Compliance September 3, 2010

Court Dismisses FA Suit over Merrill WealthBuilder

Merrill Lynch’s WealthBuilder Plan did not violate the Employee Retirement Income Security Act (ERISA) because it was a top-hat plan, a federal judge ruled in throwing out a proposed class-action lawsuit by three financial advisers against the company.
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In deciding the Merrill Lynch plan did not run afoul of ERISA’s minimum vesting requirements, U.S. District Judge Roger T. Benitez of the U.S. District Court for the Southern District of California asserted that it fit the guidelines for such plans because it was unfunded and intended for a select group of highly compensated employees. Participants had an average compensation of more than double that of all other Merrill Lynch employees, the court pointed out.

Benitez said that while there is no hard and fast rule about what constitutes a “select group of management or highly compensated” employees, other judges have treated programs that limit participation to 15% or less of the workforce as being in the top-hat category. The opinion said the company indicated this was the case with WealthBuilder.

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While working for Merrill, plaintiffs Trever Callan, Timothy Callan, and Ryan Callan participated in WealthBuilder and two employee compensation packages: the Financial Advisor Capital Accumulation Award Plan (FAACAP), the Growth Award Plan.

When the Callans left Merrill Lynch to form their own financial advisory firm in 2007, they alleged, the three lost some of their benefits under these plans because the plans contained forfeiture provisions that violated California’s Labor Code and Unfair Competition Law and ERISA. While the Callans admitted they received all vested awards to which they were entitled under the plans, they contended the forfeiting of unvested awards was illegal.

In dismissing all plaintiffs’ claims, Benitez found that California’s Labor Code only prohibits the forfeiture of “wages,” and plaintiffs did not have a wage interest in the Merrill plans.

Not only that, but Benitez ruled that the company did not violate ERISA’s minimum vesting standards when it came to the FAACAP or Growth Award Plan because neither plan was governed by ERISA.

The case is Callan v. Merrill Lynch & Co., S.D. Cal., No. 3:09-cv-00566-BEN-BGS.

 

Data & Research September 3, 2010

Financial Stress Calls Employees to Action

An analysis from Financial Finesse finds employees reported more financial stress in Q2 2010, but instead of retreating in fear, they were called to action.
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Twenty percent of calls into Financial Finesse’s Financial Helpline service, were related to retirement planning. Employees are also becoming more proactive about all long-term financial planning issues, as calls for long-term planning issues increased from 37% of calls in second quarter last year to 48% of calls in Q2 2010.  

Less than 18% of employees indicated they are on target to reach their income replacement goals in retirement. The top five retirement planning questions callers were asking in Q2 were: How much do I need to save for retirement; What type of retirement account(s) should I contribute to; Should I convert to a Roth IRA; What is a Roth 401(k) and why should I participate; and How do I structure my withdrawals from my retirement plan?  

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Eighty-five percent of survey respondents said they contribute to their employer-sponsored retirement plan.  

More than three quarters of employees (78%) reported some form of financial stress, with 33% reporting high or overwhelming stress. Only 22% of respondents reported feeling “low” or “no” financial stress.  

Employees seem to have responded to the stress by improving the way they manage their finances. Calls about Debt and Budgeting & Saving came in at a combined 32% of calls, down from 38% of calls one year ago.  

With the exception of investment planning, wellness scores for users of the Financial Learning Center improved in all areas. Improvements were made in the key areas of debt management (4.4 to 5.0), money management (5.1 to 5.5), and retirement planning (4.3 to 4.9). Users continue to score highest in insurance planning (7.4), and lowest in investment planning (2.7).  

Trend analysis research is compiled by tracking calls into Financial Finesse’s Financial Helpline service, which is available to over 500,000 employees from more than 300 organizations.  

 

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