Data & Research November 3, 2020

Workers Concerned About How Election Day Will Impact Retirement Savings

A Lincoln Financial report also finds some workers are uncertain or confused when it comes to how they should prepare their retirement plans ahead of election results.

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As Americans await Election Day results, a Lincoln Financial Group report examined the potential effects of the presidential election on retirement savings.

According to the report, the majority of both Democratic and Republican workers are preparing or planning to prepare for any impact that election night could have on their investments or retirement accounts. Fifty-two percent of Democrats said they are preparing for an impact to their retirement account, while 54% of Republicans noted the same.

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When asked what would impact their ability to stay on track with their retirement savings and future financial goals, 34% of Republicans said the outcome of the election would hinder their savings, 24% of Democrats said having a better understand of the products and solutions available to them would help them, and 42% of independents reported having more time and/or money would help.

Along with those concerns, the Lincoln Financial report also finds some workers are uncertain or confused when it comes to how they should prepare their retirement plans ahead of the election results. About one in 10 say they would like to be planning, but they don’t know what they should be doing.

However, despite their trepidations and anxieties on election night, Americans are feeling hopeful about their financial planning in the current market, according to the study. It’s possible their worries are being addressed with the help of a financial planner or adviser. Workers are speaking to financial professionals and making changes to their retirement accounts, including by looking at current investments, says Liz Casals, vice president of consumer insights for Lincoln Financial Group, in an interview with PLANADVISER.

Financial worries have been an ongoing trend in 2020, and not just as a result of the election. COVID-19 led many workers to feel financially stressed earlier this year. According to Lincoln’s Monthly Consumer Sentiment Tracker released in July, 41% of full-time employed U.S. adults said they would like to save more for retirement as a result of the crisis. Thirty-five percent said they would expand emergency savings, and 30% reported they would create or revise their budgets.

Numbers were similar for those who were employed but earning less as a result of COVID-19. Thirty-eight percent said they wanted to save more for retirement, 35% wanted to add to emergency savings and 27% said they would create or revise their budget.

Regardless of political affiliation, workers are thinking more about financial planning as a result of the pandemic, the Lincoln Financial study finds. Forty percent of Democrats are taking their financial planning more seriously due to COVID-19, and 39% of Republicans and 35% of independents are doing the same.

Compliance November 3, 2020

Court Finds Plaintiffs Have Standing to Sue Universal Health Services

The defendants argued that they lacked standing to recover losses for investments in which they did not invest.

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Universal Health Services’ defendants asked the U.S. District Court for the Eastern District of Pennsylvania to partially dismiss a lawsuit against them, arguing that plaintiffs lacked standing to recover losses for investments in which they did not invest.

The court noted that Congress permits plan participants to sue if the retirement plan fiduciaries allow the plan to pay inappropriate management fees or otherwise lose value for reasons arguably within their control. But they typically cannot challenge losses to funds in which they did not invest. However, it noted that the 3rd U.S. Circuit Court of Appeals recently ruled that participants can challenge decisions which affect the value of the plan if they can allege specific extra costs affecting their funds and therefore imposed upon them.

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The defendants argued the three plaintiffs only invested in seven of the plan’s funds during the putative class period and therefore lacked standing to bring claims about the remaining funds. However, the plaintiffs argued they have alleged injury with respect to each of their claims—which implicate “plan-level conduct”—and, therefore, have standing. The court agreed with the plaintiffs.

“Judge Edgardo Ramos recently evaluated—and denied—a similar argument in Falberg v. Goldman Sachs Group,” the court wrote in its opinion. “He declined to dismiss ERISA [Employee Retirement Income Security Act] breach of fiduciary duty claims even though the plan participant only invested in three of the five proprietary funds at issue. Judge Ramos found the plan participant had standing to bring his claims because he alleged ‘millions in losses to the plan resulting from defendants’ decision to maintain underperforming, high cost funds, which specifically affected him as a participant invested in several of them.’ He further found the allegation the fiduciaries acted in their own interest by offering a category of proprietary, high-cost funds applied to all participants who invested in any one of those funds.”

The court also cited Clark v. Duke University in which the judge found the claims relating to the fiduciaries’ overall decisionmaking processes affected all plan participants, including the named plaintiffs. The judge further found the plan participants had standing to bring their claims related to specific imprudent funds because at least one named plaintiff invested at least one of the funds at issue in the claims.

The first claim in the Universal Health Services lawsuit involves the plan’s inclusion of a suite of 13 Fidelity Freedom target-date funds (TDFs). The plaintiffs allege plan fiduciaries imprudently offered plan participants the high-cost, actively managed suite of funds even though index funds with much lower fees were available. The defendants concede that each plaintiff was invested in at least one of these funds. “As our Court of Appeals held in Sweda, this admitted fact is enough to link them to some of the underperforming funds and demonstrate individualized injury for standing,” the court said.

A second claim alleges Universal Health failed to monitor the plan’s recordkeeping and administrative costs, leading to the plan participants paying much higher fees than necessary. The court found this claim applies to all participants.

A third claim essentially alleges plan fiduciaries lacked a “prudent investment evaluation process.” The plaintiffs allege this imprudent process forced them, and all plan participants, to choose from an “expensive menu of investment options.” The court said it joins other courts in finding that claims relating to allegedly imprudent decisionmaking processes injure all plan participants.

The court found the plaintiffs have standing to move forward on their claims it and denied Universal Health’s motion for partial dismissal. However, it did not determine whether the named plaintiffs are appropriate proper class representatives to bring claims on behalf of all plan participants. “This inquiry may be appropriate at the class certification stage or in understanding their possible damages model,” the court said.

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