Products January 30, 2019

Transamerica Urges Sponsors to Remind Participants About the Saver’s Credit

Sixty-two percent of workers are unaware of the credit, according to survey findings from Transamerica Center for Retirement Studies.

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The Saver’s Credit, also referred to as the Retirement Savings Contributions Credit by the Internal Revenue Service (IRS), is available to eligible taxpayers who are saving for retirement. However, 62% of workers are unaware of the credit, according to survey findings from the Transamerica Center for Retirement Studies (TCRS).

The Saver’s Credit is a non-refundable tax credit that may be applied up to the first $2,000 of voluntary contributions an eligible worker makes to a 401(k), 403(b) or similar employer-sponsored retirement plan, or a traditional or Roth individual retirement account (IRA). The maximum credit is $1,000 for single filers or individuals and $2,000 for married couples filing jointly.

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The credit is available to workers ages 18 years or older who have contributed to a company-sponsored retirement plan or IRA in the past year and meet the following adjusted gross income (AGI) requirements:

  • Single tax filers with an AGI of up to $31,500 in 2018 or $32,000 in 2019 are eligible;
  • For the head of a household, the AGI limit is $47,250 in 2018 or $48,000 in 2019; and,
  • For those who are married and file a joint return, the AGI limit is $63,000 in 2018 or $64,000 in 2019.

Additionally, the filer cannot be a full-time student and cannot be claimed as a dependent on another person’s tax return.

TCRS has created fact sheets, infographics and newsletter articles—in English and Spanish—that are available and encouraged for public use at www.transamericacenter.org/saverscredit.

Compliance January 30, 2019

Stadion, United of Omaha Face Lawsuit Over Managed Account Offering

According to the lawsuit, Stadion directed participants’ accounts into investments that would better benefit itself and Mutual of Omaha, and Mutual of Omaha retained revenue sharing knowing of Stadion’s actions.

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A participant in the Palace Entertainment 401(k) plan has filed a lawsuit against Stadion Money Management and Mutual of Omaha alleging that she and other participants in a proposed class lost money due to violations of Employee Retirement Income Security Act (ERISA) fiduciary duty by Stadion Money Management and Mutual of Omaha.

According to the complaint, as a provider to retirement plans, Mutual of Omaha pitches Stadion’s managed account service to plan sponsors. If employers include Stadion’s service, Stadion exercises complete discretion over participating employees’ accounts by selecting investments from the menu of options in the employer’s retirement plan. Stadion receives a fee from participating employees, which it shares with United of Omaha and its affiliates.

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While the complaint says, “It is not unusual for a managed account provider to depend on another provider to pitch their service to employers. Nor is it unusual for the managed account fee to be split between them,” it alleges that Stadion and Mutual of Omaha abused their managed account arrangement by putting their own interests ahead of participants’.  According to the lawsuit, Stadion directed participants’ accounts into United of Omaha- and Stadion-affiliated investment options, despite the availability of lower-cost, higher-performing investment options within the plan that would have better met the needs of participants.

The complaint says that in certain instances, there were identical options available in the plan menu that would have charged 50% less in fees. The participant alleges, “Stadion avoided these options because they did not generate as much revenue for its business partner, United of Omaha.” In other instances, according to the lawsuit, Stadion financially benefited itself and United of Omaha by continuing to use Stadion-affiliated accounts despite their underperformance on both an absolute and risk-adjusted basis.

For its part, Mutual of Omaha is accused of improperly retaining revenue sharing resulting from Stadion’s actions.

The lawsuit says the conduct of the defendants caused participants to incur millions of dollars in losses due to excessive fees and investment underperformance.

Counts against Stadion include alleged breach of fiduciary duties of loyalty and prudence and alleged prohibited transactions. Mutual of Omaha is being sued for knowingly profiting from a fiduciary breach.

In statements to PLANSPONSOR, Mutual of Omaha said its practice is not to comment on pending litigation, and Stadion said, “Class action lawsuits against financial services firms and insurance companies have become a normal occurrence. It’s now Stadion’s turn to defend against misstatements and omissions. Our goal, all day and every day, is to help employees achieve retirement security. To do that, we have made significant commitments, both internally and externally, to develop investment practices that equal or exceed industry standards and legal requirements.”

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