Benefits February 27, 2006

Survey Documents Changes in UK Pension Offerings

February 27, 2006 (PLANSPONSOR.com) - A new survey documents the changes in types of retirement schemes offered by UK employers.
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According to a press release, the results of the Pensions Scheme Risk Management Survey conducted by Jardine Lloyd Thompson and Financial Director Magazine included:

  • 45% of organizations surveyed offer defined contribution (DC) pension schemes.
  • 31% offer Group Personal Pensions (GPP) schemes.
  • Of the 50% of respondents that still operated defined benefit (DB) pension schemes, 47% have now closed them to new employees.
  • The average pension deficit was 15% of respondents’ total turnover.

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The survey found that the major factor for changes to pension offerings was cost. The future for UK pensions is in GPP schemes, rather than trust-based DC schemes, according to the release. Respondents cited a lack of need for trustees, administration cost savings and superior information provision for employees as main reasons for this trend.

Many US companies have also frozen their DB plans in favor of DC plans (See Nissan Follows Trend of DB to DC Switch). A recent poll also documented the trend of freezing DB pensions in the UK (See UK Pensions Follow US Trend).

Compliance February 24, 2006

Spouse not Informed of Effect of Beneficiary Waiver

February 24, 2006 (PLANSPONSOR.com) - The US District Court for the Northern District of California has ruled that a deceased participant's beneficiary designation form was invalid, even though his spouse had signed consent to name his children as beneficiaries.
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EBIA reports that, because the form did not include any acknowledgement by the spouse of the effect of the election to consent to a non-spouse beneficiary as required by the Employee Retirement Income Security Act (ERISA), the designation of his children as beneficiaries was invalid.  

The form merely stated that if the participant was married and wished to designate someone other than the participant’s spouse, the spouse must sign the form.   It gave no explanation of the right the spouse was giving up, though that was a requirement by the plan, according to the EBIA report.

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In addition the court ruled that the signature was not witnessed by a notary or a plan representative, also required by the plan (and ERISA), and the form was “likely” invalid for that reason as well.

The case is Sun Microsystems, Inc. v. Lema, No. C 04-04968 JF (N.D. Cal. Feb. 2, 2006).

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