Compliance May 27, 2016

Another Appellate Court Allows Participants to Seek Plan Reformation

The appellate court noted that under Amara, if the participants cannot get relief with their benefit claims, they can seek an equitable remedy for breach of fiduciary duty to disclose.
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Citing the Supreme Court decision in Amara v. CIGNA Corp., the 9th U.S. Circuit Court of Appeals has moved forward equitable relief claims of plan participants who say they were misled about the pension benefits they would receive.

While a district court found the plan participants’ benefit claims and equitable relief claims under the Employee Retirement Income Security Act (ERISA) duplicative, the appellate court noted that under Amara, if the participants cannot get relief with their benefit claims under U.S. Code Section 1132(a)(1)(B), they can seek an equitable remedy for breach of fiduciary duty to disclose under U.S. Code Section 1132(a)(3).

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In its opinion, the 9th Circuit noted that in the current case, Moyle v. Liberty Mutual Retirement Benefit Plan, as well as in the Amara case, there was a material lack of disclosure about the terms of the plan, and participants sought relief under 1132(a)(1)(B) as well as equitable remedies under 1132(a)(3). The high court found that if participants are not able to recover benefits based on interpretation and enforcement of the retirement plan document, they can receive reformation of the retirement plan as an equitable remedy under 1132(a)(3).

The 2nd and 6th Circuits have also allowed participants to seek a plan reformation remedy.

In the Moyle case, participants were employees of Old Golden Eagle Insurance Company when it was sold to Liberty Mutual Insurance Company. Liberty Mutual’s pension plan document entitled them to past service credit for purposes of eligibility, vesting, early retirement and spousal benefits, but not retirement benefits accrual. However, the summary plan description (SPD) was silent on the issue, and participants claimed they were told in benefit meetings that their past service did count towards benefits accrual.

After seeking claims for benefits they thought were due from Liberty Mutual and denied, the participants filed a lawsuit. A district court dismissed all claims. The 9th Circuit agreed the participants could not get benefits recovery due to the plain language of the plan document; however, it remanded their claims for equitable relief to the district court for consideration in light of Amara.

The district court’s opinion is here.
Data & Research May 27, 2016

Housing Costs Never Really Go Down for Clients

A new Beyond the Numbers blog post from the Bureau of Labor Statistics examines the real spending patterns of older Americans and their households.  
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Data from the Bureau of Labor Statistics shows housing is the “greatest expense in dollar amount and as a share of total expenditures for households with a reference person 55 and older.”

This finding is reported in a new Beyond the Numbers blog post, which includes some interesting and extensive charts on the ways older Americans spend their dough. Matching volumes of other research published by industry providers and academics alike, the blog post projects that the aging of the United States population will influence the economy in many ways for many years to come.

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According to the blog, age 55 is an important reference point for thinking about the way the U.S. population spends and saves: “Age 55 was chosen because the article focuses on spending changes that occur as household members age and transition to retirement,” with one’s 55th birthday kicking off the last decade of quality prep time before the typical retirement age of 65.

In 2014, older households with a reference person at least 55-years old made up 41.5% of the sample of the Bureau’s Consumer Expenditure (CE) Survey, compared with 37.5% in 2009 and 34.6% in 2004, reflecting the aging of the U.S. population. For the population as a whole, annual pre-tax income was $58,528, the blog post explains. Pre-tax income was $75,241 for households with a reference person 55- to 64-years old, declining to $35,467 for households with a reference person 75 and older.

While housing expenditures do decrease somewhat in dollar terms as a person ages ($18,006 per year for the 55 to 64 age group, declining to $15,838 for the 65 to 74 group and $13,375 for the 75-and-older group)  they remain a significant expense throughout one’s latter years. When weighed against income, one can see that the oldest actually pay the most on housing relative to the amount of money coming in.

At the mean, the numbers imply that the typical retiree is directing more than one-third of annual income to meet housing costs, compared with between 8% and 16% on health care, depending on exactly how old the individual is.

“Housing was the greatest expense in average dollar amount and as a share of the household budget for older households,” the blog concludes. “Housing expenses declined with the age of the reference person and accompanying increase in the proportion of households without mortgage debt. Whether this pattern will continue is unclear. One explanation is that data from the Survey of Consumer Finances show that the proportion of families with heads ages 55 or older with housing debt increased steadily from 24% in 1992 to 42% in 2010. The increase was more pronounced for families with heads ages 65 to 74 and 75 and older.”

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