Client Service August 20, 2024

Commonwealth Gets $7M JPMorgan Funding for Low-Income Worker Program

The nonprofit will use the funds to launch an initiative to enhance access to workplace financial benefits to low- and moderate- income workers.

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Commonwealth, a nonprofit focused on building financial security, announced Tuesday a $7 million commitment from JPMorganChase to launch a three-year national project aimed at providing financial education and services to low- and moderate-income workers at participating employers.

According to the announcement, JPMorgan has committed the funds to develop an initiative, Benefits for the Future, trying to address the financial well-being of low- and moderate-income workers, which it notes are disproportionately made up of Black, Latinx and women-led households.

The program will offer financial services to benefits providers and employers with “significant” employee bases earning low and moderate income, defined as less than 80% of the median family income in their area. By participating in the program, the organizations will “design, test, and scale quality benefits for their employees, choosing from a variety of solutions, including debt reduction, workplace savings, and wealth-building strategies.”

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Commonwealth will be starting the project in Chicago and in Columbus, Ohio, before taking it to other markets. It will also leverage the data, insights and positive results from the pilot programs to be “amplified to influence industry best practices and policy.”

In program materials, Commonwealth identified the program’s audience as employers with more than 20,000 U.S.-based employees who make less than $75,000 per year; they must also be committed to sharing insights, data and broader findings. The money from JPMorgan will fund the program for three years and should reach 2.5 million workers nationally, according to the announcement.

Commonwealth hopes to work with more than a dozen employers, though the final number may depend on the size and scope of the partnerships, according to Vice President Brian Gilmore.

“Existing Commonwealth staff, with expertise in consumer research, behaviorally informed design, workplace benefits, program evaluation, and communications will be working with employers to implement programs and projects as part of the initiative,” Gilmore says via email.

Those services will include advice on workplace financial benefit best practices; research and data to inform, co-create and structure benefits, incentives and outreach strategies; implementing the enhanced workplace benefits strategy; and help identifying any adjustments to the programs.

The pilot program’s benefit focus areas include:

  • Debt reduction (student loan, medical and consumer);
  • Retirement;
  • Workplace savings;
  • Child care costs;
  • Home ownership;
  • Long-term health care; and
  • Wealth and asset building.

The financial services being offered to participating organizations were also touted by Commonwealth as helping “improve employee financial health, while delivering positive business outcomes such as increased worker productivity, engagement and retention.”

The nonprofit cited research from Morgan Stanley’s Graystone Consulting noting that financial stress, even among those making at least $100,000 a year, can lead to lower productivity, “weakened” company culture and delayed retirement. Meanwhile, it cited Financial Health Network findings that fewer than one-third of workers have access to benefits that help them with financial needs.

JPMorgan’s funding is part of the firm’s work to “improve financial health outcomes for employees,” both at its own firm and among other employes, according to the announcement.

Commonwealth offers organizations the chance to set up a call to discuss the program on its website.

Commonwealth was founded in the late 1990s with the goal of reducing the cost to serve working families with new financial products, services and policies; the organization works with employers, financial services firms, recordkeepers, payroll and other workplace solutions providers.

 

Compliance August 20, 2024

Nordstrom Suit, HP Revival Add to 401(k) Forfeiture Cases

A Wagner Law Group attorney says plan sponsors should review their plan documents, as Nordstrom is the latest employer challenged over its use of forfeited funds.

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New and ongoing litigation regarding plan sponsors’ use of forfeitures under the Employee Retirement Income Security Act means plan sponsors should carefully review the forfeiture provisions of their defined contribution plans, an ERISA attorney says.

Michael Schloss, a counsel at the Wagner Law Group, says use of forfeiture amounts is “built into the structure of these types of plans.”

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In a law alert from his firm this week, Schloss also wrote that “consideration should be given to whether fiduciary decisions relating to forfeitures could be seen as relieving the employer of an obligation to the plan and imposing additional costs on participants and whether action should be taken now that might mitigate any litigation risk going forward.”

The Wagner alert came just days after a new fiduciary breach suit was filed against retailer Nordstrom Inc., citing use of forfeitures, the costs of a managed account service and excessive recordkeeping fees,  and shortly after the revival of an earlier forfeiture case against HP Inc., which was initially dismissed last month.

The new case, Curtis McWashington et al. v. Nordstrom Inc. et al, was filed on August 12 in U.S. District Court for the Western District of Washington. The plaintiffs are seeking class action status.

Represented by lawyers from Keller Rohrback LLP, Walcheske & Luzi LLC and Schneider Wallace Cottrell Konecky LLP, the plaintiffs claim the retailer, its board of directors and the Nordstrom 401(k) Plan Retirement Committee “failed to fulfill their fiduciary duties to prudently and loyally ensure the Plan’s total recordkeeping and other administrative expenses were reasonable and not excessive, as well as engaged in self-dealing with regard to Plan forfeitures in violation of ERISA fiduciary prohibited transaction rules.”

The Nordstrom plan had 11,352 participants and $3.9 billion in assets at the end of 2023, according to the plan’s 2023 Form 5500.

The case against HP is an amended version of the suit that was dismissed. The new suit was filed July 17 by plaintiff Paul Hutchins, as a representative of a class of participants and beneficiaries on behalf of the HP Inc. 401(k) Plan in U.S. District Court for the Northern District of California. The court gave HP until Friday to respond and scheduled further proceedings on the company’s motion to dismiss.

Hutchins is represented by the law firm Hayes Pawlenko LLP.

Schloss, in an interview with PLANSPONSOR, says the range of forfeiture cases pending against Nordstrom and other employers, including Bank of America Corp., Intuit Inc. and Qualcomm Inc., stem from IRS rules for the plans to qualify for tax-preferred status under ERISA that include permitted uses of forfeiture amounts.

While he says the various federal courts in which similar ERISA cases about forfeitures are pending will have to sort out how those funds fit into the fiduciary duties of prudence and loyalty set out in Title I of ERISA, he believes, ultimately, “this can be resolved in plan documents.”

Haffner Law PC is representing the plaintiffs in the BofA suit, and Hayes Pawlenko is leading the litigation in the Intuit and Qualcomm suits.

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