Compliance June 3, 2010

Employer not Obligated to Make Discretionary 401(k) Match

A federal judge in Washington, D.C., has thrown out a lawsuit by a 401(k) participant alleging, among other things, that his former employer failed to make a matching contribution.
Reported by

U.S. District Judge Paul L. Friedman of the U.S. District Court for the District of Columbia ruled that Landis Construction Co. was under no legal obligation to make the match of 3% of Nathan Lindell’s earnings because the match payments were discretionary under the plan.  Friedman added that the employer had produced a declaration by its chief executive officer and co-owner that the plan did not have an ongoing employer match but instead had a discretionary profit-sharing 3% paid after the end of the year.

Lindell also did not present sufficient evidence for his lawsuit to survive on his allegation Landis did not submit contributions from his paycheck in a timely manner, Friedman asserted.  According to the court, Lindell did not produce evidence in response to Landis’s statement that a payroll company cut a check for each employee 401(k) deduction and that Landis then submitted those checks on every pay date.

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The court also dismissed a claim by Landis that plan fiduciaries breached their duties by not properly disclosing the plan’s fees. 

Friedman rejected the former employee’s request for the court to delay ruling on the request to throw out the case until Lindell could take additional pre-trial discovery.

The case is Lindell v. Landis Construction Co., D.D.C., No. 08-1462.

Data & Research June 3, 2010

Many Midwesterners Lack Confidence in Ability to Retire

Those in America’s Heartland expect economic conditions to improve in the near-term future but remain concerned about their long-term financial security.
Reported by

A new survey by Citi found only 30% of Midwestern respondents reported that they are confident in their ability to retire in financial security as planned. Thirty-five percent in the Midwest are not confident in their ability to retire in financial security, and 29% said they are confident but would need to make changes to their plans.  

Among those ages 18 to 39, 45% lack confidence in their ability to retire in financial security, compared to 31% of Midwesterners age 40 and older.  

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When it comes to investing money, Midwestern investors are more willing to take a chance on a high-return investment than their national counterparts—even though they remain less optimistic than investors nationwide about the current and future investment climate, according to a release of the survey results. Thirteen percent of Midwestern investors would rate their investment strategy as an eight or higher on a 10-point risk scale, with 10 being the highest risk available, compared with 8% of all investors nationally.  

Midwestern investors are more likely to believe it’s a good time to invest in mutual funds (45%) and individual stocks (42%) than the national average of investors (40% and 37%, respectively). More Midwestern investors describe their investment strategy as focused on maintaining wealth (55%) than on trying to build wealth (44%), reflecting the national trend, Citi reported.  

Fewer Midwesterners (28%) than the national average (32%) reported that they have taken money out of savings to pay expenses. When asked what they would do if they were to receive extra money, 37% of Midwesterners would save the extra money and 30% would pay overdue bills. Only 20% of Midwestern respondents would invest the money, and 11% would spend it.  

The survey found younger people in the Midwest are focusing their finances on saving and investing and are more likely than older generations to report that they are reducing the amount of money that they owe. Fifty-five percent of young adults surveyed said they are saving and investing more today than previously, compared to 34% of Midwesterners age 40 and over, and 79% of young adults said they are actively working to reduce their debt, compared to 62% of Midwesterners age 40 and over.  

Hart Research Associates conducted the telephone survey of 2,002 adults nationally from March 15 to 25. The survey included 467 respondents from the Midwest.

 

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