The Siemens Energy, Inc. Savings Plan, valued at $3.5 billion, has been hit with a class action lawsuit for multiple fiduciary breaches, including excessive recordkeeping fees, high managed account charges, a poorly performing stable value option, and the practice of offsetting employer contributions with forfeitures. The defendants in the suit include Siemens Energy, Inc., its Board of Directors, the Administrative Committee, and the Investment Committee, with participant-plaintiff Brian Babinski leading the case.
On July 28, the DOL announced a request for public input on how to assist smaller employers in selecting pooled employer plans. It acknowledged that PEPs, introduced by the SECURE Act of 2019, may be unfamiliar to many small employers and that they may lack understanding of ERISA implications. The DOL aims to gather information to address challenges that hinder small employers from adopting PEPs.
Matt Hutcheson, who was convicted in 2013 on 17 counts of wire fraud involving over $5 million in retirement plan assets, had his 17-year prison sentence commuted. However, he subsequently faced tax liabilities and penalties related to his embezzlement. A Tax Court ruling determined that the $5,307,688 he siphoned from the retirement plans was considered taxable income from unreported embezzlement, as Hutcheson had abandoned his fiduciary responsibilities and treated the funds as his own.
In ERISA fiduciary breach lawsuits, plaintiffs typically need to demonstrate that fiduciaries violated legal standards. However, the Supreme Court's ruling in Cunningham v. Cornell University reversed this by placing the burden of proof for exemptions from prohibited transactions on the defendants -- plan fiduciaries. This shift is likely to result in more lawsuits alleging prohibited transactions moving forward to trial, increasing the risk of unfavorable outcomes for fiduciaries.
A strong response to 401k breaches is essential to protect retirement accounts from cyber threats. Fiduciaries must be prepared to respond effectively, as their responsibilities under ERISA become more critical during an attack. Regulators and participants will scrutinize actions taken before, during, and after a breach, making it imperative for fiduciaries to develop a robust and proactive recovery strategy. A response plan should be practical and actionable, rather than just a theoretical document, ensuring the protection of participants, reputation, and fiduciary integrity during crises. Implementing tested strategies helps create a strong defense against cybercriminals targeting 401k plans.
Given the substantial amounts of money that circulate within a retirement plan and are allocated to various participants, it's not unusual for excessive funds to be deposited into an individual’s plan account. This article examines the existing correction methods for addressing overpayment failures and highlights the new guidance provided in Notice 2024-77 regarding such overpayments.
Uncashed checks are a common issue faced by retirement plans, typically involving small accounts that are forced out of the plan or required minimum distributions. These checks may be returned if a terminated employee moves without notifying the plan or if a participant requests a distribution but fails to cash the check. Such uncashed checks can create compliance challenges for plan sponsors, often without their awareness.
Participants invested in target-date strategies may worry about inflation eroding their retirement spending power, as inflation can diminish the purchasing power of savings over time. However, research from BlackRock indicates that a well-balanced approach -- combining future earnings with investments in growth assets -- can sufficiently safeguard future spending against inflation. The research also outlines specific points in the investment glidepath and the appropriate levels of allocation to inflation-hedging asset classes.
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Collected Wisdom™
Our researchers look for what they think are some of the better resources available to assist you in administering your plan or helping your clients. We group these resources in our COLLECTED WISDOM™ topics to make it easy for you to locate the information you need. Each item in a category contains a summary and date of when it was placed in the group.
We also maintain some older material in these collections for perspective and context.
