joel Posted June 29, 2015 Report Share Posted June 29, 2015 This is a voluntary 403b investment plan. It is run by the NJ Division of Pensions. The Trustees have never adopted an investment menu. All employee contributions are invested in a common stock portfolio invested by the Division of Investment. Q.: I feel a lack of an investment menu is a breach of prudence. Would a Class Action to compel the Trustees to adopt an investment menu succeed? Link to comment Share on other sites More sharing options...
mbozek Posted July 1, 2015 Report Share Posted July 1, 2015 What is the NJ statute that you would use to allege a breach of prudence? NJ is exempt from ERISA so only a NJ statute that applies to NJ state government could be used. And NJ has sovereign immunity. mjb Link to comment Share on other sites More sharing options...
jpod Posted July 2, 2015 Report Share Posted July 2, 2015 What is the legal authority under IRC Section 403(b) for investments in something other than mutual funds or annuity contracts issued by insurance companies? Link to comment Share on other sites More sharing options...
mbozek Posted July 2, 2015 Report Share Posted July 2, 2015 In 1986 Congress amended 403b to specifically limit funding to annuity contract and mutual funds. However, under a 1967 IRS ruling 4 govt entities had established 403b plans that were held in trusts including NYC and NJ. The 1986 change grandfathered these plans just as Congress grandfathered 401k plans established by government employers prior to Jun 2, 1986 which is why NYC has a 401k plan for all city employees as well as a 457b plan and 403b. mjb Link to comment Share on other sites More sharing options...
joel Posted July 2, 2015 Author Report Share Posted July 2, 2015 This proposed Class Action would be brought in NJ State Court under the statutes that govern trusts and fiduciary duties. This is the same statute that governs the fiduciary duties of all of the Trust Funds of NJ including the Defined Benefit pension system which is a public trust fund. With that said, do you feel the Plaintiff would win? Link to comment Share on other sites More sharing options...
mbozek Posted July 2, 2015 Report Share Posted July 2, 2015 What is the NJ statute that requires exercise of fiduciary duty and how is the 403b plan covered under it? General fiduciary principles don't apply. And the state of NJ has sovereign immunity. If the NJ supreme court says that NJ does not have to fund the state pension at the amount that it promised to pay what NJ law requires the state to follow fiduciary rules to keep the plan funded? Final question: what law firm would litigate a case against a state government that has sovereign immunity for a contingency fee based on unknown damages at some unknown time in the future? mjb Link to comment Share on other sites More sharing options...
joel Posted July 2, 2015 Author Report Share Posted July 2, 2015 Please cite the NJ law that says general fiduciary principles does not apply. Link to comment Share on other sites More sharing options...
mbozek Posted July 2, 2015 Report Share Posted July 2, 2015 The plaintiff who sues the state is the party who is required to state what provision of NJ law imposes a fiduciary duty on the state pension plan. If the complaint is not based on applicable law it will be dismissed. No brainer. If you want to know if there is a fiduciary law that governs the state pension plan contact the NJ Division of Pensions and Benefits of the NJ Treasury dept. PO Box 295, Trenton NJ 08625-0295. mjb Link to comment Share on other sites More sharing options...
joel Posted July 2, 2015 Author Report Share Posted July 2, 2015 Please answer my direct question rather than providing an address. With that said, you know the minute details of why the state of NJ and the City of New York were allowed to continue to run their 403(b) plans notwithstanding the 1986 federal amendment to section 403(b). With your vast knowledge of governmental 403(b) plans surely you know that 403(b) plans must operate for the sole benefit of the participants. Who would dare say that the absence of a diversified investment menu is for the sole benefit of the participants? Would you? Link to comment Share on other sites More sharing options...
QDROphile Posted July 2, 2015 Report Share Posted July 2, 2015 If by "diversified investment menu" you imply participant direction of investment, I would assert that the absence is not adverse to the interests of beneficiaries. It is certainly not required by ERISA, if one looks that direction for guidance or wisdom. It is well documented that individual participant investment direction results on average in significant underperformance of the portfolio. If you mean that a common stock portfolio cannot be operated solely in the interests of beneficiaries, you need to make an argument for the position rather than issue dares. Link to comment Share on other sites More sharing options...
mbozek Posted July 2, 2015 Report Share Posted July 2, 2015 Joel: You posted your question under the govt plans topic which discusses plans that are exempt from ERISA fiduciary provisions that you referred to.There is nothing in IRC 403b that requires 403b plans to operate for the sole benefit of participants and there is nothing in the tax law that requires diversified investments to be available to participants in a 403b plan. I don't what you are trying to prove but you sure are not connecting the dots. Q- I accidently hit the tab to your response and then exited without many any changes. Sorry for the confusion. mjb Link to comment Share on other sites More sharing options...
mctoe Posted July 7, 2015 Report Share Posted July 7, 2015 In 1986 Congress amended 403b to specifically limit funding to annuity contract and mutual funds. However, under a 1967 IRS ruling 4 govt entities had established 403b plans that were held in trusts including NYC and NJ. The 1986 change grandfathered these plans just as Congress grandfathered 401k plans established by government employers prior to Jun 2, 1986 which is why NYC has a 401k plan for all city employees as well as a 457b plan and 403b. mbozek, How is NYC able to offer a 401(k) plan? The NYC 401(k) started in 2002; the 457(b) started in 1986. Link to comment Share on other sites More sharing options...
mbozek Posted July 7, 2015 Report Share Posted July 7, 2015 A small autonomous NYC agency adopted a 401k plan prior to the 1986 cutoff date when it became grandfathered. Under the regulations for grandfathered 401k plans any other agencies, instrumentatilities or government entitles of the same municipality can adopt the grandfathered 401k plan after 1986. In 2002 NYC adopted the 401k plan for all NYC workers. mjb Link to comment Share on other sites More sharing options...
mctoe Posted July 7, 2015 Report Share Posted July 7, 2015 Thank you mjb. Out of curiosity, do you know which NYC agency it was? Link to comment Share on other sites More sharing options...
joel Posted July 7, 2015 Author Report Share Posted July 7, 2015 MJB: if the 401(k) was established by a City of NY agency prior to the 1986 cutoff date when it was grandfathered in, why did the City wait 18 years to offer it to its entire workforce? Joel Link to comment Share on other sites More sharing options...
My 2 cents Posted July 7, 2015 Report Share Posted July 7, 2015 MJB: if the 401(k) was established by a City of NY agency prior to the 1986 cutoff date when it was grandfathered in, why did the City wait 18 years to offer it to its entire workforce? Joel Repairs on the George Washington Bridge? Always check with your actuary first! Link to comment Share on other sites More sharing options...
mbozek Posted July 7, 2015 Report Share Posted July 7, 2015 Joel: You need to direct your question to Mike Bloomberg. mjb Link to comment Share on other sites More sharing options...
jpod Posted July 7, 2015 Report Share Posted July 7, 2015 I am taking a guess but is it because it wasn't until EGTRRA (eff. 2002) that you could double up on both 401k and 457(b)? Link to comment Share on other sites More sharing options...
Mike Preston Posted July 8, 2015 Report Share Posted July 8, 2015 Is everybody else as offput as I am by the tone of Joel's posts? Enough, already. mctoe and Belgarath 2 Link to comment Share on other sites More sharing options...
joel Posted July 17, 2015 Author Report Share Posted July 17, 2015 mike----just change the channel. Link to comment Share on other sites More sharing options...
joel Posted July 17, 2015 Author Report Share Posted July 17, 2015 I pod: You are right on. Link to comment Share on other sites More sharing options...
joel Posted July 17, 2015 Author Report Share Posted July 17, 2015 mjb---If you don't have a answer, say nothing. Your sarcasm, per usual, is noted! Link to comment Share on other sites More sharing options...
joel Posted July 17, 2015 Author Report Share Posted July 17, 2015 My two cents: You, my friend, should be on stage. Link to comment Share on other sites More sharing options...
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