Compliance September 21, 2018

NYU Calls for Sanctions Against Workers, Attorneys

There are several bases on which the court could impose sanctions.

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The fiduciaries of several 403(b) plans sponsored by New York University (NYU) defeated a class action lawsuit last month brought by participants. Sacerdote et al. v. New York University is one of a glut of cases brought against higher learning institutions, alleging that excessive recordkeeping and investment fees were charged and underperforming investment options were offered by the plans. The U.S. District Court for the Southern District of New York found that NYU’s retirement plan committee adequately managed the plan’s recordkeepers and investment options.

While a number of such cases have settled or been dismissed, this was the first to proceed to trial. The case provides helpful guidance for other fiduciaries subject to the Employee Retirement Income Security Act (ERISA) and particularly those responsible for 403(b) plans.

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But in a new turn of events, on September 19, NYU called for sanctions against the workers and attorneys (Schlichter Bogard & Denton) behind the now-dismissed proposed class action suit arguing in New York  federal court that their suit had been an attempt to avoid unfavorable rulings in an earlier, identical case.

  • There were four different bases on which the court could sanction the workers and their attorneys, for their “frivolous and vexatious conduct,” the university said. NYU argued that the workers and attorneys violated Federal Rule of Civil Procedure 11 with the allegedly duplicative lawsuit.

  • Secondly, the university contended that the workers’ attorneys should be held liable for the costs of its motions to dismiss the suit under Title 23 Section 1927 of the U.S. Code.

  • Thirdly, NYU said that the court could also use its inherent authority to sanction the workers and attorneys, arguing that the court already found the claim was “without a colorable basis” and brought “in bad faith.”

  • In addition, the school said attorneys’ fees could be awarded under ERISA, because the alleged improper conduct was willful and in bad faith, the workers’ counsel could afford the fees and the award could deter the counsel from bad behavior in other cases.
Compliance September 21, 2018

Request for GAO to Study Process by Which Retirement Funds are Divided in Divorce

Women's household income and assets, on average, fell by 41% with divorce.

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Senator Patty Murray (D-WA), Ranking Member of the Senate Health, Education, Labor and Pensions (HELP) Committee, sent a letter to Government Accountability Office (GAO) Comptroller General Gene Dodaro requesting a study on the process for obtaining a Qualified Domestic Relations Order (QDRO), which allows for pensions or retirement accounts to be divided following a divorce or legal separation.

The Senator’s letter includes data from a GAO study which found that women’s household income and assets, on average, fell by 41% with divorce, with the income decline being almost twice the size of the decline that men experienced. One protection available to women is the QDRO, which creates or recognizes the existence of a right to receive a share of retirement benefits. She says in her letter, “The DOL issued interim regulations governing QDROs in 2007, with final regulations issued in 2010. Since that time, there have been concerns that the current QDRA process has not been wholly effective in protecting the rights of alternate payees, especially women.”

Murray asks that this study looks at the process for dividing retirement assets that looks at the timeline, costs, barriers, opportunities for improvement, and impacts on various segments of the population.  In efforts to address retirement gap, Senator Murray has introduced legislation  focused on challenges that disproportionately affect women and legislation to enhance Social Security benefits for divorcees and widows.

This action is the latest in Senator Murray’s ongoing efforts to address the retirement gap women face as they prepare for their financial futures. Earlier this month, Senator Murray reintroduced the Women’s Pension Protection Act (WWPA), a package of solutions to help strengthen women’s retirement security by addressing some of the challenges that disproportionately affect women. She also introduced the Stronger Safety Net Act (SSN) earlier this year, legislation that included provisions to enhance Social Security benefits for divorcees and windows.

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