Compliance November 15, 2006

Plan Document Trumps Antenuptial Agreement

The US District Court for the Western District of Kentucky ruled that, even though the surviving spouse of a retirement plan participant waived her rights to benefits in an antenuptial agreement, the plan document dictated she receive his assets in the plan.
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Citing a ruling by the 6th US Circuit Court of Appeals, Judge John Heyburn III wrote in his opinion that the plan administrator, law firm Greenebaum Doll & McDonald, should only refer to the plan documents when deciding a beneficiary.

“If the plan administrator does not receive a proper designation naming a non-spouse beneficiary and reflecting spousal consent, the pertinent provisions of the Plan designate the participant’s widow as the beneficiary,” Heyburn wrote. He further stated that the provisions of the plan were in line with the requirements of the Employee Retirement Income Security Act (ERISA).

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The court said waiving the right to plan assets in an antenuptial agreement does not satisfy the plan’s requirement for designation of a new beneficiary under the plan, or spousal consent to name a beneficiary other than the surviving spouse.

The dispute over retirement benefits in this case was between Debbie Sandler, the surviving spouse of David Sandler, and his two children from a prior marriage.

The children brought a cross claim against Debbie Sandler, alleging breach of contract and seeking damages in the amount of the assets of their father’s retirement benefits account, or for specific performance of Debbie Sandler’s contractual obligation to “execute the documentation verifying and confirming her agreement” to waive her rights in her deceased husband’s account.

The court said there was no evidence that David Sandler had asked his wife to consent to changing the plan beneficiary.

The case is Greenebaum Doll & McDonald v. Sandler, W.D. Ky., No. 3:05CV-754-H, October 24, 2006.

The Markets November 15, 2006

Retirement Plans Boost Mutual Fund Ownership

The gap between mutual fund ownership outside of retirement plans and inside of retirement plans narrowed in 2006, a recent survey by the Investment Company Institute (ICI) revealed.
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An estimated 54.9 million US households and 96 million individual investors own mutual funds, according to the report, with 38.3 million households owning mutual funds through their retirement plans. While the percentage of U.S. households owning funds has stayed about the same since 2003, a decade ago, an estimated 10.4 million more households owned funds outside employer plans than inside these plans. According to ICI, the growth of fund ownership through workplace retirement plans has been largely fueled by the shift from traditional pensions to defined contribution plans.

Most mutual fund shareholders have moderate household incomes and are in their peak earning
and saving years. About three in five U.S. households owning mutual funds have incomes between $25,000 and $99,999, and about two-thirds are headed by individuals between the ages of 35 and 64. The incidence of mutual fund ownership increases with household income, which explains why mutual fund owners generally have incomes higher than the national average, according to ICI. For instance, 70 percent of all U.S. households with incomes of $50,000 or more
own funds in 2006, compared with 26% of households with incomes less than $50,000.

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At present 72% of shareholders age 65 or older have Internet access, up from 63% a year ago. In contrast, Internet access among shareholders age 35 or younger increased modestly, from 94% a year ago to 96% this year. An annual ICI survey of fund ownership and Internet usage reveals that nearly 55 million U.S. households own mutual funds and more than 70% of these households use the Internet at least once a day.

The full ICI report is online here

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