Deals & People November 24, 2010

Broadridge to Acquire Matrix

Broadridge Financial Solutions signed an agreement to acquire Matrix Financial Solutions, Inc. for $201 million in cash.
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A news release said Matrix is an independent provider of mutual fund processing solutions for the defined contribution market, and holds a position in the rapidly growing small- and medium-sized retirement plan segment. Its open-architecture solutions enable customers to leverage distribution arrangements with approximately 25,000 mutual funds from nearly 500 mutual fund families.

“The acquisition of Matrix will significantly expand Broadridge’s position as a provider of data and distribution channel solutions to the mutual fund industry,” stated Richard J. Daly, Chief Executive Officer, Broadridge, in the news release.

According to the announcement, Matrix is expected to generate approximately $80 million of revenue during the year ending December 31, 2010.  

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The stock purchase agreement has been approved by the Boards of Directors of both companies. The transaction is expected to close prior to December 31, 2010, subject to the satisfaction of customary closing conditions, including regulatory approvals.

Compliance November 24, 2010

Minor Loses Battle over 401(k) Distribution Taxes

A federal court upheld a lower court ruling that the child of a woman who pleaded guilty to killing the child’s father is liable for federal income tax on a 401(k) distribution from his father’s account.
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The 9th U.S. Circuit Court of Appeals agreed with the lower court that the minor had to pay the tax because while his mother was listed as the plan’s primary beneficiary, Oregon law made her statutorily ineligible to get a payout because of her role in her husband’s death.

According to the ruling, the minor – identified as “D.N.” – paid the federal tax on the distribution, but later sought a refund, which the Internal Revenue Service denied. The minor filed suit, but a federal trial judge ruled for the government.

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The basis for D.N.’s argument was that he should not be held liable for the tax because the mother was actually the “distributee” because she was originally entitled to the proceeds as the account’s original primary beneficiary.  The minor was listed on the account as a secondary beneficiary, according to the appellate opinion.

Circuit Judge Richard R. Clifton, writing for the appellate court, rebuffed D.N.’s argument because his mother never received any funds from the account and couldn’t from the time the plan received notification she was a suspect in her husband’s death.

The case is D.N. v. United States, 9th Cir., No. 10-35037.

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