Retiree Loses Bid to Recover 2008 Losses

A dentist was adhering to his fiduciary duty to 401(k) plan participants when he decided to wait until a December 31, 2008, plan valuation to make a distribution to a retiree.

Dr. David M. Perry acted reasonably when he determined that, due to unforeseen market conditions, paying benefits to Sandra Wakamatsu based on the 2007 valuation would prejudice the other participants in the plan, U.S. District Judge Charles R. Breyer of the U.S. District Court for the Northern District of California ruled. Given the drastic decrease in the value of the pooled account for plan assets in 2008, and the request for disbursement came only two weeks before the scheduled end-of-the-year valuation.  Dr. Perry reasonably concluded that making a distribution based on the 2007 valuation would have allowed Wakamatsu to escape her share of the losses occurring in 2008 and force the other participants to bear those losses, Breyer found.    

“It is important to recognize that applying a different valuation date did not deprive [the] plaintiff of her benefits, and instead merely ensured that [the] plaintiff bore her share of the losses that the plan suffered over the course of the year,” Breyer wrote in his opinion. “Dr. Perry acted reasonably and fulfilled his duties to all plan participants by refusing to apply the 2007 Valuation to [the] plaintiff’s claim for benefits.”  

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The court did find that there was a conflict of interest due to the fact that Dr. Perry’s wife and daughters were participants in the plan. However, considering their share of the assets was only 10%, Breyer said it was unlikely this weighed in Dr. Perry’s decision and gave it little consideration in the court’s ruling.

 

 (Cont...)

Wakamatsu retired from Dr. Perry’s dental office on October 31, 2006. In a letter to Wakamatsu dated December 10, 2008, by the 401(k) plan’s recordkeeper, her payable benefits were estimated at $195,317.82, based on the valuation date of December 31, 2007. Wakamatsu completed the required distribution request forms on December 17, 2008.    

However, after determining that processing Wakamatsu’s claim under the 2007 valuation would be a breach of fiduciary duty owed to the remaining plan participants, Dr. Perry processed the request for benefits under a valuation date of December 31, 2008, which totaled $135,449.40. Wakamatsu declined to take payment in 2009.  

Another valuation on December 31, 2009, put Wakamatsu’s account at $159,581.93. She took a distribution of $159,581.93, but filed a lawsuit seeking the $35,735.89 difference between her distribution and her account value as of December 31, 2007.  

The court’s opinion is here

 

ETF Assets Increase $14B in March

Exchange-traded fund (ETF) assets totaled $1.2 trillion as of March 31, 2012.

In March ETF assets increased by more than $14 billion, or 1.2%, according to State Street Global Advisors’ (SSgA’s) ETF Snapshot report for March 2012.  

ETF flows topped $11 billion in March. The Size-Large Cap led all categories with $5.9 billion in inflows, a reversal from the $4.8 billion in outflows it had in February. The Fixed Income category continued to see positive inflows, attracting $3.9 billion in March and $15.6 billion year-to-date.  

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The top three managers in the U.S. ETF marketplace in March were BlackRock, State Street and Vanguard. Collectively, they account for approximately 83% of the U.S.-listed ETF market.  

The top three ETFs in terms of dollar volume traded for the month were the SPDR S&P 500 [SPY], the iShares Russell 2000 [IWM] and the PowerShares QQQ [QQQ]. The top three ETFs in terms of assets for the month were the SPDR S&P 500, SPDR Gold Shares [GLD] and Vanguard Emerging Markets [VWO].  

By asset class, developed and emerging markets posted negative returns of 0.5% and 3.3%, respectively. Domestic large cap, mid cap and small cap markets were all positive, gaining 3.3%, 1.9% and 2.9%, respectively. The U.S. Aggregate, Treasury and Corporate Bond were all slightly negative. Commodities fell 2.4%.

 

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