Opinions September 11, 2014

Helping Women Take Charge of Their Future

September 11, 2014 (PLANSPONSOR.com) - I’ve spent 30 years working in the financial services and nonprofit sectors, surrounded by capable, intelligent and driven women.
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My experience is not unique, as women today make up 47% of the workforce and contribute more to the U.S. economy than ever before. But, despite our economic gains, women still face notable financial challenges. While many working women juggle their careers and personal lives with great dexterity, all too often I’ve seen these same women struggle to manage their personal finances.

My observations are more than anecdotal; they are validated by a new report from the TIAA-CREF Institute produced in partnership with the Global Financial Literacy Excellence Center at George Washington University. The report, “Working Women’sFinancial Capability: An Analysis Across Family Status and Career Stages,” examines data on the financial capability and security of more than 6,000 working women who participated in the 2012 National Financial Capability Study.

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Several findings stand out for me. Nearly half of the working women we studied are concerned about their level of debt and ability to repay it. Excessive debt can put women in a vulnerable financial position, limiting their ability to handle financial emergencies and save for retirement. This too was reflected in the findings. Only 38% of the women in our sample have saved enough to cover three months’ worth of living expenses, roughly the same percentage doubt they could come up with $2,000 if an unexpected need arose, and only 44% are currently contributing to a retirement plan.

These challenges notwithstanding, the vast majority of working women seem satisfied with their day-to-day financial management skills. Fewer than half of those surveyed have sought any professional financial advice in past five years. And nearly 80% believe they are good at handling checking accounts, using credit and debit cards, and tracking expenses. Yet, when asked five questions measuring basic financial concepts, such as the effect of interest rates on savings, only 12% were able to answer all five correctly.

In total, the report paints a picture of working women—across career stages and age groups—resorting to high-cost borrowing, setting aside minimal savings and doing little retirement planning. Needless to say, these findings have significant implications for women’s long-term financial security.

So what can be done? First and foremost, financial literacy needs to be part of high school and college curricula. But, financial education shouldn’t stop there. Advice and counseling ought to be available in the workplace too, as it’s in every employer’s interest to have financially secure employees. Today only 20% of working women have received financial education through school or work. For their part, women need to take advantage of the financial advice that’s offered and participate in their employer’s retirement plan, if one is available.

Debt counseling, in particular, would help many working women, especially if focused on managing multiple sources of debt. Such information could be made available to women throughout their careers, or even pre-career. For example, facts about likely earnings for different college majors combined with data about projected student loan payments might be eye-opening to young women entering college.

Of course there is no one-size-fits-all approach; financial education and advice need to be tailored to women’s personal goals, career stage and family status. But, one thing is certain: Helping working women meet their financial challenges is a critical issue, not just for those involved, but for the U.S. economy as a whole.

Stephanie Bell-Rose, senior managing director and head of the TIAA-CREF Institute  

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author(s) do not necessarily reflect the stance of Asset International or its affiliates.
Compliance September 11, 2014

Signature Authority May Trigger ERISA Fiduciary Status

September 11, 2014 (PLANSPONSOR.com) – A company CEO’s signature authority for payments from the company’s bank account may make him an Employee Retirement Income Security Act (ERISA) fiduciary.
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In denying a motion to dismiss by Mihir Taneja, the CEO, secretary and director of Geopharma, U.S. District Judge Virginia M. Hernandez Covington of the U.S. District Court for the Middle District of Florida noted that ERISA’s definition of fiduciary includes those “exercising any authority or control over the management or disposition of plan assets” (italics added). She agreed with U.S. Department of Labor Secretary Thomas E. Perez that since employees’ contributions toward payments of their benefits were commingled with Geopharma’s general assets and never remitted or used to pay claims, Taneja allegedly exercised fiduciary authority or control over both Geopharma’s assets and benefit plan assets simultaneously.

In addition, as Geopharma’s CEO, secretary, director and signatory on Geopharma’s bank accounts, Taneja plausibly had a fiduciary duty to monitor the actions of Geopharma and those appointed to act as fiduciaries on behalf of Geopharma, the judge concluded.

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According to the court opinion, Perez contends that, for payroll periods between October 3 and December 26, 2009, and between January 2 and October 9, 2010, Geopharma withheld employee premium contributions to the company’s Group Welfare Plan from payroll in the amounts of $115,707.19 and $101,751.29, respectively, failed to segregate the contributions from company assets as soon as it reasonably could do so, and failed to use the funds to pay claims. In addition, Geopharma received Consolidated Omnibus Budget Reconciliation Act (COBRA) premium payments totaling $16,507.24, failed to segregate the premiums from the company assets as soon as it reasonably could do so, and failed to use the funds to pay claims.

Perez also asserts that the named defendants in the case, as fiduciaries and parties in interest to the plan, violated their respective duties under ERISA by: (1) participating knowingly in an act of another fiduciary, knowing such act was a breach, (2) failing to monitor or supervise another fiduciary and thereby enabling a breach, or (3) having knowledge of a breach by another fiduciary and failing to make reasonable efforts under the circumstances to remedy the breach.

Taneja argues that the complaint does not sufficiently or plausibly allege facts necessary to establish that he is a fiduciary of the plan since it fails to establish that he performed any function or exercised any authority with respect to the “particular activity” of remittance of employee premium contributions to the plan. Taneja further emphasizes that the mere fact that he allegedly possessed signature authority on Geopharma’s corporate bank accounts is insufficient to make him a fiduciary, saying “[i]f this alone were sufficient to trigger ERISA fiduciary responsibilities on the part of corporate officers, it would transform nearly every member of senior management of any corporation into an ERISA fiduciary.”

However, Perez emphasizes that the plain language of ERISA permits a person to become a fiduciary by exercising authority or control over the management or disposition of plan assets without requiring “discretionary” authority or control. He argues that, because Geopharma was named the plan administrator and fiduciary within the plan itself, Geopharma had a duty to monitor the actions of those administering the plan on its behalf. Likewise, as Geopharma’s CEO, secretary, director, and signatory on Geopharma’s bank accounts, Taneja allegedly had a fiduciary duty to monitor other fiduciaries as well as Geopharma’s management and administration of the plan. Perez asserts that Taneja knew or should have known that Geopharma was having cash flow issues and was using employee compensation and COBRA payments to fund operations instead of using the funds to pay medical claims, and such knowledge should have triggered an investigation to determine whether Geopharma and its fiduciaries were administrating the plan in accordance with ERISA and the terms of the plan.

According to Hernandez Covington, “in light of these factual allegations, the court can reasonably infer that Taneja exercised authority or control over Geopharma’s Plan assets as an ERISA fiduciary when employee premiums were commingled with Geopharma’s general assets.”

She also found the plain language of ERISA reasonably supports Secretary Perez’s position that a person can become a fiduciary, even without discretion, if he or she exercises any authority or control respecting management or disposition of its assets, but declined to decide whether a person with authority or control over plan assets must also exercise “discretion” over those assets in order to become an ERISA fiduciary, saying that “determination is more appropriately decided at the summary judgment stage of the proceedings.”

The opinion in Perez v. Geopharma, Inc. is here.

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