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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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403b Plan Participants: Getting "Noticed"

A reminder for public schools and 501(c)(3) organizations with 403b plans as year-end approaches, employers have an annual notice obligation to employees to meet IRS requirements. This article reviews the IRS employers' annual notice obligation to employees.

Source: Voya.com, October 2021

Autoenrollment and the Importance of the Default

Automatic enrollment is a powerful strategy proven to increase retirement plan participation, but the newest -- and last -- edition of Nudge, a seminal book on behavioral finance coauthored by Nobel laureate Robert H. Thaler, stresses that the benefits of the popular strategy depend largely on how it is implemented.

Source: Vanguard.com, October 2021

Only 31% of Hispanic Workers Participate in a Workplace Retirement Plan

While they're one of the fastest-growing population demographics in the country, Hispanic workers face major challenges in allocating enough money to retirement savings compared with other groups. In the report "A Closer Look Into The Finances of Hispanic American Households," behavioral researchers at Morningstar dug into the underlying causes of the lower savings rates for this group.

Source: Planadviser.com, October 2021

Plaintiffs Claim Deloitte Breached ERISA Prudence Duties

Plaintiffs have filed a new ERISA lawsuit in the U.S. District Court for the Southern District of New York, naming as defendants Deloitte LLP, the company's board of directors, and various other related entities. The suit alleges the defendants permitted the payment of excessive administrative and recordkeeping fees in the operation of a 401k plan and a profit-sharing plan provided to Deloitte employees.

Source: Planadviser.com, October 2021

401k Fee Litigation: What Must a Plaintiff Allege to Survive a Motion to Dismiss?

This term the Supreme Court is considering -- for the first time -- critical issues in DC plan fee litigation, in Hughes v. Northwestern. This piece discusses the recent decision by the United States District Court for the Southern District of Ohio, dismissing plaintiffs' claims in Forman v. TriHealth, Inc. 401k Retirement Savings Plan Retirement Committee. Forman illustrates an issue that is also likely to be presented in Hughes: how fact-specific must plaintiffs' complaint be to survive a motion to dismiss?

Source: Octoberthree.com, October 2021

DOL Proposes Rule Encouraging ESG and Proxy Voting, Reducing Documentation Requirements

The proposed rule would largely retain the basic framework of the investment duties regulation while reinstating guidance similar to the sub-regulatory framework that existed immediately before the 2020 rules. For example, the proposed rule retains two longstanding principles. First, the duties of prudence and loyalty require ERISA plan fiduciaries to focus on material risk-return factors and not subordinate the interests of participants and beneficiaries to objectives unrelated to the provision of benefits under the plan. Second, the fiduciary act of managing plan assets includes making decisions about voting proxies and exercising shareholder rights. While the framework is the same, the proposed rule would include changes that seem likely to result in greater leeway for fiduciaries to include ESG investments in plans.

Source: Groom.com, October 2021

How Fiduciaries Can Help Protect Themselves from Excessive Fee Litigation

Employers that sponsor a retirement plan should be concerned with the risk of excessive fee claims, as the number of these has skyrocketed recently. Chubb's Alison Martin shares steps plan fiduciaries can take to reduce the chances of a lawsuit or increase their chances of successfully defending against one.

Source: 401kspecialistmag.com, October 2021

Surprising Findings on 401k Participant Student Loan Debt

Nearly one-in-three Baby Boomer and Gen-X 401k plan participants who have student loan debt also have outstanding 401k loans, a much higher percentage than Millennials or Gen Z participants. The research also shows Gen-Z joining the ranks of workers increasingly burdened by debt, entering adulthood with $27,900 in student debt on average. But notably, Boomers hold more than twice as much debt as these younger borrowers.

Source: 401kspecialistmag.com, October 2021

DOL Proposes Rule to Remove Barriers to ESG Funds in Retirement Plans

The DOL has proposed removing barriers put in place by the prior administration that would have limited plan fiduciaries' ability to consider climate change and other environmental, social, and governance issues as risk factors affecting workers' financial security when fiduciaries select retirement plan investments and exercise shareholder proxy voting rights.

Source: Shrm.org, October 2021

New 401k Adoption Agreements on the Horizon: Pitfalls for the Unwary

It is important for employers to carefully review the updated documents prepared for their plans. Simply "rubber stamping" the updated document package from the vendor is likely to result in compliance failures and could lead to costly corrections and penalties. Here are some of the issues to watch for.

Source: Sgrlaw.com, October 2021

After 401k Account Growth Catapults Ahead of Curve, Vestwell CEO Scrambles

Vestwell CEO Aaron Schumm just abdicated his chairmanship to Lori Hardwick as part of a senior executive team shuffle, after experiencing overwhelming growth in the workplace 401k accounts it services.

Source: Riabiz.com, October 2021

Aon Triumphs in ERISA Suit Over Lowe's Investments

A judge determined the firm didn't breach its ERISA fiduciary duties when it encouraged Lowe's to move more than a billion dollars in plan assets to one of Aon's investment funds.

Source: Planadviser.com, October 2021

Four Tech Trends Shaping the 401k Industry

While the 401k industry may be somewhat slow to adapt to new technology, the results of a new survey suggest that ongoing developments are quickly transforming the retirement space. According to the resulting of a recent, outdated recordkeeping technology has led to high costs, administrative difficulties, and rigid plan designs. But that appears to be changing as large banks and private equity firms, for example, have invested nearly $1 billion into the industry over the past year alone.

Source: Napa-net.org, October 2021

Changes in 401k Plan Asset Allocation Among Consistent Participants, 2010-2018

This paper provides an update of a longitudinal analysis of plan participants drawn from the EBRI/ICI 401k database. It examines how asset allocations change over the years within the accounts of consistent participants, that is, those who maintained accounts in each year from 2010 through 2018.

Source: Ebri.org, October 2021

Scary Surprise for Some New 401k Sponsors: Plan Audit Costs

You are a business owner and have just found out that as part of your Form 5500 filing obligations you need to engage the services of an independent qualified public accountant to audit plan operations and finances. The cost of these services run about $10,000. This is a scary surprise for you. Did things have to end up this way?

Source: Eforerisa.com, October 2021

DOL Proposes Rule to Remove Barriers to Considering ESG Factors in Retirement Plan Management

The DOL announced a proposed rule that would remove barriers to plan fiduciaries' ability to consider climate change and other environmental, social and governance factors when they select investments and exercise shareholder rights. The proposed rule, "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights," follows Executive Order 14030, signed by President Biden on May 20, 2021. The order directs the federal government to implement policies to help safeguard the financial security of America's families, businesses and workers from climate-related financial risk that may threaten the life savings and pensions of U.S. workers and families.

Source: Dol.gov, October 2021

TIAA Faces New Managed Account Rollover Complaint

A new lawsuit suggests the individual advisory program TIAA clients were rolled into was significantly more expensive and generated hundreds of millions of dollars in fees for TIAA, without providing commensurate performance benefits.

Source: Planadviser.com, October 2021

ESG Would Get Massive Boost From DOL Proposed 401k Rule

A proposed rule issued Wednesday by the DOL bodes extremely well for ESG investment managers, especially because the regulator clarified that target-date funds and other default products that use the investment criteria are permissible in 401ks. But the DOL went a step further, noting that it is retaining the so-called "tie-breaker" test for investments, meaning that all else being equal, financially immaterial factors can give one product an edge over another. The proposal also clarifies that ESG can be material when it comes to proxy votes that plan sponsors make on behalf of participants.

Source: Investmentnews.com (registration may be required), October 2021

Labor Department Issues ESG Rule Proposal for 401ks

The DOL has issued its much-anticipated rule for the use of ESG investments in retirement plans, effectively walking back two Trump-era rules that were finalized last year. In the single rule proposal, "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights," the DOL would modify requirements outlined in the two rules from last year, "Financial Factors in Selecting Plan Investments" and "Fiduciary Duties Regarding Proxy Voting and Shareholder Rights."

Source: Investmentnews.com (registration may be required), October 2021

A Primer on DOL Probes for ERISA Plan Service Providers

The DOL has proactively shifted its enforcement resources in recent years from the sponsors of plans covered by ERISA to the financial institutions that provide services to ERISA plans. This has allowed the agency to conduct investigations involving hundreds or thousands of plans at once rather than investigating individual plan sponsors. Given this shift, it is important to know both what to expect when the DOL decides to investigate and how to respond.

Source: Groom.com, October 2021

Do This If You Don't Like Your 401k Plan's Fees

If you've been paying attention, you know there's been a constant cry lamenting the "high" fees of 401k plans. Setting aside whether or not this is as pervasive as some make it sound, the truth is, at least a few 401k plans do pay more than they should. You might even be tempted to call them "outrageous." If your 401k plan falls into that sorry camp, what can you do?

Source: Forbes.com, October 2021

The Key Differences Between 401k and Roth IRA Retirement Plans

If you're thinking about starting to save for retirement, chances are good that you are looking at both Roth IRA and 401k plans. Both offer tax benefits and can help you grow your wealth over time, but there are several key differences between the two.

Source: Cnbc.com, October 2021

Despite Pandemic, Nonprofit Workers Boost Participation in 403bs

Despite COVID-19 hitting nonprofit organizations particularly hard last year, nonprofit workers participated in 403b retirement plans at the highest level since tracking began in 2008, according to an annual 403b Plan Survey from the Plan Sponsor Council of America. Overall retirement plan participation continued to climb, rising to 77.2% in 2020, up from 76.6% in 2019 and 72% in 2018.

Source: Psca.org, October 2021

DCIO Service Providers Report Significant Momentum

The average defined contribution investment-only provider's assets under management rose 30% over the 12 months leading up to June 30, aided by market gains of around 10% in just the first half of 2021, according to a new Sway Research survey. The analysis is based on surveys and interviews with 21 DCIO sales leaders and DC plan intermediaries. It shows that not all the AUM growth is the result of increasing stock prices, as two-thirds of the managers captured positive net sales during the first half of this year.

Source: Planadviser.com, October 2021

New IRS Snapshot Tackles Deemed Distributions

A new IRS issue snapshot explains when different kinds of participant loan failures will cause a taxable deemed distribution. The snapshot also highlights the provisions of the CARES Act that gave more loan flexibility to participants affected by COVID-19. While the snapshot summarizes existing guidance rather than providing new information, it may alert plan sponsors and taxpayers to the kinds of issues IRS agents review during audits.

Source: Mercer.com, October 2021

Revenue Sharing Declines Among DC Plan Sponsors

The percentage of DC plans using revenue sharing -- or a combination of revenue sharing and other forms of plan payments -- has been declining over the years. The strategy has been a casualty of trends in lower fees, more transparency, government regulation, litigation risk, and fiduciary liability insurance requirements.

Source: Pionline.com, October 2021*

Six Excessive Fee Suits Paused for SCOTUS Ruling

A federal judge has put a half dozen excessive fee suits on hold pending a decision by the U.S. Supreme Court in a case that "will likely clarify the pleading requirements for ERISA breach of fiduciary claims in cases such as this...." That was the determination of Judge William C. Griesbach regarding six cases pending in the U.S. District Court for the Eastern District of Wisconsin.

Source: Ntsa-net.org, October 2021

Can 401k Plans Better Serve Their Retired Workers?

Improving 401k plans for retirees is a worthwhile goal. Currently, the system is messy. To start, plan sponsors view their responsibilities divergently. According to a survey from Pimco, 36% of sponsors actively encourage their company's retirees to remain in the 401k plan, 38% prefer that they do so but do not solicit such behavior, 19% are indifferent, and 7% hope that their retirees will leave. The trend, however, is toward greater involvement. Over time, attempting to retain retiree accounts will likely become the corporate standard.

Source: Morningstar.com, October 2021

Budget Bill Seeks Retirement Plan Mandate, Roth Conversion Ban

Nearly all employers would have to offer retirement plans with automatic enrollment, and the saver's credit would turn into a government matching plan contribution under the current House version of a roughly $3.5 trillion budget package. Other retirement-related proposals would ban Roth conversions in employer plans and cap retirement benefits for high earners. Although the retirement provisions may change as the Senate weighs in, they stand a good chance of surviving in any final package.

Source: Mercer.com, October 2021

AT&T Fends Off 401k Fee Suit

AT&T saw a big win in a five-year-old lawsuit over its 401k plan, with a federal judge on Sept. 28 granting summary judgment in the company's favor. In 2017, the telecommunications giant was sued in U.S. District Court in Central California for alleged fiduciary breaches in the plan, including claims over administrative fees paid to the plan provider, Fidelity, as well as to indirect compensation that Financial Engines paid to that firm.

Source: Investmentnews.com (registration may be required), October 2021

Small Business Tax Incentives for Retirement Plans

The growing emphasis on expanding retirement plan coverage, particularly among small businesses, leaves many employers asking when -- not whether -- retirement plan access will become a requirement. But establishing a retirement plan can be expensive and time consuming, especially for small businesses. Fortunately, there are some incentives in place to make establishing a plan easier for small employers.

Source: Captrust.com, October 2021

SECURE Act Revisited -- Plan Participants

The SECURE Act provides more access to retirement plans for more people, allows participants more options in retirement, and provides small businesses with incentives to offer and additional options to establish new 401k plans. With all the provisions now effective, here's what plan participants need to know.

Source: Benefit-Resources.com, October 2021

Congress Considers Mandatory Auto-Enrollment IRAs

All eyes are on Congress as it wrestles with a $1 trillion infrastructure bill and a $3.5 trillion budget reconciliation bill. The House Ways and Means Committee markup of the reconciliation bill would require certain employers with five or more employees to automatically enroll employees in a payroll deduction IRA. This requirement would take effect on January 1, 2023.

Source: Wagnerlawgroup.com, October 2021

EBSA Nominee Addresses Fiduciary Rulemaking, Women's Protection

Lisa Gomez, who was nominated to serve as Assistant Secretary of Labor for the Employee Benefits Security Administration, tackled a wide range of issues during her Oct. 7 Senate confirmation hearing.

Source: Napa-net.org, October 2021

Small U.S. Retirement Plans Lagging in Cybersecurity Oversight

Fiduciaries at large, sophisticated plans tend to understand their responsibility and have resources and staff to regularly assess contractors' fraud and data controls. But smaller firms can be left in the dark. As recordkeepers continue to make cyber improvements, they may play an outsized role in helping their smaller clients keep up. One of the things they need to be doing is helping raise awareness to plan fiduciaries that they have this responsibility.

Source: Groom.com, October 2021

District Court Dismisses ERISA 401k Performance and Fee Putative Class Action

The District Court for the Southern District of Ohio recently dismissed an ERISA putative class action lawsuit asserting fiduciary duty claims based on allegations of unreasonably high administrative fees and relatively higher-cost, underperforming funds offered in TriHealth, Inc.'s 401k plan. Plaintiffs were TriHealth 401k Plan participants and beneficiaries. On behalf of a putative class, they alleged that TriHealth and the Plan's Retirement Committee breached their duties of prudence and loyalty to Plaintiffs.

Source: Erisalitigationadvisor.com, October 2021

IRS Updates Issue Snapshot on Participant Loans

On Sept. 28, the IRS updated the "Issue Snapshot" which discusses the laws and regulations governing plan loans. This article reviews the update.

Source: Asppa.org, October 2021

Study Reveals That Americans Are Shifting Retirement Due to Pandemic

New research from Northwestern Mutual shows that Covid-19 has changed many Americans' retirement plans, with over one-third (35%) saying it has either moved up or pushed back their target retirement age. Almost a quarter (24%) plan to retire later than previously expected while 11% plan to retire earlier.

Source: Prnewswire.com, October 2021

Specialist Advisers Say Cybersecurity Practices a Top Factor in Recordkeeper Selection

Nearly one-third (31%) of retirement plan recordkeepers expect to increase their cybersecurity staff, according to a Cerulli report. Industry stakeholders suggest the threat of retirement account fraud has increased in recent years, particularly during the remote work environment, Cerulli Associates says. And, even though the majority of recordkeepers act in a non-fiduciary capacity, Cerulli points out that courts have suggested that cybersecurity is a shared responsibility.

Source: Planadviser.com, October 2021

Audit Communications to Plan Sponsors More Robust Under SAS 136

The AICPA's Statement on Accounting Standards No. 136 will meaningfully change the audit process for defined contribution plan sponsors. The AICPA issued SAS 136 intending to give readers of the audit report a better understanding of the scope of the audit, as well as clarifying the responsibilities of the plan sponsor and auditor. SAS 136 requires a greater level of written communication to those charged with governance.

Source: Orba.com, October 2021

2021 Retirement Plan Regulatory Update

While businesses and the people they employ continued to navigate the ever-changing landscape of COVID-19, 2021 has brought new and refurbished legislature top of mind for plan sponsors. Despite the SECURE Act's debut nearly two years ago, many plan sponsors are just now contemplating whether to adopt some of the provisions. Meanwhile, plan sponsors are gearing up for the House of Representative's proposed SECURE 2.0 bill. This 15-page paper covers this development, the IRS' EPCRS changes, updates from the DOL, a review of notable updates in retirement plan fee litigation cases, plus much more.

Source: Multnomahgroup.com, October 2021

Resources to Help Identify, Manage, and Avoid Retirement Plan Vendor Conflicts

Fiduciaries are required by ERISA to monitor service providers to the plan. That includes monitoring for any conflicts of interest. This 7-page paper identifies five areas where recordkeeping vendors have tried to monetize their relationship with retirement plans: Proprietary investment management, managed accounts, IRA rollovers, annuitization, and cross-selling retail financial products. These don't constitute a conflict of interest, but whenever a recordkeeper stands to be compensated by choices made by the plan fiduciaries or plan participants, extra care should be taken.

Source: Multnomahgroup.com, October 2021

2021 Plan Amendment Deadlines and Other Looming Fourth Quarter Considerations

As the year draws to a close, it is helpful for employers to pause to evaluate employee benefit plan amendment deadlines and other crucial fourth-quarter considerations. Ten are reviewed here.

Source: Jacksonlewis.com, October 2021

Murder Victim's Son Can Get Money From 401k Linked to Killers

The son of a man murdered by a Colombian guerrilla group can obtain money from a 401k account connected to the perpetrators, a Massachusetts federal judge ruled, deciding a novel legal question involving federal benefits and anti-terrorism laws. Fidelity Investments can turn over 401k assets to the victim’s son under the Terrorism Risk Insurance Act of 2002 without violating the federal law protecting retirement plan assets from being used for other purposes.

Source: Investmentnews.com (registration may be required), October 2021

Seventh Circuit Weighs in on Arbitration and Class Waiver Provisions in DC Plans

The Seventh Circuit decided Smith v. Board of Directors of Triad Manufacturing Inc. holding that benefit plans may require claimants to arbitrate claims under the Employee Retirement Income Security Act of 1974, 29 U.S.C. Section 1001, et seq., but may not preclude claimants from obtaining relief that ERISA provides.

Source: Faegredrinker.com, October 2021

Exposing Excessive Fee Litigation Against America's DC Plans

This 24-page whitepaper is designed to highlight the problem of excessive fee lawsuits and present a sensible framework to restore sanity and fairness to the defined contribution landscape.

Source: Euclidspecialty.com, October 2021

Managed Accounts and TDFs Better Together Than Apart, Research

For years plan sponsors and consultants have compared the outcomes of managed accounts and target-date funds within workplace retirement plans. The thinking was that plan sponsors and consultants should choose one or the other to offer retirement plan participants. New research and analysis from Empower Institute show that managed accounts and target-date funds instead complement each other and together can improve investors' retirement savings outcomes.

Source: Empower-Retirement.com, October 2021

415 Limit Applies in Aggregate When 403b Participant Sponsors Another Plan

In an updated Issue Snapshot, the IRS reminds plan sponsors about rules for the Internal Revenue Code Section 415 annual additions limitation when a 403b plan participant also sponsors a qualified plan to which he contributes.

Source: Planadviser.com, October 2021*

Bipartisan Aura Around Retirement Savings Diminishes in Reconciliation

Partisan tension has surrounded most issues in Washington, D.C. over the last several years with a few notable exceptions. One of them was retirement-savings policy. For the moment, "was" is the operative word because of a massive bill that is creating brittle politics on Capitol Hill. Republicans are upset about auto-IRA and other proposals in the $3.5 trillion budget reconciliation package. Will their ire carry over to SECURE 2.0?

Source: Investmentnews.com (registration may be required), October 2021

AT&T Win Is Road Map for Defense of 401k Fees

AT&T's defeat of a massive class action challenging its retirement plan's recordkeeping fees could help other plan sponsors defend against similar disputes. The flood of class actions brought in recent years over allegedly excessive 401k plan fees isn't letting up. But with more companies choosing to fight rather than settle, defense attorneys say AT&T's case could serve as a road map for what evidence needs to be produced to prevail at trial.

Source: Bloomberglaw.com, October 2021

Department of Labor Teases Cryptocurrency Interest

Hinting that the DOL is currently working on guidance related to cryptocurrency, the Acting Assistant Secretary for the DOL's Employee Benefits Security Administration recently commented that the DOL finds the prospect of cryptocurrency investments in 401k plan lineups "troubling." This may be a sign of DOL focus on the increasing frequency of ERISA plan investments in cryptocurrency vehicles, including funds with cryptocurrency exposures.

Source: Morganlewis.com, October 2021


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