Just 0.022% of total defined contribution (DC) plan assets traded in December 2014, with a slight majority of days (55%) favoring equities over fixed-income assets, Aon Hewitt data shows.
When
participants made trades, they were most likely to sell out of premixed funds,
small U.S. equity funds and company stock. The asset classes with the most
inflows for the month were large U.S. equity, international funds, and balanced
funds.
After
incorporating December’s contributions, trades, and market activity, the
overall DC participant allocation to equities increased slightly from 66.0% in
November to 66.4% in December, according to the Aon Hewitt 401(k) Index. Future
contributions to equities decreased marginally month-over-month, from 66.3% to
66.1%.
U.S.
equities posted mixed results during the last month of 2014. On the large-cap
U.S. equity front, as measured by the S&P 500 Index, returns were negative
at -0.3%. Small-cap equities outperformed their large-cap counterparts, with
the Russell 2000 Index gaining 2.9% during the month.
The
fixed-income market, as measured by the Barclays U.S. Aggregate Index, was
flat, returning 0.1%. The MSCI All Country World ex-U.S. Index, a benchmark
used to represent companies based in the developed markets outside of the U.S.,
had a poor showing in December, returning -3.6%.
Even
with the low volume of activity in December, Aon Hewitt says the last quarter
of 2014 was “easily the heaviest trading quarter of 2014,” featuring 11 of the
24 above-normal trade volume days that occurred during the year. Aon Hewitt
defines a “normal” level of relative DC account transfer activity as when the
net daily movement of participants’ balances, as a percent of total 401(k)
balances within the Aon Hewitt 401(k) Index equals between 0.3 times and 1.5
times the average daily net activity of the preceding 12 months. Slightly more
than half (52%) of all trading days for 2014 favored fixed-income funds.
The
domestic equity markets performed well during the fourth quarter, Aon Hewitt
says, as both the S&P 500 Index and the Russell 2000 Index posted positive
results, returning 4.9% and 9.7%, respectively. U.S. bonds also posted positive
results over the trailing three month period, as the Barclays Aggregate Index
gained 1.8%. The MSCI All Country World ex-U.S. Index had a volatile quarter
and returned -3.9% during the period.
The
surviving spouse of a fully vested participant in a FedEx pension plan claims
she is being unlawfully denied a survivor annuity benefit owed to her by the
plan.
A complaint filed in a federal district court by Stacey
Schuett claims FedEx has refused to pay a mandatory survivor benefit she should
receive as the surviving spouse of a fully vested FedEx pension plan
participant.
The complaint argues Schuett was legally married to Lesly
Taboada-Hall at the time of Taboada-Hall’s death from cancer in June 2013. At
the time of her death, according to the complaint, Taboada-Hall had been an
employee of FedEx Corporation for more than 26 years and was fully vested in
the FedEx Corporation Employees’ Pension Plan. As Taboada-Hall’s surviving
spouse, Schuett says she is entitled to a survivor annuity beginning on the
date that Ms. Taboada-Hall passed away.
The complaint, filed in the U.S. District Court Northern
District California San Francisco/Oakland Division, cites the U.S. Supreme
Court’s June 2013 ruling in the case of United States v. Windsor as
grounds that the FedEx plan is inappropriately withholding benefits due to
Schuett. That landmark ruling found Section 3 of the Defense of Marriage Act
(DOMA), which legally defined the term “spouse” as marriage between a
man and woman, was unconstitutional (“Benefit
Changes Ahead After DOMA Ruling”).
After the DOMA ruling, industry compliance professionals
said the decision was a big step towards legal recognition
of same-sex spouses for benefits purposes, at least in some states, and
would likely lead to Employee Retirement Income Security Act (ERISA)
litigation.
“In light of Windsor, same-sex spouses are
entitled—on the same basis as opposite-sex spouses—to the protections of
ERISA’s mandatory benefits provisions,” the complaint alleges. “Although Ms.
Schuett submitted a claim for the survivor benefit after Windsor,
FedEx has improperly insisted that it must continue to apply the Plan’s
definition of spouse incorporating the now-unconstitutional law, rather than
current law, in determining eligibility for benefits. In denying Ms. Schuett
the survivor benefit to which she is entitled, and in providing misleading and
incomplete information to Ms. Taboada-Hall about her benefits under the Plan
before her death, Defendants have violated ERISA.”
Schuett’s complaint suggests the FedEx plan denied her a
survivor annuity on the basis that the plan document defines “spouse” by
explicitly incorporating Section 3 of DOMA, part of the law struck down as
unconstitutional in Windsor. Court filings show Schuett is
seeking declaratory, injunctive, and monetary relief pursuant to § 502(a)(1)(B)
and § 502(a)(3) of ERISA; and 29 U.S.C. §§ 1132(a)(1)(B) and 1132(a)(3).
The complaint adds that the California federal trial court
has subject matter jurisdiction over Schuett’s claims because the
ERISA-governed plan at issue was administered in part in the district. “The
venue is also proper pursuant to 28 U.S.C. § 1391(b) because some of the
administrative events or omissions giving rise to Ms. Schuett’s claim occurred
within this District, and Ms. Schuett resides in this District,” the complaint continues.
According
to the complaint, the FedEx plan at issue is a defined benefit plan established
and qualified under Section 401 of the Internal Revenue Code/26 U.S.C. § 401.
The plan has two benefit accrual formulas: a traditional pension benefit formula,
and a portable pension account formula.
The traditional pension benefit formula promises the
participant a specified monthly benefit at retirement based on the
participant’s age, salary, and years of service, according to Schuett’s
complaint. The traditional pension benefit formula is only available to
participants who were hired by FedEx prior to June 1, 2003. Benefits accrued
under the traditional pension benefit formula were capped as of May 31, 2008.
After June 1, 2008, participants accrued benefits under the
portable pension account benefit formula, in which the participant earns
compensation credits (based on compensation and the participant’s combined age
and years of service) and interest credits during each year of employment. The
complaint defines the portable pension account benefit as a “cash balance”
formula, meaning it defines the promised benefit in terms of a stated account
balance, which is the sum of all compensation credits and interest credits.
Participants cannot accrue benefits under both formulas at
the same time for a particular year of service at FedEx, the complaint
explains. Rather, longtime employees such as Taboada-Hall initially accrued
benefits under the traditional pension benefit formula, and then began accruing
benefits under the portable pension account formula when the plan changed. As a
result, when she died, Taboada-Hall had earned plan benefits under both
formulas. Only Taboada-Hall’s traditional pension benefit is at issue in
Schuett’s lawsuit. FedEx also has a 401(k) plan that is not at issue in the
suit, according to the complaint.
As a defined benefit plan, Schuett says the plan is required
by ERISA to provide a qualified preretirement survivor annuity to all married
participants who are vested and die before the annuity starting date, unless
the participant has waived the benefit and the spouse consented to the waiver,
per 29 U.S.C. § 1055(a)(2).
“Section 5.02 of the Plan requires that, for the Traditional
Pension Benefit, a ‘Qualified Joint and Survivor Annuity’ must be paid to the
surviving spouse of a fully vested Plan participant who dies before retiring,”
the complaint argues. “Section 1.66 of the Plan defines ‘Spouse’ to ‘have the
same meaning as set forth in 1 U.S.C.A. § 7 (a person of the opposite sex who
is a husband or wife), and shall be deemed to refer solely to the persons who
have entered into a marriage, as defined in 1 U.S.C.A. § 7 (a legal union
between one man and one woman as husband and wife).’”
The complaint says Schuett and Taboada-Hall became a couple
in 1983, and “at all relevant times they lived together in Sebastopol,
California.” Schuett and Taboada-Hall entered into a California registered
domestic partnership in July 2003. In February 2010, Taboada-Hall was diagnosed
with cancer, and by 2013 Taboada-Hall had to take a medical leave of absence
because she could no longer safely operate a vehicle. Although she was on a
medical leave, she remained employed by FedEx until her death. Before their
marriage and Taboada-Hall's death, the complaint suggests the couple struggled
to receive confirmation from FedEx plan officials about whether Schuett would
be able to collect a survivor annuity from the plan—only getting a negative
answer about a week before Taboada-Hall's death.
The complaint shows Taboada-Hall and Schuett were married
one day before the former’s death, on June 19, 2013, in a ceremony officiated
by a Sonoma County supervisor. This was one week before the Supreme Court
handed down its decision in Windsor, but on September 18, 2013,
Schuett says she obtained an order from the Sonoma County Superior Court
stating that the couple’s marriage was legally valid, and the court issued a
marriage certificate listing the date of the marriage as June 19, 2013. “Thus,
Ms. Schuett and Ms. Taboada-Hall were legally married under California law at
the time of Ms. Taboada-Hall’s death on June 20, 2013,” the complaint
concludes.
FedEx responded with the following statement to PLANADVISER:
“Lesly Taboada-Hall was a valued, long-term FedEx Express employee for 26
years, and we are saddened by her passing. Ms. Schuett’s claim has been
carefully reviewed, and while we are sympathetic to her situation, we are
required by federal law to apply the pension plan rules equally to all
participants.”