Compliance February 24, 2015

Judge Orders New Jersey to Pay Pension Contribution

An attempt by Acting Attorney General of New Jersey John J. Hoffman to find the 2011 pension reform Governor Christie signed into law unconstitutional failed.
Reported by

A Superior Court judge in New Jersey concluded that New Jersey’s failure to make contributions into its pension systems was a substantial impairment of public employees’ constitutionally protected contract rights.

The court ordered the state to pay approximately $1.57 billion to the pension funds, which was previously approved in a fiscal year 2015 budget by the legislature, but removed by Governor Chris Christie.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

The state already cut its pension fund payment for last fiscal year, a move which was approved by the courts as necessary under the Contract Clause of the State and Federal Constitutions due to the severe unanticipated revenue shortfall that arose at the end of FY 2014. Acting Attorney General of New Jersey John J. Hoffman argued the 2011 pension reform that Governor Christie signed into law violated the state’s constitution by mandating certain contribution amounts by the state. Hoffman said the contractual right in the pension reform violates the debt limitation and appropriation clauses of the state’s constitution and detracts the governor’s constitutional veto power.

The court noted that state employees have continued to make increased contributions to the pension funds mandated by the reform.

The court also decided plaintiffs in the case were due attorneys’ fees from the state. The court’s decision is here.

Data and Research February 24, 2015

Investment Fees Dip for Small and Large Plans

Underlying 401(k) investment fees declined for both small and large retirement plans in 2014, according to the 15th edition of the 401k Averages Book.
Reported by

The 15th edition of the 401k Averages Book suggests 2014 was yet another year of falling fees for 401(k) retirement plans of all sizes. 

The report reveals a year-over-year decline for eight of the nine investment categories tracked for small retirement plans, with large U.S. equity fees declining from 1.40% to 1.38% and target-date funds dropping from 1.35% to 1.32%. For large retirement plans, 2014 fee averages declined from 1.05% to 1.03% for large U.S. equity and from 0.98% to 0.96% for target-date funds. 

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

Despite the positive fee findings, the average total plan cost for small and large retirement plans remained flat last year, with small plans (50 participants and $2.5 million in assets) at a 1.44% average annual cost and large plans (more than 1,000 participants with at least $50 million) at 1.03%.

“Plans have been successful at driving down investment expenses by changing share classes or prudence in the selection process,” says Joseph Valletta, co-author of the 401k Averages Book.

There is a significant difference between low- and high-cost providers, as the total plan costs for a small plan range from 0.43% to 1.88%, while the range for a large plan is 0.31% to 1.38%. “The range of costs has narrowed over the years, but sponsors still need to examine their fees and understand where they fit in the spectrum of total plan costs,” adds Valletta.

The 15th edition of the 401k Averages Book includes data updated through September 9, 2014, and is available for purchase at a price of $95 by calling (888) 401-3089 or visiting www.401ksource.com.

«