Transamerica Latest to Add Emergency Savings Accounts

The solution, which aims to help employees save for unexpected events that may impact their retirement security, is being rolled out via new relationships for the firm with Millennium Trust Company and SecureSave.

This week, Transamerica announced the addition of emergency savings accounts to its suite of benefit services solutions.

The offering is being rolled out through new strategic relationships with Millennium Trust Company and SecureSave, and according to Transamerica’s leadership, the new offering will help employees save for unexpected events that may impact their ability to contribute to or preserve their workplace retirement savings account.

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One recent report on the topic of emergency savings, put out by the Defined Contribution Institutional Investment Association, suggests there is an emerging consensus among retirement industry practitioners that emergency savings solutions should enable short-term savings with liquidity while also preserving long-term savings—so long as they are designed, implemented and communicated effectively. Most of the existing solutions highlighted in the DCIIA report offer a dedicated account distinct from retirement savings, hosted either outside the retirement plan as a standalone account or inside the plan in a separate account from the core retirement assets.

In explaining its motivation for developing the new emergency savings solution, Transamerica points to the most recent Federal Reserve report on the economic well-being of U.S. households. In the analysis, the Fed finds that only about two-thirds of adults would be able to cover an unexpected $400 expense by exclusively using cash, savings or a credit card that they could pay off at the following statement. Alarmingly, some 12% of adults feel they would be unable to pay the unexpected $400 expense “by any means.”

One of Transamerica’s new collaborators, Millennium Trust, has previously partnered with other national retirement providers on emergency savings solutions. The other, SecureSave, is a newer firm founded in direct response to what its founders call “the economic catastrophe that resulted from the COVID-19 pandemic.”

In adopting the emergency savings accounts, participating employers are able to choose whether to work with Millennium Trust or SecureSave, which take different approaches to delivering the accounts.  According to Transamerica, both providers deliver to employers “an easy way to offer and manage an emergency savings fund as a workplace benefit.” Transamerica says this multi-provider approach gives employers the ability to match their company’s needs with the best solution for their employees.

As the product announcement notes, the Transamerica emergency savings accounts enable employees to automatically save a portion of their regular paychecks in order to build an emergency savings fund. To incentivize employees to establish emergency savings accounts, employers have the option to contribute to employees’ accounts. Transamerica emergency savings offerings are FDIC-insured up to the standard maximum deposit insurance amount of $250,000.

“Employers realize that individual employees’ financial stress can impact productivity, retention and overall health significantly,” says Kent Callahan, CEO of Workplace Solutions at Transamerica. “Emergency savings programs can help alleviate sudden and unexpected needs for cash liquidity. We believe that people will be more willing to save for the long term in retirement plans if they already have a cushion to first meet household and emergency needs. Emergency savings accounts offered through the workplace are perfectly positioned to help people address life’s unexpected events and reduce their financial stress.”

John Hancock Defeats ERISA Foreign Tax Credit Lawsuit

Though the court previously allowed class certification in the case, a new order firmly rejects the plaintiffs’ arguments that they were entitled to certain foreign tax rebates generated by group variable annuity contracts they had signed.

A new order has been issued by the U.S. District Court for the Southern District of Florida in an Employee Retirement Income Security Act fiduciary breach lawsuit filed against the John Hancock Life Insurance Co. and various related defendants.

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The lengthy order, which stretches to 84 pages and quotes both Albert Camus and Jean-Paul Sartre for rhetorical effect, in the end sides firmly with John Hancock’s defense, finding the plaintiffs’ lawsuit and claims are “inconsistent with the choices they made about their ERISA plan and the party with whom they contracted to provide ERISA-related services.”

In late January, the court issued an order certifying a sizable class of plaintiffs, including trustees, sponsors and administrators of employee benefit plans that purchased a group variable annuity contract from John Hancock Life Insurance Co. via its Signature platform, which is run by John Hancock’s Retirement Plan Services division. The underlying case emerged in 2021 when trustees of the Romano Law PL 401(k) Plan sued John Hancock over the treatment of tax credits related to investments “in stocks and securities of foreign companies” that they chose for their plan under the group contract.  

The plaintiffs alleged John Hancock breached the Employee Retirement Income Security Act fiduciary duty of loyalty by receiving and retaining foreign tax credits for the international investment options, resulting in an alleged reduction in the value of the plan’s assets. The plaintiffs also alleged that John Hancock caused the plan to enter into an ERISA-prohibited transaction by not crediting it with the value of the FTCs.

As recounted in the order on the motion for class certification, some of the investments held foreign securities and incurred foreign taxes. The plaintiffs alleged that John Hancock did not actually pay the foreign taxes; effectively, they say, the plan did, because the value of the plan participants’ investments fell by the amount of taxes paid.

The new order concludes unequivocally that there was nothing disloyal about John Hancock’s “using, for itself, the foreign tax credits which only it, as the taxpayer, could use.”

“Not only could plaintiffs not use the FTCs, but they do not pinpoint any contractual language requiring John Hancock to give them the functional equivalent of the FTCs—a rebate or credit,” the order states. “Moreover, plaintiffs did not cite any on-point legal authority supporting their unique premise that John Hancock was required to provide rebates or credits merely because plaintiffs themselves chose to invest in mutual funds which invested in foreign securities. Likewise, plaintiffs did not submit legal authority establishing that John Hancock’s use of the FTCs breached a fiduciary duty or was somehow a prohibited transaction even though authorized by the federal tax code.”

The order concludes that it was plaintiffs, not John Hancock, who ultimately decided that the plan would be responsible for foreign tax payments by selecting the funds that they did.

“It was plaintiffs who decided to terminate their relationship with John Hancock by selecting another entity to provide the services which John Hancock had been providing even though the replacement did not provide FTCs (or rebates or credits for the FTCs) either,” the order states. “Plaintiffs chose to enter into a contract with John Hancock which expressly and unequivocally disclaimed John Hancock’s possible role as a possible fiduciary except in limited ministerial-act circumstances inapplicable here.”

The full text of the new summary judgment order is available here.

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