Data & Research September 17, 2018

Companies With Strong Performance Have Quality 401(k)s

Above-average-rated plans are more apt to be found at companies with 20% to 80% higher profitability than are average-rated plans, says T. Rowe Price.

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T. Rowe Price Retirement Plan Services Inc. learned in new research, which it is reporting in “Where 401(k) Design and Corporate Profitability Cross Paths,” that companies with strong performance have quality 401(k) plans. The study evaluated 485 401(k)s with more than $50 million in assets and a BrightScope rating, which served as a proxy for 401(k) plan quality.

T. Rowe Price discovered that 401(k)s with an “above average” rating are strongly associated with companies that have between 20% and 80% higher profitability measures than companies with 401(k) plans rated as “average.”

Further, 401(k) plans rated as “poor” are strongly associated with companies that have profitability measures up to 80% lower than companies having average-rated plans.

Companies whose plans are rated “great” are more likely to have gross margins between 20% and 40% higher than companies with average-rated 401(k) plans. Companies with a “great” 401(k) are also more apt to have net income per employee between 40% and 80% higher than are companies with average-rated plans.

Revenue per employee is between 20% and 60% higher for companies with 401(k) plans rated great than companies with 401(k) plans rated average, and companies with plans rated “below average” or poor have up to 80% lower revenue per employee.

“While correlation isn’t the same as causality, our findings provide strong evidence that there’s a connection between better-designed and higher-quality 401(k) plans and a company’s bottom line,” says Joshua Dietch, head of T. Rowe Price’s retirement and financial education team, which conducted the study with the company’s customer and market insights team and quantitative equities group. “We’ve long believed this was the case, but this is the first time we’ve been able to prove the correlation.”

Aimee DeCamillo, head of T. Rowe Price Retirement Plan Services Inc., adds: “Our research shows that there may be corollary benefits when companies invest in their 401(k)s—and disadvantages when they don’t.”

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Compliance September 14, 2018

Church Failed to Provide Retirement Benefits to Former Employees

Its former executive pastor and his wife presented evidence showing that supplemental retirement benefits were improperly taken in November 2011 and placed in the church's building campaign.

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A Tarrant County, Texas, jury delivered a $3.7 million verdict against Crossroads Christian Church for failing to provide supplemental retirement benefits to its former executive pastor and his wife.

According to a press release from Dallas employment law boutique Clouse Brown PLLC, Mel Dietz, who previously served as executive pastor from 1995 to 2015, helped oversee church operations and multiple construction projects. His wife, Vicki Dietz, worked directly for Crossroads’ Senior Pastor, Barry Cameron, and was Cameron’s executive assistant for more than 20 years. The Dietzes were both participants in Crossroads’ Supplemental Retirement Plan.

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During trial, the Dietzes presented evidence showing that supplemental retirement benefits were improperly taken in November 2011 and placed in Crossroads’ “We Believe” building campaign to help fund construction of a children’s building after the church came up $22 million short in pledges and contributions needed to build the children’s building and a youth building.

Regarding the jury verdict in Dietz v. Crossroads Christian Church, Andrew Stubblefield, lead trial counsel for Crossroads and an attorney with Bradley Arant Boult Cummings LLP, provided the following statement to PLANADVISER: 

 

“Crossroads is extremely pleased that the jury found no merit in the overwhelming majority of the plaintiffs’ claims. Specifically, the jury voted unanimously to reject claims for breach of an alleged employment contract, fraud, negligent misrepresentation, and promissory estoppel. The jury’s sole finding in the plaintiffs’ favor was apparently based on specific language in Crossroads’ long-since-terminated Supplemental Retirement Plan, which the Church had planned to extend to the entire pastoral staff.

 

“Crossroads is disappointed that compelling evidence was not present to provide the jury with additional facts, which could have changed the outcome of the jury’s decision about the Supplemental Retirement Plan.

 

“Crossroads remains unfailingly committed to its mission, its ministry, and its members. Once the verdict is finalized, the Church will weigh its options for further action.”

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