Data & Research April 2, 2018

Individual Account Retirement Plans the Dominant Source of Retirement Income

EBRI also found not only do individual account assets make up a large portion of families’ financial assets, but those with individual account assets also have substantially higher levels of net worth than those families without them.

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Individual account (IA) retirement plans are the dominant source of financial assets for retirement income among current and future retirees—and they continue to grow, according to the Employee Benefit Research Institute (EBRI).

Individual Account (IA) plans include employment-based retirement savings plans financed by both employer and employee contributions (most notably, defined contribution (DC) plans), as well as Keogh plans for the self-employed, and individual retirement accounts (IRAs) for savings outside of the workplace. EBRI’s analysis of Survey of Consumer Finances (SCF) data finds that in 2016, IA assets constituted 67.9% of financial assets at the median among families owning IA assets.

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The percentage of IA plan assets in DC plans from a current employer amounted to 40.9% in 2016. The percentage in a previous employer DC plan was 8.7%, while IRAs/Keogh plans held 50.4% of the IA plan assets.

In 2016, 66.5% of all families that had an active participant in an employment-based retirement plan from a current employer had a DC plan only, while 16.2% of these families had both a defined benefit (DB) and DC plan and 17.2% had a DB plan only. The percentage of family heads who were eligible for DC plans and chose to participate increased from 78.7% in 2013 to 79.4% in 2016.

EBRI also found not only do IA assets make up a large portion of families’ financial assets, but those with IA assets also have substantially higher levels of net worth than those families without IA assets. The median net worth for families that owned IA assets was $249,950 in 2016 compared with $19,200 for families without IA assets. “Consequently, any policy that alters this system could have consequences–either positive or negative–for Americans’ ability to fund a comfortable retirement,” says Craig Copeland, with EBRI.

The EBRI report, “Individual Account Retirement Plans: An Analysis of the 2016 Survey of Consumer Finances” is published as the March 13, 2018, EBRI Issue Brief, and is available online here. A Fast Facts version is here.
Compliance April 2, 2018

NYU Moves to Limit Evidence Used in Trial Over 403(b) Plans

In its motion, NYU asks that a federal district court judge issue an order “precluding from trial … any testimony, evidence, or arguments concerning claims that were previously dismissed by the court in its August 25, 2017, opinion.”

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In the excessive fee case against New York University (NYU) regarding its 403(b) plans, NYU filed motions in limine to have certain evidence excluded from trial.

The case is the first of many excessive fee cases against large universities to go to trial.

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In its motion, NYU asks that U.S. District Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York issue an order “precluding from trial … any testimony, evidence, or arguments concerning claims that were previously dismissed by the court in its August 25, 2017, opinion.” In that opinion, Forrest dismissed all of the plaintiffs’ loyalty claims, finding that the plaintiffs failed to plead sufficient facts to support the loyalty-based claims.

Forrest previously dismissed certain duty of prudence claims under the Employee Retirement Income Security Act (ERISA), saying that in order to state a claim for breach of the duty of prudence connected to the retention of certain investment options, plaintiffs must raise a plausible inference that “the investments at issue were so plainly risky at the relevant times that an adequate investigation would have revealed their imprudence, or that a superior alternative investment was readily apparent such that an adequate investigation would have uncovered that alternative”; that is, that “a prudent fiduciary in like circumstances would have acted differently.” The defendant’s contractual agreement to include certain investment options does not, by itself, demonstrate imprudence, she said.

In addition, Forrest found that merely having a contractual arrangement for recordkeeping services does not, as a matter of law, constitute a breach of the duty of prudence—to support a claim on this basis, plaintiff must make a plausible factual allegation that the arrangement is otherwise infirm. She also said that having a single recordkeeper is not required as a matter of law, and based on the facts alleged (for instance, that NYU consolidated recordkeeping for one plan but not the other), the allegation that a prudent fiduciary would have chosen fewer recordkeepers and thus reduced costs for plan participants—the “recordkeeping consolidation” allegation—is sufficient at this stage to support the plaintiffs’ claims.

Claims Forrest did move forward included the “failure to get bids” claim and the “excessive recordkeeping fees” claim. “More broadly, when plaintiffs’ prudence allegations in Count III are viewed as a whole, they plausibly support an assertion that the Plan fiduciaries failed to diligently investigate and monitor recordkeeping costs,” she wrote in her August 2017 opinion.

In its motions in limine, NYU also asks that the plaintiffs not be able to attempt to use evidence that their prudent measures and conduct that occurred subsequent to the plaintiffs’ filing of the lawsuit proves that prior conduct was imprudent.

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