At least five employees used donated leave while on active duty so they could continue to receive pay. The court document says, in some instances, Guam contributed to the employee’s retirement account and withheld the person’s contribution from wages for periods during which he or she used donated leave. However, the GRF refunded the contributions and discredited that service when it learned the employees had used it.

As a result, the employees accumulated less credited service time, have a reduced retirement account and will draw a lower pension annuity for the rest of their lives. Two of the plaintiffs in the case were told they would have to work more years to qualify for full retirement benefits.

The Justice Department says in its complaint that it believes employees other than the plaintiffs have been treated the same way.

The lawsuit asks the court to order the defendants to stop denying service members proper pension credit, to identify all current and former employers who have been harmed by defendants’ discriminatory practice and to properly credit those employees’ retirement funds or adjust their current pension benefits.

401(k) Participant Transfer Activity Grew in August

Most transfers went from equity to fixed income, according to the Alight Solutions 401(k) Index report.

Net trading activity among retirement plan participants is on the rise, according to Alight Solutions 401(k) Index.

According to the report, net trading activity in August was 0.13% of balances, up from 0.07% in July. Nearly all trading days in the month saw money moving from equities to fixed income, reported Alight.

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The index found that on average, 0.01% of 401(k) balances were traded daily, and 20 of 22 days favored fixed income funds while two days favored equity funds.

During the month of August, trading inflows primarily went to stable value, bond and specialty/sector funds, and outflows were generally posted from large U.S. equity, small U.S. equity and company stock funds. Stable value funds saw 47% of inflows, with bond and specialty/sector funds trailing behind at 28% and 9%, respectively. Large U.S. equity funds saw the most outflows at 36%, while small U.S. equity stocks lost 22% of participant balances and company stock saw outflows of 21%.

Average asset allocation in equities remained the same at 70.2% last month, while new contributions to equities decreased from 69.4% in July to 69.3% in August.

Target date-funds (TDFs) remained as the asset class with the highest percentage of balances and most contributions in August, with 30% of overall balances and 48% of contributions. Large U.S. equity funds hold 27% of overall balances and received 21% of contributions. Stable value funds hold 8% of balances, and international equity funds received 7% of overall contributions.

More information from Alight Solutions is here.

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