Insurance Group Calls On White House to Support More Retirement, Annuity Legislation

The IRI wrote to the Biden administration in the hopes it will back retirement legislation that paves the way for more guaranteed income products and seeks CIT use in 403(b) plans.


The Insured Retirement Institute wrote to the administration of President Joe Biden on Wednesday, calling for additional retirement legislation that includes furthering the use of guaranteed income annuities and allows the use of collective investment trusts in nonprofit 403(b) plans.

In the letter addressed to the White House, the Washington-based institute championed the sweeping SECURE 2.0 Act of 2022 passed last year while calling for the passage of additional retirement policies previously brought before Congress.

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“There is still more that needs to be done to soothe the anxiety that middle-class workers and retirees across America express about their ability to accumulate sufficient savings that will provide them with a sustainable income to last throughout their retirement years,” IRI President and CEO Wayne Chopus wrote in the letter.

The move follows the IRI’s announcement in February that it would focus its advocacy efforts on removing barriers to including guaranteed lifetime income annuities in retirement plans as qualified default investment alternatives. With that announcement, the institute published 28 legislative goals as its 2023 Federal Retirement Security Blueprint.

In Tuesday’s letter, the IRI highlighted four acts previously brought before Congress:

  • The Lifetime Income for Employees Act of 2023, which would allow retirement plan sponsors to use lifetime income solutions for a portion of contributions made by participants who have not made retirement plan investment selections. These lifetime income solutions have delayed liquidity features and can provide better returns as qualified default investment alternatives, the IRI wrote.
  • The Retirement Fairness for Charities and Educational Institutions Act of 2023 would amend federal securities law to provide 403(b) retirement plan participants with equal access to cost-efficient investment options that use CIT and unregistered insurance company separate accounts, including protected lifetime income solutions. This would level the playing field among private sector, public sector and nonprofit 403(b) retirement plans, allowing employees of charities, schools and universities access to lower-cost investment options, the IRI argued.
  • The General Account Products Clarification Act of 2022 would ensure legal certainty for insurers offering stable value and principal preservation funds. These products protect retirement account balances from loss and provide steady income, the IRI wrote.
  • The Automatic Retirement Plan Act would address retirement insecurity by requiring all but the smallest of employers to offer automatic retirement savings plans. Employees would be enrolled by default but could opt out. The bill would also require that participants with account balances of $200,000 or more be given the choice to receive up to 50% of their vested balance in the form of a protected, guaranteed lifetime income product, the IRI noted. The act aims to increase coverage for minority communities, as nearly 64% of Latino workers, 53% of Black workers and 45% of Asian American workers lack access to an employer-provided retirement plan.

In addition to further legislation, the IRI’s letter noted a potential obstacle to SECURE 2.0 provisions and other legislation: a new Department of Labor proposal, expected in August.

The proposal, as referenced by IRI, seeks to further expand the federal and state framework regulating the standard of conduct for financial professionals who provide personalized advice about investments and insurance to retail consumers. A similar DOL rule was vacated by a federal appeals court in 2018, the IRI noted. It argued that “there is no evidence indicating that the current regulatory framework fails to protect retirement savers effectively.”

“The forthcoming regulation has the potential to significantly impact access to affordable professional financial advice, particularly for Black and Latino workers and retirees,” the Institute wrote. “Moreover, it may further widen the existing wealth gap.”

Twitter Hit With $500M Suit for Unpaid Severance

The proposed class action alleges Elon Musk promised to abide by the firm’s severance plan but did not follow through.

Twitter was hit Wednesday by a complaint seeking $500 million in damages for allegedly not making promised severance payments to terminated employees, according to a court filing in U.S. District Court for the District of Northern California.

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The complaint, brought by the firm’s former head of people experience on behalf of a putative class of fellow former employees, alleges that Elon Musk and X Corp., the parent company of Twitter, violated the Employee Retirement Income Security Act by not delivering on severance payments promised in an employee benefit plan.

The complaint alleges that Twitter’s benefit plan entitled many senior employees to severance of six months’ base play, plus one week’s pay for each full year of service, and employees with less time at the company to two months’ base pay, plus one week’s pay for each full year of service. The suit alleges that Musk and his leadership team told employees the benefit plan remained in place, then instituted mass layoffs in which employees were offered “at most three months of compensation.”

“Musk initially [upon buying Twitter] represented to employees that under his leadership Twitter would continue to abide by the severance plan,” Kate Mueting, the firm administrative partner in Sanford Heisler Sharp LLP, said in a statement. “He apparently made these promises knowing that they were necessary to prevent mass resignations that would have threatened the viability of the merger and the vitality of Twitter itself.”

The complaint, McMillian v. X Corp. et al., was filed by Sanford Heisler Sharp on behalf of Twitter’s former human resources executive, Courtney McMillian, and the class of participants and beneficiaries in Twitter’s severance plan.

According to the complaint, Musk and X Corp. are the fiduciaries on the plan, as ERISA law considers the employer the plan administrator in the “absence” of a designated fiduciary. The suit also claims Musk’s communication to employees about the plan and severance payments makes them responsible under ERISA.

“These violations of fiduciary duties caused substantial harm to the Plan and its participants, by causing the Plan to be deprived of the funds necessary to make full payments to Plan participants,” the complaint states.

Twitter did not immediately respond to request for comment on the complaint.

Andrew Oringer, general counsel and partner in the Wagner Law Group, which is not involved with the case, says employees seeking allegedly promised severance benefits may face multiple questions about the binding nature of the payouts. He notes that provisions possibly may provide the employer the ability to change the plan or “interpret the words of the plan and related documentation.”

“Where there’s reliance on a transaction document (like the Merger Agreement here), there will also be questions about whether anyone other than the parties to the transaction can enforce the provisions of the transaction document,” Oringer notes. “And where oral assurances are alleged, it may be hard to enforce alleged oral promises.”

Musk bought Twitter in October 2022 in a $44 billion deal, after which he took over the company as CEO, dubbing himself “Chief Twit,” and laid off more than half the workforce, in part to cut costs.

The complaint cites Musk’s own Twitter account as evidence, alleging that he wrote on November 4, 2022, that terminated staffers were getting “50% more than legally required,” with “legally” referring to Department of Labor guidelines around worker layoffs, not to the plan in question. According to the complaint, “some laid-off employees have yet to receive anything,” and the three months’ severance others received is “a fraction of what employees are entitled to as plan participants.”

The complaint goes on to allege that the defendants attempted to “hide the existence” of the severance plan from employees and refused to make payments “so those funds could be used to prop up the company,” according to the complaint and a statement from Sanford Heisler Sharp.

Oringer notes that there could be hurdles regarding class certification in the case, particularly if “there is perceived to be a wide range of relevant factual scenarios. An inability to get class certification could easily be as damaging to the case’s prospects as any substantive hurdle faced by a plaintiff.”

Twitter, however, could also face challenges, Oringer says.

“For example, there are cases indicating that a fiduciary’s dissemination of inaccurate information, and particularly intentionally inaccurate information as is alleged here, could amount to an actionable fiduciary breach,” he says. “Such a claim requires the establishment of fiduciary status and would be bolstered by successfully establishing intentionality.”

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