Data & Research December 30, 2013

Saving Popular with Low-Income Workers

Research from the polling firm Gallup indicates that those who prefer to save money most may also have the most trouble doing so.
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In reviewing data from 2009 to 2013, Gallup finds that Americans with the absolute lowest annual household incomes, $20,000 or less, are the most likely to say they enjoy saving money (66%) rather than spending it (30%). This propensity to save drops off notably among those bringing in $50,000 or more, including 56% of those with household incomes between $50,000 and $74,999, and 55% of those earning $75,000 or more.

Age also plays a role in attitudes about saving, according to Gallup. Younger adults are seen as more probable spenders, since they are less likely to have financial obligations such as supporting a family or paying a mortgage, and may figure they have time to save later in life. Older Americans, those age 65 and older, were seen as the most probable savers.

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The research also indicates that a person’s political outlook can affect how they look at saving. Those who identified themselves as “conservative” were more likely to say they prefer saving money (64%) than those who considered themselves as “liberal” (54%). Gallup indicates that this could be a function of age differences, with liberals more likely to be younger and conservatives more likely to be older. However, the research did find that this dynamic holds across the different age categories. For example, among those that are 18 to 29 years old, 66% of conservatives say they enjoy saving more than spending, while 52% of liberals say the same.

Research results are based on aggregated telephone interviews conducted by Gallup from 2009 to 2013, with a combined sample of 6,127 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia.

Compliance December 30, 2013

Court Remands Benefit Offset Case

A federal appellate court has vacated a ruling about offsetting pension benefits and remanded the case back to a district court.
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The 2nd U.S. Circuit Court of Appeals has reviewed the case of Frommert v. Conkright and decided it should be remanded a third time back to the U.S. District Court for the Western District of New York.

The original lawsuit was brought by participants of a retirement plan sponsored by the Xerox Corporation. These participants left the company and received a lump sum distribution of their retirement benefits, but were then rehired at a later date. Upon rehiring, the plan administrators told these participants that their retirement benefits would be reduced by prior distributions, using what’s called a phantom account offset method.

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The affected participants disagreed with the use of this method and filed suit, alleging that the practice violated the Employee Retirement Income Security Act (ERISA). Specifically, the suit says that the plan violated ERISA’s notice provisions and that the plan administrator’s interpretation of these provisions was unreasonable. The current version of the suit also contends that the district court was in error when it failed to allow the plaintiffs to conduct discovery on whether the plan administrator was operating under a conflict of interest.

The case originated in 2002 and four years later reached the 2nd Circuit, which remanded the case back to the district court (see “Method of Offset for Prior Distributions Violates Anti-Cutback Rule”). The defendants in that case eventually appealed to the U.S. Supreme Court, which ruled in 2010 that the case should be remanded back to the district court and judged against the standards set forth in another case, Firestone Tire and Rubber Company v. Bruch.

The main point of the Firestone standards, said the Supreme Court, was that an ERISA plan administrator with discretionary authority to interpret a plan is entitled to deference in exercising that discretion (see “U.S. Supreme Court Orders More Respect Shown for Plan Admins”).Therefore, the original case, Frommert, went back to the district court. When the district court did not rule in favor of the plaintiffs, they appealed once again to the 2nd Circuit.

In December 2013, the 2nd Circuit decided that the plaintiffs’ suit had merit for several reasons. First, the appellate court found that “the proposed offset produces an absurd and contradictory result and is therefore unreasonable.” Second, the appellate court found that the summary plan descriptions (SPDs) of the Xerox plan did not state that the amount of the lump sum distribution “will” reduce the benefit, only that it “may.” The court considered that a “critical omission,” ruling that the plan’s SPDs were “insufficiently accurate.”

In terms of additional discovery, the appellate court found that the district court “did not abuse its discretion in declining to reopen discovery,” citing the fact that the district court properly made use of the standards set forth in Firestone.

The full text of the 2nd Circuit’s most recent decision can be downloaded here.

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