Products March 13, 2017

Wells Fargo Revamps Digital Tools for 401(k) Participants

The firm has introduced new digital features and mobile app enhancements to help its participants improve their money-management skills.
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To help its 401(k) participants boost their savings and manage their accounts, Wells Fargo Institutional Retirement & Trust has added three new features to its participant website for tablet and desktop users.

A new How do I compare? dashboard tool presents investors with visuals illustrating the average account balance and saving deferral rates of people in their age group and income levels who are on track to replace at least 80% of their income in retirement. Wells Fargo points to research that indicates that these figures can put participants in a competitive mode and encourage positive behavior by motivating people to save more.

Another addition to the dashboard is the Retirement Income Estimator, which helps participants visualize how close they are to replacing at least 80% of income in retirement. The tool also allows users to model different contribution amounts to see how small changes can impact overall retirement income by using an interactive slider bar with a corresponding graph. The contribution rate slider also highlights next best step recommendations for increasing contributions by increments of 1%, up to the amount needed to take full advantage of the company match if offered.

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The new Manage My Investments page allows users to update investment elections. The page also offers interactive features and visuals to measure the potential impact a particular investment change would have on overall assets. This feature is also accessible via smart phones.

In addition, the firm is enhancing components of its mobile app. If applicable, participants will now be able to sign up for, or change their automatic rebalance settings; choose to invest exclusively in a portfolio of pre-selected investments based on their risk tolerance; or choose to invest exclusively in a diversified investment option based on their date of birth and estimated retirement age.

These additions to Wells Fargo’s 401(k) management services are examples of an industry trend seeing recordkeepers amping up financial wellness resources. In fact, Wells Fargo’s Financial Health site now offers participants in the accounts it services access to One Little Thing, a dashboard component under the “Simple steps to better financial health” box. It is designed to provide simple tips for better budgeting, debt management, emergency savings building, and student loan repayment.

“We continue to invest in new digital options for the more than 3 million participants in plans we manage, always with the goal of making it easier to increase retirement savings and drive better outcomes,” says Joe Ready, director of Wells Fargo Institutional Retirement and Trust. “Providing a participant with information about peers who are better prepared for retirement may spark ideas for changes they can make to increase their retirement savings trajectory. Simplifying the investment options and illustrating them visually can help people quickly manage their investments digitally in one space.”

Compliance March 13, 2017

Holy Cross Hospital Settles ERISA Challenge

Plaintiffs had alleged their employer falsely claimed church plan status for its retirement program. 

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A settlement agreement reached in the case Butler vs. Holy Cross Hospital will result in $4 million being paid to plan participants and their attorneys.  

The plaintiffs had alleged that their employer’s retirement plan cannot be considered a church plan within the meaning of Employee Retirement Income Security Act (ERISA) Section 3(33)—and thus that the plan should be subject to the provisions of Title I and Title IV of ERISA.

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Plaintiffs said the plan was terminated as of September 1, 2015, at a time when its assets were insufficient to pay for all accrued benefits. They suggested the plan paid only about 50% of its liabilities upon termination and further alleged the plan was in 2013 improperly transferred to an entity that lacked sufficient assets or ability to fund the plan. If the plan was not considered a church plan, plaintiffs argued, these actions would have been barred under ERISA.

In their initial complaint, plaintiffs alleged violations of ERISA’s required minimum funding standards under Section 302;  failure to establish the plan pursuant to a written instrument under Section 402; failure to establish a trust meeting the requirements of Section 403; failure to meet anti-cutback provisions under Section 402(g) and (f). Additional breaches were alleged under ERISA 404(a), 406(a) and 406(b).

The text of the settlement agreement shows the influence of another case citing the church plan exception, Stapleton v Advocate Healthcare Network. That case was appealed to the Seventh U.S. Circuit Court of Appeals after a federal district court ruled in favor of the plaintiffs and found that only an actual church can establish a church plan. In March 2016, the Seventh Circuit issued its ruling in that case and held that “a church plan must be established by a church, and a church plan must be maintained either by a church or by a principal-purpose organization.”

That case has been appealed to the U.S. Supreme Court and has been granted a review by the top court, which is still pending.

NEXT: Reading into the current decision 

Plaintiffs and defendants in this current case involving Holy Cross Hospital’s retirement plan “understand that this is a complex, multi-defendant case which will require the parties and the court to expend significant time and resources to litigate regardless of how the Supreme Court rules.” Recognizing this, the parties are seeking “an early resolution of this matter and agreed to submit to formal mediation before a nationally known mediator, Robert Meyer of JAMS.”

The settlement effort has taken some significant time and negotiation and has involved a large number of witnesses and experts, but the final result seems to have the blessing of both sides. According to the settlement agreement, “class counsel believes the settlement will provide a substantial benefit to the class, and that, when the benefit is weighed against the attendant risk of continuing prosecution of the action as well as defendants’ ability to satisfy a judgement even if plaintiffs were to prevail, the settlement represents a reasonable, fair and adequate resolution of the claims.”

Interestingly, the plaintiffs seem to be getting a lot of the protections they were seeking without their employer actually agreeing that its plan is not a church plan. As the settlement lays out, “defendants contend that nothing in the term sheet and/or this settlement agreement should be construed as an agreement that the plan is not properly treated as a church plan or that the plan is subject to ERISA … Plaintiffs content that nothing [in the settlement] should be construed as an agreement that the plan is properly treated as a church plan or that the plan is not subject to ERISA. Notwithstanding these differences between the parties, they agree jointly to the conditions set forth.”

Pursuant to court approval, the settlement will see Holy Cross pay $4 million into an escrow account, which will “be used to satisfy any amounts awarded by the court for attorney’s fees, costs and incentive awards.”

The full text of the settlement agreement, including terms under which the settlement could be deemed null, is available here. 

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