Daily Article Digest - Updated Regularly

This digest contains a wide variety of the freshest source material dealing with current trends, opinion, news, legislative action, investments, marketing, sales, consulting, and legal issues regarding 401k, 403b and other retirement plans. Each listing contains a headline (hyperlinked to the source document), description, source of the item, and the month and year posted to this digest.

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4th Circuit Revives Lawsuit Over 'Imprudent' Gannett 401k Plan

A federal appeals court has revived a proposed class-action lawsuit accusing Gannett Co Inc of imprudently maintaining a risky single-stock fund in its employees' 401k plan, resulting in tens of millions of dollars in losses.

Source: Reuters.com, August 2020

Mercy Health Corp. Faces 403b Plan Excessive Fee Lawsuit

An ERISA lawsuit has been filed against fiduciaries of Mercy Health Corp.'s 403b plan. Among other things, the lawsuit alleges the health care system unreasonably maintained investment advisers and consultants despite the known availability of others with lower costs and/or better performance histories.

Source: Plansponsor.com, August 2020

Judge Finds 401k Participants Proved No Harm From Lack of Stable Value Fund

A more than four-years-long lawsuit arguing American Airlines should have offered a stable value fund in its 401k plan rather than the AA Credit Union Fund has ended with a federal judge granting summary judgment to American Airlines.

Source: Planadviser.com, August 2020

Do 401k Menus Suffer From a Generation Gap?

A new whitepaper finds that the use of fixed income options in 401k plans has not kept pace with workplace trends. The whitepaper points out that in the past, investment recommendations may have been more focused on achieving minimum compliance and "checking the fixed income box" rather than anticipating participant investment needs at various life stages. A multi-generational participant population has more complex needs.

Source: Napa-net.org, August 2020

Illinois Federal Court Dismisses ERISA Claims Against 401k Fiduciaries

ERISA requires plan fiduciaries to act prudently and loyally when making decisions about a plan. In Martin v CareerBuilder, LLC, a federal district court held that the plaintiff's allegations about expensive recordkeeping costs and imprudent investment options failed to give rise to an inference that the defendants had violated their ERISA obligations.

Source: Internationallawoffice.com, August 2020

Canadian Pension Plans Outperform Their Global Peers: Study

While Canadian pension plans hold quiet confidence, it turns out they do outperform their international peers when it comes to asset performance and liability hedging, according to a research paper from McGill University and CEM Benchmarking.

Source: Benefitscanada.com, August 2020

IRS Provides Updated Model 402(f) Notices

The IRS released Notice 2020-62 providing updated safe harbor explanations for rollover distributions to accommodate changes made under the SECURE Act. Specifically, the new 402(f) Notices -- one for distributions from a non-designated Roth account and one for distributions from a designated Roth account -- update the two safe harbor explanations provided by the IRS in 2018, as outlined in IRS Notice 2018-74, to reflect the changes reviewed here.

Source: Amazonaws.com, August 2020

Media Company Latest to Face Legal Scrutiny Over Fidelity Freedom Funds

A new ERISA lawsuit has been filed in the U.S. District Court for the Southern District of New York, naming as defendants the Omnicom Group and various individuals and committees who are alleged to be fiduciaries of the media company's retirement plan. The plaintiffs say these fiduciaries breached the duties of prudence and loyalty demanded by ERISA in their management and oversight of the plan's investment menu.

Source: Planadviser.com, August 2020

If it Ain't Broke, Fix it as Needed: The DOL's Revised Fiduciary Rule

In this Bloomberg Tax article, Groom associate Anthony Onuoha first discusses the historical timeline that provided the impetus for the Proposed Class Exemption. Then, he provides a broad overview of the Proposed Class Exemption along with key takeaways.

Source: Groom.com, August 2020

IRS Lends a Hand on 402(f) Notices

This week, the IRS has released updated safe harbor 402(f) notices to reflect the recent legislative change made, including changes in law made by the SECURE Act. These changes include qualified birth and adoption distributions and the change from age 70 1/2 to 72 for RMDs.

Source: Graydon.law, August 2020

Not "Wired at Work"? New DOL E-Disclosure Rule is Here to Help

The DOL announced final regulations that describe new "safe harbor" procedures for electronic delivery of required ERISA retirement plan disclosures such as Summary Plan Descriptions, quarterly or annual account statements, and other items. The new safe harbor procedures are an addition to the DOL e-disclosure rules that date back to 2002 and represent an improvement on the 2002 rules for employees who are not "wired at work," as defined in those regulations. The safe harbor procedures took effect on July 27, 2020. A plan administrator that relied on the safe harbor before that date wouldn't be subject to enforcement action, the DOL vowed.

Source: Eforerisa.wordpress.com, August 2020

IRS Updates 401k Model Rollover Notice

The IRS issued Notice 2020-62 which updates the information that must be provided to participants in retirement plans (including 401k plans) when they become eligible for a distribution. Also, Notice 2020-62 provides two model rollover notices (one solely for payments from Roth contribution accounts, and another for payments from traditional, non-Roth accounts) which, if used for this purpose, are deemed to satisfy the statutory requirement.

Source: Compliancedashboard.net, August 2020

Evidence Emerges of COVID-19's Impact on Forced Retirement

Unplanned retirement in the current crisis is higher than during the Great Recession, with women and people of color disproportionately affected, a report finds. Nearly 5 million people ages 55 to 70 have lost their jobs since March, and many of them are unlikely to return to the workforce, according to a report this week from The New School's Retirement Equity Lab.

Source: Investmentnews.com (registration may be required), August 2020*

Retirement Plans and Coronavirus: Take Steps to Protect Your Employees

Employers know their employees are stressed and worried about their retirement planning in the wake of the Coronavirus pandemic. The good news is there are steps you can take to help your employees and your business at the same time. Here's how.

Source: Hubinternational.com, August 2020

IRS Issues Safe Harbor Explanations for Eligible Rollover Distributions

The IRS on Aug. 6 in Notice 2020-62 issued safe harbor explanations for eligible rollover distributions. The notice modifies the two model notices in Notice 2018-74. Those safe harbor explanations reflect relevant law as of Sept. 19, 2018: one safe harbor is for payments not from a designated Roth account, and the other is for payments from a designated Roth account.

Source: Asppa.org, August 2020

Maine Bill Would Create Public-Private Partnership to Increase Retirement Saving

A bill pending in the Maine legislature would create a public-private partnership to promote individual retirement savings accounts. Even those with differing views on the measure roughly agreed in their testimony to the committee regarding what the bill would require.

Source: Asppa.org, August 2020

Proposes ESG Rule Tells Plan Fiduciaries to Stay in Their Lane

The DOL has proposed a rule intended to "provide clear regulatory guideposts for plan fiduciaries in light of recent trends involving environmental, social and governance (ESG) investing." The new rule codifies the Department's existing position that plan fiduciaries must select investments based on financial considerations, not on non-pecuniary objectives.

Source: Velaw.com, August 2020

What Employers Should Know About the DOL Final Rule for Electronic Disclosure

On May 27, 2020, the DOL issued a final rule that makes it easier for employers to provide required disclosures to retirement plan participants and beneficiaries. The final rule provides two additional safe harbors for the production of retirement plan disclosures via electronic media: the "Notice and Access" safe harbor and the "Direct Delivery Via Email" safe harbor. Here are the key points that employers should know about the new safe harbors.

Source: Thompsoncoburn.com, August 2020

DOL Motives for Fiduciary Rule Questioned in Public Comments

Much of the financial services industry's commentary about the proposal has been positive, with various commenters voicing appreciation that multiple national-level conflicts of interest rules are now aligned. Not everyone is pleased with the DOL's proposal, however. Consumer groups and advocates of the fiduciary adviser industry want the Department of Labor to reconsider aspects of its proposed fiduciary rule.

Source: Planadviser.com, August 2020

Overview of the DOL's New Fiduciary Rules for Retirement Plan Investment Advice

The DOL released final regulations that reinstate its definition of who is a fiduciary because of providing investment advice to Retirement Plans, which reflect a "5-Part Test" that had been in effect from 1975 until its modification by the 2016 Fiduciary Rule. The final regulation adds several new interpretations and clarifications to the longstanding 5-Part Test. The DOL's new approach has no impact on existing standards for financial institutions or investment professionals with discretionary authority over Retirement Plans.

Source: Kilpatricktownsend.com, August 2020

Key Concepts You Should Be Aware of as a 401k Plan Sponsor

Times change and seasons change. Yet, some things remain the same. When it comes to sponsoring a 401k plan, some key concepts never change, whether there is a global pandemic going on or not. This article is about the key concepts that 401k plan sponsors need to understand.

Source: Jdsupra.com, August 2020

Review Investment Policy Statements for ESG Investment Compliance

As the DOL increases its investigations and inquiries into ESG investments held by retirement plans, plan fiduciaries should review their plan investments and policies to (i) determine if their retirement plans hold any ESG-type investments, and (ii) if they do hold such investments, (a) review their investment policy statements and evaluate whether such policies comply with the current rules for ESG investments, and (b) confirm whether such investments remain appropriate for the plan.

Source: Haynesboone.com, August 2020

Avoiding COVID-19 Benefits-Related Litigation

The COVID-19 pandemic has brought about a staggering number of changes for employers in the past few months, requiring them to make significant changes to workplace processes and policies virtually on the fly. In this environment, it's important to review employee benefits plans to ensure these changes have not triggered any adverse consequences.

Source: Hallbenefitslaw.com, August 2020

Know Your Rights Under ERISA to Prevent Pension Fraud

Although the defined benefit plan may be falling by the wayside, many believe that pensions are still a hotbed for fraud. This belief is due in large part to the general nature of a pension and the large amounts of money accumulated over time that is inaccessible to the intended recipient until some future point in time. Under ERISA, employers and fund managers can be held liable for damages sustained when employees are defrauded of their pension assets.

Source: Eisneramper.com, August 2020

DOL's New Rules Don't Have to Slow DC Plan ESG Adoption

Demand for ESG investing is growing among DC plan participants, but with plan sponsors facing many choices and proposed new DOL rules, what’s the best approach? Two in three sponsors feel that integrating ESG factors into their investment approach is a fiduciary duty. But about four in 10 say their biggest obstacle is understanding the many ways to offer ESG.

Source: Alliancebernstein.com, August 2020

How to Pick the Best Small Business 401k Plan Provider

To attract and keep talented employees, it can be a smart move to add a 401k plan to your small business. As a result of the SECURE Act, which was passed in 2019, there are now more opportunities for small employers to offer retirement plans. The law allows small businesses to participate in pooled employer plans, making it easier and less costly for small employers to provide workers with a retirement plan. Here's how to select the right 401k plan provider for your small business.

Source: Usnews.com, August 2020

DOL's ESG Proposal Blasted by Commenters

The DOL's proposed rule addressing environmental, social, and governance factors in selecting plan investments received more than 1,500 comment letters during the 30-day comment window, with many taking issue with the proposal.

Source: Napa-net.org, August 2020

SEP, MEP, or PEP: Identifying The Key Differences in Retirement Plans

This 24-page white paper explains the differences between single-employer, multiple-employer, and pooled-employer plans, as well as other group programs for offering retirement benefits.

Source: Ferenczylaw.com, August 2020

Federal Court Dismisses ERISA Claims Against 401k Fiduciaries

ERISA requires plan fiduciaries to act prudently and loyally when making decisions about the plan. In Martin v. CareerBuilder, a federal district court held that the complaint's allegations about expensive recordkeeping costs and imprudent investment options failed to give rise to an inference that the defendants violated their ERISA obligations.

Source: Employeebenefitsblog.com, August 2020

No "Earth-Shattering" Retirement Proposals in Biden Platform

Presumptive Democratic presidential nominee Joe Biden has issued his plan for helping American seniors retire more successfully, dubbed "The Biden Plan for Older Americans." The platform promises to reinforce Social Security and Medicare, though it lacks major economic policy reforms of the type preferred by more progressive Democrats.

Source: Plansponsor.com, August 2020

The Latest on Participant Behavior During the Pandemic

While various shifts were seen in savings plan contributions and withdrawals in the first few months of the outbreak, there have been some improvements as of late, according to data from Ascensus. In the first few months of the COVID outbreak, the firm reported on a relatively small percentage of retirement plans that had stopped making contributions altogether due to business interruptions. But on a more positive note, as of the end of June, most of these plans have shown encouraging signs of recovery and are taking steps to return to pre-pandemic levels of savings plan contributions.

Source: Napa-net.org, August 2020

Participants Looking for "Extreme" Automatic 401k Plans; Survey

Believing their workplace retirement savings plan is one of the most important benefits their employer offers, a large majority of employees support employer efforts to implement automatic plan features. According to the survey by American Century Investments, some 7 in 10 respondents believe automatic enrollment should be implemented at a 6% contribution rate, and two out of three believe their employer should automatically enroll employees into their plan at a set percent and increase it automatically each year.

Source: Napa-net.org, August 2020

Safe Harbor 401k 2020 Establishment Deadline

As you might expect, preparation and planning are always necessary to establish a new tax-qualified plan or redesign an existing one. The same holds for a Safe Harbor Plan. Therefore, even with the new Safe Harbor Plan establishment timing flexibility under the SECURE Act, now is the time to begin to consider whether a safe harbor feature is right for your company or your client's plan to ensure that it can be fully operational in advance of the applicable deadline.

Source: Legacyrsllc.com, August 2020

DOL Reinstates Five-Part Test for Fiduciary Investment Advice

The DOL has proposed a new prohibited transaction exemption from the rules of ERISA and the Internal Revenue Code that would allow qualifying investment advice fiduciaries to receive what would otherwise be prohibited compensation. These rules are important for plan administrative, investment, and other service providers to 401k and other retirement plans. In general, employers are typically not the fiduciary involved in a potential prohibited transaction related to investment advice, but employers should always be alert to services being marketed by plan vendors by reviewing the information provided to participants related to plan distributions and IRA rollovers.

Source: Frostbrowntodd.com, August 2020

401k Survey Finds Savings Goals and Stress Levels on the Rise

Anxiety about long-term retirement savings is up according to a new survey from Schwab Retirement Plan Services, and so is participant engagement. The nationwide survey of 1,000 currently employed 401k plan participants finds that saving enough for a comfortable retirement continues to be their leading source of significant financial stress. Two in five participants also say they made a change to their 401k account due to COVID-19, citing rebalancing and increasing contribution rates as the most common changes.

Source: Businesswire.com, August 2020

Are There Partial Terminations of 403b Plans?

The "partial termination" rules are pretty straightforward, and TPAs and recordkeepers all know where to draw the line and provide guidance to their clients. Or so you would think. But the 403b termination vesting rules are vastly different than those for 401k plans. You'll find that there just aren't any in the Tax Code, ERISA, or Tax regulations.

Source: Businessofbenefits.com, August 2020

Participants Talk Saving, Retirement Plans and Risk; Research

Plan Sponsors and their advisors consider many factors when evaluating and defining retirement plan design. One of those should be understanding participant sentiments about saving and retirement benefits. Use findings from our 8th national survey to add insight and value in your discussions and deliberations about participant behaviors and plan features.

Source: Americancentury.com, August 2020

Quest Diagnostics Faces Additional ERISA Litigation

A new ERISA lawsuit has been filed in the U.S. District Court for the District of New Jersey, naming Quest Diagnostics and several of its retirement plan committees as defendants. The medical testing company is already facing scrutiny for its use of actively managed investments within its retirement plan; it is now the subject of a broader excessive fee lawsuit.

Source: Planadviser.com, July 2020*

Princeton ERISA Settlement Features $5.8M Price Tag

Details of a settlement of an ERISA lawsuit against Princeton University that was previously announced have been posted. The university has agreed to pay $5.8 million to settle a lawsuit alleging excessive fees for recordkeeping and investments. In addition to the payment into a settlement fund, Princeton has agreed to what the settlement agreement calls "therapeutic relief," including a pledge to not raise fees.

Source: Planadviser.com, July 2020

IRS Updates Operational Compliance List for Retirement Plans

IRS recently updated its Operational Compliance List for qualified retirement and 403b plans to identify changes in law and guidance affecting plan operations. The Operational Compliance List reminds sponsors about revised operational requirements taking effect during a calendar year, even though conforming amendments might not be due until a later date.

Source: Mercer.com, July 2020

Citing "Endless Risk," District Court Disqualifies Firm From 401k Case

A New York district court judge earlier this month disqualified a firm representing hundreds of 401k plan participants based on a conflict of interest. The judge called the risks posed "endless," and requested additional briefing on whether the firm would be allowed to remain as counsel in related arbitration proceedings in Missouri. The ruling spotlights the sometimes-thorny conflict issues that can arise in ERISA litigation.

Source: Lexology.com (registration may be required), July 2020

CARES Act: Implications for Retirement Security of American Workers

What is the cost of effectively using defined contribution plans as emergency savings vehicles in this way when it comes to the future retirement security of American workers? Using the Employee Benefit Research Institute’s Retirement Security Projection Model, EBRI simulates the impact on retirement balances as a multiple of pay at age 65 for scenarios where employees take full advantage of the CARES Act flexibility to access their defined contribution plan.

Source: Ebri.org, July 2020

How to Communicate Employee Benefits in Uncertain Times

As employers plan for open enrollment season careful consideration and planning should be given to how to communicate benefits holistically. If shelter in place orders and social distancing practices are still in effect during your enrollment window, it will also impact which communications channels are needed to reach employees.

Source: Voya.com, July 2020

DOL Participant Fee Disclosures Impacted Decisionmaking, Study Finds

Despite prior evidence that retirement plan participants are passive and do not react to new information, a new study finds that the Department of Labor's participant fee disclosure regulation did have an impact. The National Bureau of Economic Research's newly released study found that participants became more attentive to fund fees and to short-term fund performance following the DOL's regulation.

Source: Napa-net.org, July 2020

Costs Continue to Fall for 401k Investors

ICI's latest study of 401ks shows that investors continue to benefit from falling expenses and fees, a wide range of account services, and diverse fund investment choices. In this podcast, ICI Economist James Duvall breaks down the latest trends.

Source: Ici.org, July 2020

Protecting Retirement Plan Participants and Your Company's Bottom Line When Employees Return to Work

Now that plan sponsors have had a few months to adjust to a "new normal," many are asking themselves, "Did we do enough to protect our business and plan participants from the pandemic"? With a new surge of infections predicted in the fall, plan sponsors want to know if there is more they can do with their benefit plan arrangements to protect themselves and plan participants from another economic downturn. This article provides an overview of the more common retirement plan issues facing plan sponsors along with suggestions for addressing these challenges.

Source: Icemiller.com, July 2020

Best Practices for ERISA Fiduciary Responsibilities and Cybersecurity for Retirement Plans

Data and personally identifiable information have become increasingly more vulnerable to attack as it travels on employer and third-party systems. This has been partially due to the recent advancements in plan administration, technology, online enrollment, and electronic access to account information, the electronic delivery of disclosures including benefit statements, as well as benefit plan transaction processing (including self-certifications of distributions). Most transactions involving retirement plans are conducted electronically, including maintaining and sharing data and information across multiple platforms. This article guides plan fiduciaries of retirement plans on developing prudent policies and procedures to secure information and data.

Source: Ebglaw.com, July 2020

DOL Proposes Revised Prohibited Transaction Exemption

The DOL issued a proposed prohibited transaction exemption that would permit "investment advice fiduciaries" to receive compensation in exchange for providing investment advice to retirement plans and their participants and beneficiaries. Among other things, the proposal generally would reinstate the "five-part test" for determining who is a fiduciary within this context. The revised proposal represents the latest in a soap opera-like series of events involving initial proposed and final DOL regulations, explosive reaction, and their eventual overturning by a federal court of appeals.

Source: Compliancedashboard.net, July 2020

DOL Wants 401k Plans to Keep Their "Social Distance" From ESG Funds

The DOL published a proposed rule that would throw cold water on the idea of "social investing" in retirement plans, including 401k plans. In particular, by emphasizing that ERISA requires plan fiduciaries to select investments and investment courses of action based solely on financial considerations, and by adding new analysis and documentation requirements in some cases, the proposed rule would add new disincentives to the use of mutual funds driven largely by environmental, social, and governance factors.

Source: Compliancedashboard.net, July 2020

Pension, 401k Registry Bill Resurfaces

Workers are increasingly responsible for making sure they have enough money to retire. But moving from job to job is now the norm and pensions get left behind and 401ks fall by the wayside. People who try to find old plans often can't locate employers that have changed names, merged, relocated, or terminated a plan. A perennial proposal just reintroduced in Congress would do some good: establish an online database of employer retirement plans so workers and retirees can locate old pensions and 401k accounts.

Source: Bc.edu, July 2020

COVID Causes 1 in 10 Plan Sponsors to Halt 401k Matching Contributions

The latest look at what's happening with 401k employer matching contributions during the COVID crisis shows that one in 10 plan sponsors have eliminated their matching contributions, according to a new survey from the Secure Retirement Institute. Of those with a remaining match, 7% have reduced it, and 19% are considering a reduction.

Source: 401kspecialistmag.com, July 2020

DOL Provides Guidance for Private Equity Investments in 401k Plans

Employers that are fiduciaries of participant-directed individual account plans subject to ERISA should be pleased with the position taken by the DOL in an information letter dated June 3, 2020, addressing the use of private equity investments in designated investment alternatives offered in Plans. The DOL states that subject to the standards and considerations outlined in the letter, a plan fiduciary would not violate its duties under sections 403 and 404 of ERISA solely because the fiduciary offers a professionally managed asset allocation fund with a private equity component as a designated investment alternative in a plan.

Source: Workforcebulletin.com, July 2020

2020 RIA Benchmarking Study

The study features insights based on self-reported information on topics such as asset and revenue growth, sources of new clients, products and pricing, staffing, compensation, marketing, technology, and financial performance. Now in its fourteenth year, more than 1,000 independent advisor firms representing over a trillion dollars in AUM participated in this year's study.

Source: Schwab.com, July 2020

CARES Act Special Considerations for 403b Plans

Participants in 403b plans may not be able to take as much in distributions and loans as provided for in the CARES Act. Also, they may not enjoy the savings provided by the elimination of tax penalties for early distributions in the same way other plan participants will. Participants invested in annuity contracts may face charges for distributions and limits on amounts they can take as a distribution or loan that they may not be aware of.

Source: Plansponsor.com, July 2020

Appeals Court Hands Wells Fargo Another Win in Stock Drop Case

The 8th U.S. Circuit Court of Appeals has affirmed a ruling out of the U.S. District Court for the District of Minnesota. Assuming there will not be a successful Supreme Court appeal, the ruling brings to a close a set of complex stock-drop lawsuits filed against Wells Fargo by its employees. The case represents yet another example of "stock drop" litigation that has failed to make it beyond the pleading stage after the influential Supreme Court ruling in a case known as Dudenhoeffer.

Source: Planadviser.com, July 2020

An Article That Doesn't Make Much Sense

The author writes, "For reasons that elude me -- other than perhaps because it has a 'clickbait' headline -- the folks at Bloomberg recently published an 'op-ed' titled, '401k Plans No Longer Make Much Sense for Savers.' Sadly, it's gotten some attention, aided and abetted even by industry publications, some of which incredibly reported on it as a straight news item. Much as it pains me to give more 'oxygen' to this, the author, a 'former risk manager' (he now apparently writes books), basically makes a tax argument. His essential premise is that once upon a time, the tax benefits of 401k made that investment worthwhile, but that tax rates have dropped, and they're not likely to be lower in the future, so you'd be better off taking that money and investing it elsewhere."

Source: Napa-net.org, July 2020

DOL Issues New Proposed Fiduciary Rule

The DOL guidance officially removed the stricter fiduciary rule from 2016 that was struck down by a federal court. The DOL issued a new proposal for a broader and more flexible "prohibited transaction exemption" that would allow investment advisors to charge fees for investment advice they will profit from without violating the ERISA fiduciary standards. The guidance reinstates a 1975 rule that established a five-part test for determining when an investment advisor acts as a fiduciary in advising retirement plan participants.

Source: Hansonbridgett.com, July 2020

Navigating RMD Waivers under the CARES Act

The CARES Act suspended required minimum distributions from certain retirement accounts for 2020. This waiver applies to any retirement account subject to RMDs, including 401ks, 403bs, 457bs, traditional IRAs, and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs. Here are some of the rules you need to know regarding RMD waivers under the CARES Act.

Source: Hallbenefitslaw.com, July 2020

Cost of 401k Investing Continues Dramatic Decline

The cost of 401k investing continues its downward trend, according to new data from the Investment Company Institute. ICI noted the cost of investing in equity and hybrid mutual funds through 401k plans, specifically, fell again in 2019. The report also shows that participants who invest in mutual funds in their 401k plans tend to hold lower-cost funds.

Source: 401kspecialistmag.com, July 2020

Plan Sponsors Should Focus on Life Events Rather Than Generations in Communications

U.S. workers are tired of seeing comparisons broken down by generations when it comes to finances, according to a new survey from Empower Retirement. Employees in the survey say they believe their views are created by personal experiences and characteristics, not by their age group.

Source: Plansponsor.com, July 2020

Cost Savings Seen As Main Force Behind 401k Shifts

Changes made to the investment lineups of corporate 401k plans in 2019 reflect U.S. sponsors' ongoing focus on cost savings, a Pensions & Investments analysis of recently released 11-K filings shows. Changes to index fund lineups among plans were prevalent, with many adding to their passive tiers or changing index fund providers, with Fidelity Investments seeing several wins and Vanguard Group seeing some losses.

Source: Pionline.com, July 2020

The Economics of Providing 401k Plans: Services, Fees, and Expenses, 2019

At year-end 2019, 401k plan assets totaled $6.4 trillion, with 37 percent invested in equity mutual funds. In 2019, the average expense ratio for equity mutual funds offered in the United States was 1.24 percent. 401k plan participants who invested in equity mutual funds, however, paid about one-third of that amount -- 0.39 percent -- on average. The expense ratios that 401k plan participants incur for investing in mutual funds have declined substantially since 2000. This is a 32-page report.

Source: Ici.org, July 2020

Fiduciary Duties for Financial Services Companies: The Unique ERISA Paradigm

With respect to recent proposals to impose fiduciary responsibilities on financial services firms, Eversheds Sutherland attorneys Mark Smith and Carol McClarnon review the ERISA fiduciary regime that has been in effect since 1974 and its distinctive features as compared to the common law of trusts and other fiduciary laws and consider as a case study bank collective investment trusts.

Source: Eversheds-Sutherland.com, July 2020

Sutter Health 403b Plan the Target of Excessive Fee Suit

A lawsuit has been filed against fiduciaries of the Sutter Health 403b Savings Plan for breaches of their fiduciary duties under ERISA. Defendants are accused of failing to leverage the size of the plan to negotiate for lower investment and recordkeeping fees, among other things.

Source: Planadviser.com, July 2020*

New COVID 401k Catch-Up Bill Introduced

A quartet of GOP senators have introduced new legislation that would allow individuals facing financial challenges who are unable to make contributions to their tax-advantaged retirement accounts in 2020 to make catch-up contributions to these accounts in the coming years.

Source: Napa-net.org, July 2020

Bloomberg Op-ed Gets Fast Rebuke From 401k Defenders

A Bloomberg opinion piece this week that was critical of the 401k system has prompted a big response from the financial advice world. On July 21, a column by former AQR head of financial markets research Aaron Brown called out 401ks for no longer having much benefit for savers, largely due to tax changes and fees charged by investment and service providers. That assessment is faulty, 401k proponents responded, raising issues with the facts and assumptions cited in the opinion piece.

Source: Investmentnews.com (registration may be required), July 2020

IRS Issues Guidance on 2020 Waiver of Required Minimum Distributions

Participants in defined contribution retirement plans can skip their required minimum distribution payments for 2020. If RMDs for 2020 have already been received, participants have until August 31, 2020 to rollover the RMD into an eligible retirement plan. The IRS issued sample plan amendments that employers may adopt to give participants and beneficiaries a choice as to whether or not to receive their 2020 RMD, and FAQs covering details of the 2020 RMD waiver.

Source: Hansonbridgett.com, July 2020

Matrix Trust Accused of Being Deceptive About Fees

Matrix Trust Co. is facing a 401k class-action lawsuit from a Minnesota engineering firm that alleges the company took millions of dollars from retirement plan accounts. MBA Engineering alleges Matrix Trust Co., a subsidiary of Broadridge Financial Solutions, unlawfully retained potentially hundreds of millions of dollars in 12b-1 fees, non-float cash interest, and float cash interest from more than 60,0000 customers through nondisclosure and concealment.

Source: Planadviser.com, July 2020

Will PEPs Address the Retirement Plan Woes of Small Employers?

One downfall of our retirement saving system is the cost and quality of the plan that you have access to can be significantly dependent on the size of your employer. Small employers have fewer employees to join their plans and generally fewer collective assets to invest, resulting in limited bargaining power to negotiate low fees and barriers to accessing low-cost investment options that may have higher minimum investments. As the debut of pooled employer plans draws near, the current MEP system provides a useful test case for what can go right and wrong.

Source: Morningstar.com, July 2020

2nd Circuit Sends IBM Stock-Drop Case Back to District Court

The saga continues in the ERISA stock-drop litigation against the fiduciary committee for IBM's employee stock ownership plan. The 2nd Circuit has reinstated its 2018 decision to revive the case after the Supreme Court vacated that decision earlier this year (Jander v. Retirement Plans Comm. of IBM, No. 17-3518 (2nd Cir. June 22, 2020)). The case now heads back for reconsideration by the district court that originally dismissed the case in 2017.

Source: Mercer.com, July 2020

The Value of a Good Retirement Plan Auditing Firm

In the world of retirement plans, larger retirement plans have to answer a higher authority through the independent audit requirement. The purpose of this article is to let you know about the plan audit requirement and what to look for in hiring an independent auditor for your retirement plan.

Source: Jdsupra.com, July 2020

Retirement Plan Fiduciary Considerations in Context of COVID-19

Retirement plan fiduciaries are undoubtedly concerned about the effect of all the changes brought about by the pandemic and its effect on society and the stock market. Conducting a comprehensive review of a plan's investments, fees, and performance is in order to avoid litigation. Here are some considerations for fiduciaries navigating their duties in the wake of COVID-19.

Source: Hallbenefitslaw.com, July 2020

Hardship Withdrawals Not Widespread, Studies Say

The economic strains occasioned by the pandemic have had wide-ranging effects, and one of the actions put in place is to ease the rules concerning hardship withdrawals and loans. But availability has not made them a widespread response to economic challenges, recent studies have found. Loan and hardship distribution usage were relatively low in 2019, says T. Rowe Price in its Reference Point Annual Benchmarking Report. They report that while hardship distributions did grow in 2019, they only did so by 1.5%. They attribute the low levels to improved market conditions.

Source: Asppa.org, July 2020

E-Delivery Paper Notices Can Be Deferred Under COVID-19 Relief

A key Department of Labor official confirmed that the DOL's deadline relief provided in response to the Coronavirus pandemic also applies to initial paper notices under the DOL's new electronic disclosure regulations.

Source: Asppa.org, July 2020

How Pandemic is Putting More Retirements at Risk

Thanks to a bump from the coronavirus pandemic, now more than half of working-age households in America are not expected to be able to afford their current standard upon retirement. According to a new analysis by the Center for Retirement Research at Boston College, the unemployment caused by COVID-19 has pushed up the share of working-age households not able to afford their current standard of living in retirement from 50% to 55%.

Source: 401kspecialistmag.com, July 2020

Stock Drop Litigation Is on the Rise: Will Your Retirement Plan Be a Target?

Stock price plunges caused by COVID and current market conditions create fertile ground for stockholder litigation, including claims by participants in retirement plans funded with employer securities that fiduciaries should have eliminated company stock investments to protect against declining values. These claims present a dilemma for plan fiduciaries who owe certain fiduciary duties to the plan and its participants but must also grapple with intricate securities laws governing company stock. One important aspect of defending these cases involves understanding the interplay between securities laws and fiduciary obligations under ERISA.

Source: Velaw.com, July 2020

Qualified Plan Loans and Coronavirus Related Distributions

Pursuant to Notice 2020-50, CRD-qualified individuals who experience a loan offset may treat such amounts as CRDs, regardless of whether the plan offers CRDs. Deemed distributions of defaulted loans, in contrast, may not be treated as CRDs, and are not eligible for rollover.

Source: Retirementlc.com, July 2020

Preventing Cyber Theft of Plan Assets Before It Is Too Late

In the employee benefit plan landscape, cyber theft of participant accounts is a disaster waiting to happen. Whether or not you are liable as a plan sponsor, is a situation you do not want to be in. Fortunately, there are steps plan sponsors can take to safeguard participant accounts from cyber theft.

Source: Orba.com, July 2020

Required Distributions for 2020 Suspended for Many Plan Participants

The CARES Act creates a moratorium on required minimum distributions for 2020. The one-year required minimum distribution moratorium under the CARES Act applies to IRAs and defined contribution retirement plans, such as 401ks, money purchase pension plans, 403b plans and some government plans. Plans may need to be amended to accommodate the moratorium.

Source: Mcdonaldhopkins.com, July 2020

401k Plans: Gold Mines or Land Mines?

Crises like the COVID-19 pandemic seem to accelerate trends already in motion, as well as creating new ones. While an estimated 50% of defined-contribution plans like 401ks are managed by more than 100,000 wealth managers who do not specialize in DC plans and earn less than 50% of their revenue from such plans, it's getting harder for them to dabble in an industry littered with regulatory and legal land mines.

Source: Investmentnews.com (registration may be required), July 2020

Koch Industries Sued Over 401k Plan Fees

Koch Industries, the parent of Georgia-Pacific, Infor, and other companies, is being sued for allowing the record keeper of its 401k and other defined-contribution plans to charge fees that plaintiffs contend are excessive, according to a complaint filed in federal court in Atlanta.

Source: Investmentnews.com (registration may be required), July 2020

District Court Dismisses 401k Excessive Fee Lawsuit

The U.S. District Court for the Northern District of Illinois has dismissed a putative class action lawsuit brought under ERISA by a participant of 401k plan against the plan's fiduciaries, alleging that the fiduciaries allowed the plan to incur unreasonable expenses and retain underperforming investment options. In its opinion in Martin v. CareerBuilder, LLC, et al., issued on July 1, 2020, the court concluded that there were insufficient allegations of a fiduciary breach when the plan's investment lineup contained a diverse array of investment options with varying expense ratios.

Source: Hklaw.com, July 2020

COVID-19 & Beyond: The Need to Address Retirement Savings Access in the Workplace

As we begin to think about picking up the pieces from the coronavirus pandemic and its related impact on how Americans save, we again will come face to face with the pre-existing problems facing retirement savings in our country. The two main savings obstacles for workers today are access and participation. This piece focuses on the access part of the equation because you can't effectively begin to improve participation if there is no access.

Source: Georgetown.edu, July 2020

Retirement Savings in the Time of COVID-19: International Best Practices to Address Challenges

The COVID-19 pandemic and its related economic downturn are negatively affecting retirement savings, retirement systems, plan sponsors, plan providers, and regulators. Policymakers are trying to respond rapidly to the crises related to COVID-19 and address the same issues, but their responses will depend on their specific circumstances. Nevertheless, countries can learn and benefit from each other.

Source: Georgetown.edu, July 2020

Eight Reasons to Have an Investment Policy Statement for Your Retirement Plan

A plan investment policy statement is a written statement intended to provide a plan's investment fiduciaries with a framework for decision making regarding various types or categories of plan investments. Typically, an IPS outlines the roles of the parties involved with the plan investment process and details their investment responsibilities. Although an ERISA retirement plan is not required to have an IPS, it is generally considered a best practice to have one. Here are eight reasons to establish and maintain an IPS.

Source: Frostbrowntodd.com, July 2020

The New Electronic Disclosure Rule is Here

Plan Sponsor Council of America hosted a webinar to discuss the new electronic disclosure rule for retirement plans from the DOL, which took effect on July 26, 2020. The rule allows employers to deliver disclosures to plan participants primarily electronically, which the DOL says will reduce printing, mailing, and related plan costs by an estimated $3.2 billion over the next decade. This is the slide deck from the presentation.

Source: Cloudfront.net, July 2020

New IRS Guidance Expands Eligibility for 401k Plan COVID-19 Related Distributions and Loans

On June 19, 2020, the IRS issued Notice 2020-50, along with a related news release, that provides official guidance on coronavirus-related distributions and temporarily expanded loans taken from 401k plans due to the COVID-19 crisis. The Notice expands the eligibility criteria for such distributions and loans, thereby potentially increasing the number of 401k plan participants able to take advantage of these features.

Source: Compliancedashboard.net, July 2020

DOL Guidance on ESG Investing by Retirement Plans: Investment Committees Should Handle with Care

Retirement plan investment fiduciaries would be well-advised to note the increasing level of scrutiny the DOL is applying to ESG funds in retirement plans. Selecting or retaining ESG funds can be fraught with increased audit risk, including, potentially, imposing penalties for breach of fiduciary duty under ERISA. 401k and other defined contribution plans are at enhanced risk.

Source: Benefitslawadvisor.com, July 2020

Return of 2020 RMDs Allowed by New IRS Announcement

On June 23, the IRS issued a notice that told taxpayers they could unwind any required minimum distributions from their retirement accounts that they had taken in 2020. This provides a significant opportunity for IRA beneficiaries who didn't need this money for expenses. They can put these distributions back into their IRAs to grow there tax-deferred, lowering their total tax bill.

Source: Wealthspire.com, July 2020

Assessing the Effects of the CARES Act on 401k Savings

The CARES Act gives retirement savers added flexibility to access their 401k savings. And while this flexibility is helpful to many workers, it's encouraging that the vast majority have not needed to access their retirement savings and are staying the course on their journey to retirement. Less than 2% of participants had withdrawn assets via coronavirus-related distributions as of May 31, according to How America Saves 2020: The CARES Act. The decision to avoid tapping into retirement savings is consistent with other participant data.

Source: Vanguard.com, July 2020

Alleged Boeing Retirement Plan Fraudster Charged in California

A federal grand jury has indicted an Orange County man on charges that he fraudulently obtained access to Boeing employees' retirement accounts. The grand jury heard sufficient evidence to charge Hao Vo, who is 30, for the theft of hundreds of thousands of dollars from Boeing employees' accounts. Vo is charged with three counts of bank fraud and one count of aggravated identity theft.

Source: Plansponsor.com, July 2020

DOL Proposes New "Fiduciary Rule" and Provides Guidance for IRA Rollovers

The DOL proposed a new class exemption that permits investment advice fiduciaries to engage in otherwise prohibited transactions and receive compensation (including commissions, trailing fees, 12b-1 fees and revenue sharing) as long as certain conditions, including "Impartial Conduct Standards," are satisfied. The proposed rule does not attempt to expand the definition of a fiduciary but rather reaffirms that the definition of what it means to be a fiduciary is tied to the historic "five-part test."

Source: Icemiller.com, July 2020

Reporting Coronavirus-Related Distributions and Repayments

Employee benefits law has changed significantly, even if temporarily, under the CARES Act. Employees may now take a coronavirus-related distribution from a defined contribution retirement plan. The IRS has yet to provide official reporting guidance, but it is anticipated that the reporting process for CRDs will be similar to those already in place for Qualified Disaster Distributions as outlined in IRS Publication 976, Disaster Relief.

Source: Hallbenefitslaw.com, July 2020

CARES Act FAQs for Retirement Plan Sponsors

COVID-related distributions, loans, RMD relief, and special consideration for Balance Forward plans.

Source: Futureplan.com, July 2020

Projected 2021 Retirement Plan Limits

Most key Internal Revenue Code limits for qualified retirement plans won't increase in 2021, Mercer projects. The 415(c) maximum annual addition and the 401(a)(17) limit on retirement plan compensation will likely rise to the next rounding increment, but these limits are so close to the rounding breakpoint that even minimal deflation may keep the amounts at the 2020 levels.

Source: Mercer.com, July 2020*

Beyond Plan Audit Compliance: Improving the Financial Statement Audit Process

This report was produced by the DOL's ERISA Advisory Council. In this 28-page report, the 2019 ERISA Advisory Council examined the regulations and guidance implementing the independent qualified public accountant annual examination of financial statement requirements under Section 103 of ERISA to determine whether changes could enhance the safety of plan assets, the effectiveness of the plan's design, the efficiency of the plan's operations, and the compliance of the plan with ERISA, the Code, and other applicable laws.

Source: Dol.gov, July 2020

Voluntary Transfers of Uncashed Checks From ERISA Plans to State Unclaimed Property Programs

This report was produced by the DOL's ERISA Advisory Council. In this 48-page report, the 2019 ERISA Advisory Council explored whether there are circumstances under which a defined benefit or defined contribution pension plan might consider voluntary transfers of uncashed distribution checks to a state unclaimed property program to advance the goal of reuniting participants and beneficiaries who cannot be found or who are nonresponsive with their retirement savings.

Source: Dol.gov, July 2020

CARES Act: Retirement Plan Provisions with Updates as of July 2020

On March 27, 2020, the President signed the CARES Act to provide a broad economic stimulus and Coronavirus relief for Americans. Here are the provisions impacting retirement plans and IRAs, updated to reflect the recent guidance provided by the IRS in Notices 2020-50 and 2020-51. These provisions were effective immediately once the President signed the bill, but for the most part, employers have a choice on whether they implement these changes for their plans.

Source: Tri-ad.com, July 2020

ERISA Complaint Filed Against Biogen

The latest ERISA fiduciary breach lawsuit has been filed by a proposed class of plaintiffs in the U.S. District Court for the District of Massachusetts, naming among others as defendants Biogen Inc. and its board of directors. The complaint points to 2018 as an example year, suggesting that a significant percentage of funds in the plan at that time were "much more expensive than comparable funds found in similarly sized plans."

Source: Plansponsor.com, July 2020

DOL Proposes Rule Restricting ESG Investing

Because the proposed rule could be finalized before the end of the year, ERISA plan sponsors and investment managers, as well as the sponsors of ESG-focused investment funds (and other non-pecuniary investment strategies), should consider the potential impact of the proposed rule on their investment allocations and strategies.

Source: Paulhastings.com, July 2020

Colorado Secure Savings Program Enacted

The Centennial State has joined those providing a state-sponsored program for those whose employers do not offer a retirement plan. Gov. Jared Polis on July 14 signed into law SB20-200, a measure creating the Colorado Secure Savings Program. The measure amends the Colorado Secure Savings Plan Act to create an IRA-based program and also creates a retirement plan coverage requirement for employers with five or more employees.

Source: Ntsa-net.org, July 2020

401k Arbitration Agreements Still Not Mandatory

It has been nearly a year since Charles Schwab's court victory regarding mandatory arbitration agreements for 401ks, an addition many plan sponsors and fiduciaries are likely considering. But few companies appear to have added such agreements to their plans, and it will probably be a while before more of them do.

Source: Investmentnews.com (registration may be required), July 2020

401k Sales Will Continue to Fall: Survey

The COVID-19 crisis has hammered retirement plan sales so far this year, and things will likely get worse, according to a report this week from LIMRA's Secure Retirement Institute. Sales were up 17% in the first quarter of the year compared with the first quarter of 2019, though they fell sharply during the second quarter, coming in 21% lower than a year prior, the report found.

Source: Investmentnews.com (registration may be required), July 2020

DOL Proposes New Fiduciary Guidance for Selection of Socially Responsible Plan Investments

The proposed rule makes it clear that fiduciaries must select those investments based solely on financial considerations that impact the economic value of the investments. In other words, plan fiduciaries must not sacrifice performance or expose the plan participants and beneficiaries to additional risk by including investment options that primarily serve the non-financial interests of the plan fiduciaries.

Source: Icemiller.com, July 2020

Markets Rebound, but 401k Participants Not Moved to Trade

As the S&P 500 was posting its best quarterly performance in more than two decades, 401k investors were light traders, according to the Alight Solutions 401k Index.

Source: Asppa.org, July 2020

Studies Show Retirement Plan Gains, Resiliency

Retirement plans made gains in 2019 and, although they've been challenged by a pandemic and sudden economic downturn, they show surprising resiliency, two recent studies show. And there is more positive news.

Source: Asppa.org, July 2020

IRS Issues Operational Compliance List for 2020

The IRS issued the 2020 Operational Compliance List for tax-qualified retirement plans. The Operational Compliance List is mandated by IRS Rev. Proc. 2016-37 and notifies plan sponsors and service providers of changes to the tax-qualification requirements that became effective during the 2020 calendar year.

Source: Westlaw.com, July 2020

IRS Updates Operational Compliance List

The IRS has updated the information it provides to help plan sponsors and practitioners achieve operational compliance by identifying changes in qualification requirements effective during a calendar year.

Source: Ntsa-net.org, July 2020

Despite Challenges, 401k Plan Design Drives Positive Outcomes

Despite a slight decrease, 401k plans that auto-enroll continue to drive far greater participation, according to an annual report that examines the latest trends in participant behavior and plan design. In its 2020 Reference Point report, T. Rowe Price found that in 2019, participation in the firm's auto-enrollment plans was 85.3%, outstripping non-auto-enrollment plans by more than 40 percentage points. Overall, the firm reports that more than 61% of plans at T. Rowe Price automatically enroll participants.

Source: Napa-net.org, July 2020

Recent Developments in ERISA Plan Investment Regulation

The Department of Labor has issued guidance on private equity in 401k plan designated investment alternatives and a proposed regulation on environmental, social, and governance investing.

Source: Morganlewis.com, July 2020

Coronavirus Benefits Lawsuits Have Begun

Former participants in a 401k profit-sharing plan recently filed suit in Federal court in New Jersey seeking recovery of investment losses allocated to their accounts by the employer-sponsor. The losses were incurred when the employer imposed a special valuation date of April 30, 2020, to reflect the plan's investment losses incurred during the COVID-19 lockdown. This mid-year valuation reduced the account balances available for distribution to the former participants.

Source: Gct.law, July 2020

New Cybersecurity Decision Highlights Potential Claims Against Plan Sponsors

Based on long-standing ERISA law, it seems likely that plan sponsors will be held accountable for failing to fulfill their fiduciary responsibilities of prudence and loyalty when the vendors they hire allow a breach to occur. However, one reason the law has not been clarified to date is that often these participant claims have been settled quietly. Even a much-publicized lawsuit against Estee Lauder and its plan committee ended up being settled before trial. A pending suit against Abbott Labs could proceed to trial and there have also been two preliminary decisions in another case with the potential to clarify the rules.

Source: Cohenbuckmann.com, July 2020

Retirement Plan Excessive Fee Litigation Heats Up This Summer

Until recently, it appeared that plaintiffs' firms had taken a hiatus from excessive fee litigation targeted at large companies. Now there has been an uptick in fiduciary litigation involving 401k and 403b plans of private employers. Last month, at least three new excessive fee cases were filed in Wisconsin and at least seven additional excessive fee cases were filed in other jurisdictions.

Source: Quarles.com, July 2020

Judge Refuses to Dismiss Goldman Sachs Self-Dealing Suit

A federal judge has denied a motion to dismiss a lawsuit alleging Goldman Sachs' 401k plan fiduciaries retained expensive, low-performing proprietary funds in the plan for the benefit of itself and a subsidiary. A participant in the Goldman Sachs 401k plan alleged that the defendants retained underperforming proprietary mutual funds that an objective fiduciary in their position would have removed.

Source: Planadviser.com, July 2020

NEPC's Defined Contribution Flash Poll

In the second quarter, NEPC conducted a flash poll on defined contribution plan sponsor views and reactions in light of COVID-19. The findings quell some of the largest fears about the potentially detrimental impact of the pandemic and economic disruption on retirement savings.

Source: Nepc.com, July 2020

Finally! Leniency on Those Pesky Annual Notice Deliveries

Recognizing that over the last 20 years, technology and the workplace have changed, the DOL published a new e-delivery safe harbor at the end of May. In it, the DOL allows a plan sponsor to distribute annual notices and required disclosures to participants via a variety of electronic and virtual channels if they initially provide notice of internet availability.

Source: Francisinvco.com, July 2020

New DOL Fiduciary Rule Package: What You Really Need to Know

The DOL's new fiduciary rule package, issued on June 29, 2020, has three important components. This article describes in more detail the rules for determining whether a person is a fiduciary (including by way of providing "investment advice" under the "five-part test"), the DOL's views on the "five-part test" and rollover advice, the consequences of being a fiduciary, and the proposed exemption.

Source: Erisapracticecenter.com, July 2020

Initial Impacts of Coronavirus on Global Defined Contribution Plans

This 6-page report provides a snapshot of initial policy responses related to participant access to DC plans in various global markets as of May 15, 2020. For context, while the coronavirus pandemic has affected 188 countries, the timing and intensity of the pandemic has varied significantly across the world. Country practices and retirement plan systems vary globally. As such, a country's policy decision may not only reflect their stance towards DC plan assets but also whether the country has a robust safety net or other significant sources of guaranteed income.

Source: Dciia.org, July 2020

The DOL's Fiduciary Rule Prohibited Transaction Exemption May Only Be Needed In Limited Plan Circumstances

Attempting to assess the impact of DOL's newly proposed fiduciary "prohibited transaction exemption" is almost like trying to figure out a Rubik Cube, given all of the moving pieces. But ultimately there may not be many parties who actually will need it. Consider these points when trying to figure out how this new rule affects things.

Source: Businessofbenefits.com, July 2020

How Furloughs and Layoffs May Affect Company Retirement Plans

The coronavirus pandemic has forced many employers to implement some form of workforce reduction to continue operating. While furloughs and layoffs have a significant and immediate impact on a company's operations, plan sponsors also need to understand the longer-term effects workforce reductions have on participants' benefits and retirement accounts.

Source: Bdo.com, July 2020

Five Key Points About the DOL's New Fiduciary Rule

The proposed exemption is intended to help workers and retirees by preserving the wide availability of investment advice arrangements and products for retirement investors. The proposed exemption is expected to be well-received by "investment advice fiduciaries," because it is broader and more flexible than the DOL's pre-existing prohibited transaction class exemptions which generally provide relief for more discrete transactions. Here are five things you should know about the proposed exemption.

Source: Troutman.com, July 2020*

Astellas, Aon Sued Over CITs in 401k Plan

The class-action lawsuit filed July 1st in U.S. District Court in Chicago alleges that after Astellas and the administrative committee appointed Aon as the plan's discretionary investment manager in 2016, the defendants replaced almost all the plan's mutual funds with six collective investment trusts, five of which were Aon's.

Source: Pionline.com, July 2020

Department of Labor Proposes New Guidance for Fiduciaries

The new regulation and the proposed exemption are intended to replace the so-called "fiduciary rule" that was issued by the DOL in 2016, which was vacated by the Fifth Circuit Court of Appeals in 2018. Here some key take-aways.

Source: Paulhastings.com, July 2020

Schlichter Makes His Case for Participant Data as Plan Asset

The plaintiffs in an excessive fee suit have reiterated their argument that participant data is a plan asset and that the use of that data for non-retirement plan related purposes constitutes a fiduciary breach. The response, asking for a denial of Fidelity's motion to dismiss a suit that, at least in part, alleged that Fidelity "misappropriated a Plan asset to derive substantial additional income and continues to do so while receiving excessive recordkeeping fees for managing that asset."

Source: Napa-net.org, July 2020

Want to Optimize Your 401k Engagement Programs?

While there are many facets to a successful retirement plan, none is more valued by plan sponsors than getting participants on track and with current work arrangements, effective outreach is more important than ever. Webinar to discuss engagement capabilities and strategies to help set you and your practice apart.

Source: Napa-net.org, July 2020

Are Target-Date Funds a Good Choice for Your 401k?

Nearly every retirement plan offers target-date funds as investment options. But are target-date funds a good choice? The age-based method of setting your asset allocation makes sense in some cases, but investors can also stay in a target-date fund too long. Put another way, if your financial situation has evolved, shouldn't your investment strategy? Here's how to decide if target-date funds are a good choice for your retirement account.

Source: Forbes.com, July 2020

Employee Benefit Plans: Internal Controls for Processes and Governance

While many plan sponsors outsource most of their plan's operations, they cannot fully farm out this responsibility. Therefore, strong plan governance and the implementation of internal controls will assist in a plan's compliance with applicable laws and regulations. Preventative controls are designed to discourage errors or fraud, while detective controls are designed to identify errors or fraud after they have occurred. This article examines sample plan controls and user controls related to third-party service providers of a plan.

Source: Eisneramper.com, July 2020

Retirement and Pension Plan Administration, Application of ERISA Fiduciary Duties: Who is a Fiduciary?

ERISA Section 404 sets forth ERISA's general fiduciary duty provisions. Knowing when these stringent duties apply is critical. The fiduciary duties established under ERISA are routinely acknowledged as the "highest known to the law" and the consequences of noncompliance can be significant: ERISA Section 409 imposes personal liability on fiduciaries, to make good on retirement plan losses resulting from their actions or inactions, in fulfilling their duties under ERISA Section 404. This 23-page article goes into great detail on various fiduciary duty provisions and knowing when these stringent duties apply.

Source: Wagnerlawgroup.com, July 2020

IRS Issues New Guidance for Mid-Year Changes to Safe Harbor 401k and 403b Plans

The IRS issued Notice 2020-52 addressing mid-year reductions and suspensions of contributions to Safe Harbor 401k and 403b plans. In response to the COVID-19 pandemic, the Notice provides some temporary relief for plan sponsors that wish to reduce or eliminate safe harbor contributions mid-year.

Source: Spotlightonbenefits.com, July 2020

Risk for Cyberattacks Heightened as Remote Work Continues

The widespread move to remote work in light of the COVID-19 pandemic means plan sponsors should take a careful look at their cybersecurity measures. To drive the urgency home, lawsuits alleging cyberfraud negligence have been on the rise. MandMarblestone Group, Nationwide, Abbott Laboratories, Alight Solutions, and Estee Lauder have all faced litigation in the past year.

Source: Plansponsor.com, July 2020

401k Investors Continue to Move Into Fixed Income

There was a slight uptick in trading among 401k investors in June, according to the Alight Solutions 401k Index. These investors traded 0.26% of their balances, up from 0.11% in May and 0.13% in April. There were three days of above-normal activity. On average, 0.023% of balances were traded daily. Seventeen of 22 trading days favored fixed income.

Source: Plansponsor.com, July 2020

Attitudes That Get 401k Plan Sponsors in Trouble

While there are many types of plan sponsors, there are underlying human nature characteristics that really can dictate whether a sponsor will land in trouble. This article is all about the attitudes you should avoid.

Source: Jdsupra.com, July 2020

Working Past 62 Improves Retirement Security: Study

Working contract or gig jobs into one's 60s has become a way for many people to retire gradually, and such arrangements are linked to greater retirement security, a recent study found. People who remain in the workforce past 62 in jobs that don't provide health insurance or retirement plans tend to do so after leaving career positions or because they have spent a lifetime in jobs without benefits and have little financial choice but to keep working.

Source: Investmentnews.com (registration may be required), July 2020

CARES Act Expansion of In-Service Withdrawals Highlights 403b Plan Surrender Charge Disparity

The CARES Act includes provisions that allow retirement plan sponsors to provide plan participants the opportunity to withdraw funds from a defined contribution retirement plan if they are facing adverse financial consequences due to the COVID-19 pandemic. Unlike other DC plans, 403b plans are administered by insurance companies. These plans typically feature annuities that require the payment of a surrender charge of up to 12% on asset withdrawals or transfers. Plan participants in a 403b will need to check with their plan administrator to determine if any surrender charges apply before making a withdrawal.

Source: Hallbenefitslaw.com, July 2020

DOL's New Fiduciary Investment Advice Package Presents Significant Compliance Risk

Investment advisers, broker-dealers, banks, insurance companies, and other financial services firms, which interface with ERISA-covered plans and IRAs, should especially take note. The provision of "investment advice" to ERISA-covered plans and IRAs triggers a need to comply with stringent fiduciary duties and a complex web of prohibited transaction rules (depending on the nature of the advice recipient).

Source: Fiduciarygovernanceblog.com, July 2020

Is Personal Information of Retirement Plan Participants an ERISA Plan Asset?

A little more than one year ago, a settlement (Cassell et al. v. Vanderbilt University, et al.) involving the alleged wrongful use of personal information belonging to retirement plan participants, claimed to be a "plan assets" This year, similar claims have been made against Shell Oil Company in connection with its 401k plan. Retirement plan fiduciaries may begin seeing more of these claims and they might consider some strategies to head them off.

Source: Benefitslawadvisor.com, July 2020

Man Accused of Stealing Boeing IDs, Looting Retirement Plan

A federal grand jury on Tuesday indicted an Orange County, California man on charges that he fraudulently obtained access to Boeing employees' retirement accounts. The man is accused of siphoning their money by making hundreds of thousands of dollars' worth of fraudulent money transfers to himself.

Source: 401kspecialistmag.com, July 2020

Plan Sponsor and Service Provider Submit Dueling Motions to Dismiss in Response to Data Breach Suit

Further demonstrating the lack of clarity on who is liable when a plan suffers a data breach, on June 30th, Abbott Laboratories and Alight Solutions pointed fingers at each other in dueling motions to dismiss a complaint that alleged both were fiduciaries in connection with a plan data breach that stole $245,000 from a participant's plan account. The Northern District of Illinois will now have to decide if, based on the complaint's allegations, either Abbott or Alight (or both) could have (i) fiduciary responsibility concerning the theft of funds from the participant's account and whether (ii) the plan participant has pled a plausible claim of fiduciary breach.

Source: Wagnerlawgroup.com, July 2020

Get Beneficiary Designation and Missing Participant Practices in Order

COVID-19 has led to employee layoffs, employee health issues, and changed rules for required minimum distributions, all of which make it increasingly important for plan sponsors to have good procedures in place for maintaining updated beneficiary designations and finding missing participants.

Source: Plansponsor.com, July 2020

Another Lawsuit Challenges Use of Untested CITs in 401k Plan

Former employees of Astellas US have sued the pharmaceutical company, its board of directors, and its retirement plan administrative committee, as well as the plan's discretionary investment manager, Aon Hewitt Investment Consulting, for breaches of fiduciary duties and prohibited transactions under ERISA. According to the complaint, instead of acting in the exclusive best interest of participants, Aon Hewitt, now known as Aon Investments USA, acted in its own interest by causing the plan to invest in Aon's proprietary collective investment trusts for Aon's benefit. The Astellas defendants are also accused of failing to use the plan's bargaining power to negotiate reasonable fees for investment management services.

Source: Planadviser.com, July 2020

403b Plan's Use of Actively Managed TDFs Challenged in Lawsuit

A former participant of the MedStar Health Retirement Savings Plan has filed a proposed class-action lawsuit against MedStar, its 403b retirement plan committee, and individual committee members for breaching their fiduciary duties under ERISA. The lawsuit says the defendants not only selected and retained high-cost and poorly performing investments but also failed to fully disclose the expenses and risk of the plan's investment options to participants.

Source: Planadviser.com, July 2020

Why Private Equity Doesn't Belong in Defined-Contribution Plans

Alternatives -- such as private equity -- pose a few problems for investors like participants in self-directed defined-contribution plans (such as 401k, profit sharing, 403b, and 457 plans) or any investors, for that matter. The author reviews these problems.

Source: Morningstar.com, July 2020

Avoid Manager Concentration Risk With an Open-Architecture Target-Date Fund

As ERISA fiduciaries, plan sponsors are required to offer participants a menu that's diversified by investment type, but most defined contribution plan sponsors go further and diversify by an investment manager, too. Why? Because they recognize that different managers have different, often complementary, strengths. Yet that way of thinking doesn't always extend to a sponsor's choice of a target-date fund manager, which may expose participants to manager-concentration risk.

Source: Jhinvestments.com, July 2020

"Lost and Found" 401k Bill Resurfaces

Sen. Elizabeth Warren is again pressing for a retirement account "lost and found" system that would help workers keep track of their savings in plans sponsored by former employers. Last week the Democratic senator from Massachusetts introduced the bill, the Bipartisan Retirement Savings Lost and Found Act of 2020, which is similar to legislation she and other members of Congress have co-sponsored in the past. The bill tasks the Treasury Department with building an online system to track accounts.

Source: Investmentnews.com (registration may be required), July 2020

Supreme Court Rules "Actual Knowledge" Under ERISA "Means What It Says"

In Intel Corporation Investment Policy Committee v. Sulyma, the U.S. Supreme Court unanimously sided with the plan participant, allowing his breach of fiduciary duty claims to proceed because he claimed not to have "actual knowledge" under ERISA of claims challenging the plan fiduciaries' investment decisions, despite receiving plan literature disclosing the details of those investments. If the plan participant is found to have "actual knowledge" of the fiduciary breach, he or she has three years, running from the breach or violation, to file suit. Where no "actual knowledge" is found, however, a longer six-year statute of limitations applies.

Source: Icemiller.com, July 2020

A New Framework for Consideration of Private Equity in DC Plans

Alternative investments such as private equity can commonly be found in the investment portfolios of defined benefit plans. However, despite their potential strengths, there has not been wide adoption of private equity strategies in DC plans to date. To support the consideration of private equity by fiduciaries of DC plans subject to ERISA, the DOL issued an information letter to Groom Law Group. The information letter provides a framework for a prudent process for fiduciaries who believe a private equity allocation to a diversified plan investment option, including a target-date fund, may be appropriate.

Source: Groom.com, July 2020

The IRS Provides Relief for Mid-Year Reductions in Employer Contributions to Safe Harbor Plans

The Internal Revenue Service issued Notice 2020-52, which provides guidance and temporary relief for employers who may choose to reduce contributions during 2020 to their safe harbor 401k or 403b plan.

Source: Groom.com, July 2020

IRS Provides COVID-19-Related Relief to Safe Harbor 401k Plans

The IRS released additional guidance to help employers cope with the financial strain of the COVID-19 pandemic. This time, in Notice 2020-52, the IRS has clarified, and in some cases temporarily relaxed, rules governing when an employer with a safe harbor 401k plan can stop making safe harbor contributions without disqualifying the plan.

Source: Clarkhill.com, July 2020

DOL Proposes Exemption for Providing Investment Advice to Participants

The DOL has issued a notice of a proposed class exemption from certain prohibited transaction restrictions under ERISA and the Internal Revenue Code relating to the provision of investment advice to participants in retirement plans and individual retirement accounts and annuities. The proposal accompanies a technical amendment to conform DOL regulations to a 2018 Court of Appeals' decision that vacated the DOL's 2016 fiduciary rule.

Source: Bradley.com, July 2020

Participants Comfortable With Investing, Risk, Tech, Per Survey

DC participants are more likely to identify themselves as investors and more comfortable with risk and financial technology than those not in a DC plan. The comparison suggests that DC plan sponsors have done more than help participants build retirement savings. They have helped build a savings culture where participants are confident about investing, take advantage of financial tools and education, and are willing and able to seek advice.

Source: Blackrock.com, July 2020

Seven Trends in 401k Participant Behavior and Plan Design

How are participants behaving with all that's happening? Is plan design keeping up? T. Rowe Price did a deep dive into its recordkeeping data and surfaced with a few important points.

Source: 401kspecialistmag.com, July 2020

DOL Reinstates Five-Part Fiduciary Status Test and Proposes Class Exemption

The proposed exemption would create a pathway allowing investment advice fiduciaries under ERISA and the Internal Revenue Code to (i) receive compensation, including that which derives from rendering advice to roll over assets from employee benefit plans to IRAs, and (ii) engage in certain principal transactions that would otherwise violate the prohibited transaction provisions of ERISA and the Code. The proposed exemption would apply to registered investment advisers, broker-dealers, banks, insurance companies, and their employees, agents, and representatives who are investment advice fiduciaries.

Source: Wagnerlawgroup.com, July 2020*

IRS Offers Temporary Relief for Midyear Contribution Changes Under Safe Harbor Plans

In light of the COVID-19 pandemic, the IRS has issued Notice 2020-52, offering safe harbor plan sponsors temporary relief from certain requirements applicable to midyear reductions or suspensions of safe harbor contributions. Notice 2020-52 also clarifies the requirements for midyear contribution reductions (during or after the pandemic) that affect only highly compensated employees participating in a safe harbor plan.

Source: Thomsonreuters.com, July 2020

Proposed DOL Regulation Responds to Growth of ESG Investments by Prohibiting Subordination of Financial Interests

The DOL has proposed amending its investment duties regulation to clarify that plan fiduciaries must evaluate investments solely based on financial considerations, and may not subordinate the financial interests of participants and beneficiaries to environmental, social, corporate governance, or similarly oriented non-financial considerations. The proposal's preamble expresses concern that a growing emphasis on ESG investing may be leading ERISA plan fiduciaries to make investment decisions on grounds other than financial considerations. It stresses that financial considerations are paramount in selecting a plan investment or "investment course of action."

Source: Thomsonreuters.com, July 2020

DOL Reinstates Pre-2016 Fiduciary Rule and Proposes New Prohibited Transaction Exemption for Investment Advice Fiduciaries

The DOL has issued a technical amendment formally reinstating its pre-2016 regulation defining investment advice and has proposed a new prohibited transaction exemption for financial institutions and investment professionals who are investment advice fiduciaries. These actions close the book on the DOL's 2016 fiduciary rule and its related PTEs and exemption amendments, which were vacated by the Fifth Circuit in 2018.

Source: Thomsonreuters.com, July 2020

DOL Releases Proposed Rule for Financial Factors in Selecting Plan Investments

The DOL released a proposed rule that will amend existing guidance governing a fiduciary's investment duties under ERISA. The proposed rule clarifies that plan fiduciaries must base their investment decisions solely on pecuniary factors: those that have a material effect on an investment's risk and return based on appropriate time horizons consistent with the plan's investment objectives and funding policy. In other words, plan fiduciaries must not sacrifice performance or expose plan participants and beneficiaries to increased financial risk to serve a non-pecuniary interest.

Source: Thompsonhine.com, July 2020

401k Lawsuit Costs Fidelity $28.5 Million

Fidelity Investments is settling a lawsuit involving its 401k plan for $28.5 million, according to court records filed Thursday. The settlement resolves a class-action case brought in 2018 that alleged the firm breached its fiduciary responsibility to plan participants by including its products on the plan menu. The company had been similarly targeted in a prior lawsuit that it settled in 2014 for $12 million. As part of that, the company agreed to rebate revenue sharing from mutual funds on the plan menu back to the plan.

Source: Investmentnews.com (registration may be required), July 2020

Wave of Coronavirus Hardship Distributions Still Building

Low- to moderate-income retirement plan participants have mostly turned to reducing their spending levels and using credit cards to find financial relief during the pandemic; however, more will be turning to their retirement plans for liquidity, according to research from the nonprofit Commonwealth and the Defined Contribution Institutional Investment Association Retirement Research Center.

Source: Planadviser.com, July 2020

Attorneys Offer Closer Reading of DOL's Open MEP RFI

Advisers and broker/dealers hoping to work with open multiple employer plans now have a short window to offer their perspectives to the DOL and the IRS. Attorneys with the Wagner Law Group note that the RFI also requests information on issues facing two other types of multiple employer plans, multiple employer plans sponsored by employer groups or associations with "commonality of interest," dubbed "association plans," and those sponsored by professional employer organizations, dubbed "PEO MEPs." Together, the DOL refers to these two plan types as "MEPs."

Source: Planadviser.com, July 2020

Three New ERISA Lawsuits Bash Actively Managed TDFs

A participant in Costco's retirement plan filed a lawsuit claiming the fiduciaries of the plan breached their duties under ERISA by authorizing the plan to provide inappropriately expensive and underperforming active management funds. Similar allegations are echoed in three new lawsuits filed this week against Quest Diagnostics, IQVIA Holdings, and Eversource. All three suits question the use of actively managed funds provided by Fidelity, although the asset manager is not itself named as a defendant in any of the complaints.

Source: Planadviser.com, July 2020

DOL Proposes a New Fiduciary Investment Advice Exemption

The DOL proposed a new exemption from the prohibited transaction provisions of ERISA in connection with the provision of investment advice. The proposed exemption is the DOL's response to the vacatur of its prior fiduciary rule and reflects its desire to harmonize its approach with that of the Securities and Exchange Commission.

Source: Groom.com, July 2020

"Rolling" Ahead With New Fiduciary Guidance

The DOL issued a release proposing an important new initiative for retirement accounts that are subject to ERISA or Section 4975 of the Internal Revenue Code of 1986. This Release continues the decade-long saga that began with the DOL's highly controversial effort to remake the 1975 fiduciary rule, which many saw as dramatically extending ERISA's reach, even affecting the way financial services organizations conducted their general (non-ERISA) business.

Source: Dechert.com, July 2020

Cogent Syndicated Unveils Leaders in DC Plan Sponsor Client Satisfaction

401k plan sponsors are adjusting to massive changes in staffing and assisting remaining employees with short-term financial stress in the wake of the COVID-19 pandemic. All this on top of their traditional goals of ensuring retirement readiness and regulatory compliance. As plan sponsors rely even more heavily on their plan providers, service and support become the most influential driver of satisfaction and loyalty in the DC plan market. These and other findings are from Retirement Planscape, an annual Cogent Syndicated study from Escalent, a top human behavior and analytics firm.

Source: Businesswire.com, July 2020

IRS Answers Questions and Offers Relief for Required Minimum Distribution Changes

The IRS has issued Notice 2020-51 to provide defined contribution retirement plans with guidance relating to the waiver of 2020 required minimum distributions permitted under the CARES Act. The guidance provides certain transition relief, advises plans on how to implement the RMD waivers through a series of FAQs, and includes a sample plan amendment for adopting the RMD waivers.

Source: Bradley.com, July 2020

Most U.S. DC Plans Aren't Pausing or Reducing Contributions During Coronavirus: Survey

The majority of U.S.-based defined contribution pension plan sponsors said they haven't felt the need to pause or reduce contributions during the coronavirus pandemic, according to a new survey by the Defined Contribution Institutional Investment Association. While 86% of respondents said they aren't considering suspending matching employer contributions, just 8% said they already have. Meanwhile, 92% said they aren't considering reducing those contributions, with just 3% saying they've done so.

Source: Benefitscanada.com, July 2020

Can You Invest Your Retirement Plan to Save the Planet?

The DOL issued a proposed regulation amending the fiduciary regulations governing investment duties under ERISA. This proposed regulation guides an ERISA fiduciary considering an investment or investment strategy based on "non-pecuniary" factors such as environmental, social or corporate governance, or sustainability factors. The DOL indicated that its proposal is in response to increasing interest in ESG and sustainability investing and no clear standard for what constitutes an ESG investment.

Source: Beneficiallyyours.com, July 2020

The Five "Ws" of a 401k Plan Audit

If you've just been informed that your 401k plan needs an audit, you probably have many questions if you have never been through a 401k audit. Hopefully by answering the five "Ws" (Who? What? When? Where? Why?), this article will cover most of your questions.

Source: Belfint.com, July 2020

Who Plan Sponsors Rate as Top 401k Plan Providers

Seven in 10 plan sponsors (70%) report they are "highly satisfied" with their 401k plan providers according to a new study released July 1 from Cogent Syndicated. Yet only seven providers total achieved satisfaction marks above the industry average. According to Retirement Planscape, an annual Cogent Syndicated study from human behavior and analytics firm Escalent, Bank of America and MassMutual Retirement were the top firms for "Overall DC Plan Provider Satisfaction" among the top 15 firms eligible to be rated.

Source: 401kspecialistmag.com, July 2020

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