Data & Research May 1, 2023

Can Employers Help Americans Struggling to Save Amid Inflation?

More than 20% of U.S. workers made reported borrowing from their retirement savings in 2022, according to FinFit.

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Despite the financial stressors affecting Americans, 53% of employees say their employer has not offered additional financial wellness benefits or compensation in response to rising prices, according to data collected in January by FinFit.

The same percentage, 53%, of people with retirement savings, said they don’t know if it will be enough to retire on.

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One reason for the uncertain financial future is that those funds were needed on a more urgent basis in a turbulent 2022. Almost one-quarter of participants (22%) borrowed from retirement savings in the past year, with 64% saying it was their least expensive loan option. Not surprisingly, 62% are nervous that inflation will affect their retirement savings and/or timing to retire.

Meanwhile, 38% reported they are not contributing enough to their retirement savings, and another one-quarter plan to reduce their contributions.

“Many working Americans are at a crisis point when it comes to their personal finances,” the report stated. “With inflation reaching historic highs throughout 2022, the rising costs of everyday expenses has made it difficult, if not impossible, for people to build their savings and avoid going into high-cost debt.”

In response, the FinFit summary recommended an increased investment from employers could help their workers cope.

“We believe that holistic financial wellbeing programs—ones that support emergency savings, inclusive access to earned wages and affordable loans, as well as wrap-around financial resilience programs including coaching and education—will lead the efforts to close the benefits gap,” FinFit stated.

The firm also suggested other financial well-being benefits, like salary-linked loans and early wage access, in the hopes that employers are becoming more open to offering benefits that tackle high-cost debt, variable cash flow and lack of emergency savings.

Employees seemed to share that hope, as 68% expressed interest in an employer-sponsored savings product, and 47% were interested in a low-cost loan available through their workplace.

FinFit calculated what it termed an employer net promoter score to help employers measure employee satisfaction. It has found that, on average, employers who provide financial wellness benefits see an NPS more than 2.4 times higher than those who do not.

The report, “Inside the Wallets of Working Americans: The 5th Annual Report from Salary Finance,” was conducted in January, surveying 2,000 working Americans.

Compliance April 29, 2023

Judge Dismisses Excessive Fee Complaint Against HR Firm TriNet

The 2020 retirement lawsuit alleged that the plan committee did not properly monitor recordkeeper and investing fees.

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A federal judge in Florida dismissed the 2020 class action lawsuit, Huang v. TriNet HR III Inc. et al. on April 26 by approving TriNet’s motion for summary judgment, according to the court order.

U.S District Judge Virginia M. Hernandez Covington, presiding in U.S. District Court for the Middle District of Florida, Tampa Division, threw out both alleged counts of fiduciary breach that were brought by the plaintiffs’ class under the Employee Retirement Income Security Act.

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“Plaintiffs have not put forth any evidence demonstrating that Defendants breached their fiduciary duties,” Covington wrote. “In fact, the undisputed record evidence shows the opposite.”

The class of plaintiffs has 30 days after the entry of the judgement to appeal the decision, according to a separate filing of judgment. The lawsuit was brought in 2020 by retirement plan participants.

In an amended complaint submitted in 2021, the class of plaintiffs alleged that the TriNet retirement committee committed two counts of fiduciary breach by failing to monitor plan recordkeeping costs—causing participants to pay excessive fees for recordkeeping services—and by employing an imprudent process in selecting and monitoring the plan’s investments by selecting high-cost, underperforming investment options.

Covington was unconvinced by the plaintiffs’ arguments in support of either allegation, finding that the TriNet retirement committee “monitored the Plan’s recordkeeping fees properly, conducting three competitive searches for recordkeepers during the Class Period and conducting regular benchmarking exercises in the interim,” she wrote in the order.

Covington was also unconvinced by the plaintiffs’ investment options allegation.

“Plaintiffs have not met their burden to avoid summary judgment on their investment-related claims,” she wrote. “First, while they ‘maintain Defendants did not follow a prudent process for selecting and monitoring the Plan’s investment options,’ they did not cite to any facts that specifically controvert those Defendants included in their statement of material facts related to the investment selection process.”

Throughout the class period from September 29, 2014, until the present, the Plan had at least $962 million dollars in assets under management: at the end of 2019 and 2018, the TriNet III Plan had over $4 billion dollars and $2.9 billion dollars, respectively, in assets under management. The 2018 TriNet III Form 5500 lists 88,647 Plan participants with account balances as of the end of the plan year, according to the amended complaint.

Although the plaintiffs alleged the retirement committee should have used its size to properly negotiate lower fees for recordkeeping services to satisfy its fiduciary duty to plan participants, Covington disagreed.  

“This Court joins the refrain of other district courts that have found evidence of regular, competitive searches compelling evidence that there was no breach of fiduciary duty,” Covington’s order stated.

A request for comment to TriNet was not returned.

Attorneys with the law offices of Capozzi Adler PC, based in Harrisburg, Pennsylvania, and Landers & Sternberg PLLC, based in Orlando, represented the class of plaintiffs in court. The law office of O’Melveny & Myers LLP, based in Los Angeles, and attorneys with GrayRobinson PA, based in Tampa, Florida, served as defendants’ counsel.

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