Client Service June 13, 2017

Confidence in Retirement Does Not Match Savings Actions

Competing financial priorities are keeping people from saving for retirement what they know they should, a survey finds.
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Lincoln Financial Group’s 2017 Lincoln Retirement Power Participant Study showed that while most individuals are confident and optimistic about retirement savings, the majority of participants acknowledge they are not saving as much as they think they need to in order to meet their retirement savings needs. The study shows that competing financial priorities are the culprit creating this conundrum of confidence.

In 2012, when Lincoln Financial conducted the first Retirement Power study, only 29% of respondents reported being confident, and 45% said they were optimistic about their retirement savings. This year’s study found 39% of respondents say they feel confident, and more than half (55%) are optimistic.

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Two-thirds of retirement plan participants understand that they should be saving at least 10% of their salary to stay on track, and 45% believe they need to save 15% or more. However, only four in 10 savers are saving as much as they think is necessary, and among the savers who are saving less than what they think they need, the majority (68%) would need to increase their savings by 5% or more to be on track.

The more competing priorities a participant reports, the less money they contribute to their retirement plan, according to the survey. Only 36% of individuals with eight or more competing priorities are contributing 10% or more to their retirement plan, but of those who have two or fewer priorities fighting for a share of their wallets, 59% are contributing at least 10%, and 40% are putting 15 percent or more away for retirement.

Student loan debt has a major impact on retirement savings, no matter how many other competing financial priorities a participant reported. Six out of ten people with student loan debt said it is keeping them from saving more for their retirement.

“Savers today face many financial pressures and the reality is that the majority of them are going to be responsible for their own retirement,” says Jamie Ohl, president, Retirement Plan Services, Lincoln Financial Group. “As an industry, we have helped people understand the importance of saving. Now, it’s up to us to help them save more so they can achieve the retirement they envision.”

Compliance June 13, 2017

Northrop Grumman Settles ERISA Suit

The first of two ERISA actions filed against Northrop Grumman in a California district court has been resolved, while the second is still pending. 
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Employees of Northrop Grumman have reached an agreement with their employer to resolve claims in the long-running matter of In re Northrop Grumman Corp. ERISA Litigation, a class action lawsuit initially filed back in 2006.

The parties reached a $16.75 million settlement amount, to be used to improve the administration of the retirement plans in question and to compensate employees and retirees. In the underlying suit, the plaintiffs alleged, among other claims, that Northrop fiduciaries violated their duties to employees in two 401(k) retirement plans by improperly causing those plans to pay Northrop for administrative services.

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The case was interpreted as a classic example of an Employee Retirement Income Security Act (ERISA) self-dealing challenge. This type of charge is often leveled against the retirement plans being run by investment providers and recordkeeping providers themselves, but increasingly non-investment-industry sponsors are also accused of similar conflicts.

A motion for approval of the settlement was filed by the parties in the Court of Judge Andre Birotte Jr. of the U.S. District Court for the Central District of California. A bench trial began March 14, 2017, and the settlement was initially struck after three days of trial. The settlement extends to conduct occurring between September 28, 2000 and May 11, 2009, according to the plaintiffs.

The settlement does not cover claims raised in Marshall v. Northrop Grumman Corp., a second case against Northrop in September 2016. This second piece of litigation posits similar allegations on behalf of Northrop employees and retirees, for conduct occurring from 2010 to the present. That matter is also playing out in the Central California district court.

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