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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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The Economics of Providing 401k Plans: Services, Fees, and Expenses, 2021

Key findings: 401k plan participants investing in mutual funds tend to hold lower-cost funds. The expense ratios that 401k plan participants incur for investing in mutual funds have declined substantially since 2000. The downward trend in the expense ratios that 401k plan participants incur for investing in mutual funds continued in 2021. 401k plans are a complex employee benefit to maintain and administer, and they are subject to an array of rules and regulations. Employers and employees generally share the costs of operating 401k plans.

Source: Ici.org, June 2022

The ERISA Fiduciary Advice Exemption

DOL rules prohibit a plan fiduciary from using its fiduciary authority to benefit itself or an affiliate. A prohibited transaction involving a retirement plan cannot be cured through disclosures, and violations can lead to the potential for excise tax liability. Importantly, when an adviser deals with IRA clients, ERISA's fiduciary duties do not apply, but the prohibited transaction and excise tax provisions of the Code do. In this article, Groom attorneys discuss DOL-Prohibited Transaction Class Exemption 2020-02, which is a continuation of the DOL's efforts to further regulate interactions between financial professionals and retirement clients.

Source: Groom.com, June 2022

What is Missed Deferral Opportunity?

After a sustained outcry from the retirement plan community, the IRS came up with a correction that would make participants "whole" by requiring a corrective contribution from the employer, not for the missed deferrals, but for the missed tax deferral opportunity that the deferral of compensation provides. This is what is meant by the missed deferral opportunity. While this may not technically restore the plan to the position it would have been in had the failure not occurred, it generously restores the participant to the benefit they would have had if the failure had not occurred.

Source: Erisadc.com, June 2022

Is Your Employee Benefit Plan Adequately Covered by an ERISA Fidelity Bond?

Section 412 of ERISA requires every person who handles funds or other property of a plan to be bonded (excluding certain exempted individuals). Such persons include plan fiduciaries but may also include any director, officer, or employee of the fiduciary. It is highly recommended that each plan sponsor frequently assess the bonding coverage to comply with requirements and to prevent any associated risks. ERISA does not require fiduciary liability insurance, however, it should also be considered as protection against fiduciary breaches.

Source: Eisneramper.com, June 2022

A 'Win' for Plan Sponsors, Fiduciaries as Excessive Fee Case Dismissal Is Upheld

Some heartening news for 401k plan sponsors and fiduciaries came down in the form of a recent decision from the U.S. Court of Appeals for the Sixth Circuit in an excessive fee case. In the case of Smith v. CommonSpirit Health, the court upheld a district court decision to dismiss the case.

Source: 401kspecialistmag.com, June 2022

Advisors Unprepared for New 401k Rollover Rules

Big changes to retirement plan and IRA rollover rules will happen this Friday, July 1st. Yet too many advisors are unwilling or unable to take Prohibited Transaction Exemption 2020-02 seriously, and it's a problem, says ERISA expert and Faegre Drinker Partner Fred Reish.

Source: 401kspecialistmag.com, June 2022

State Bill Would Require Multiple 403b Providers

A bill in the New Jersey Legislature would require that certain boards of education have multiple providers for 403b plans. The legislation provides that certain school districts -- those with at least 1,000 students that offer a 403b retirement plan to school district employees -- select at minimum three providers or vendors for the plan.

Source: Plansponsor.com, June 2022*

Olin Corp. Soundly Defeats ERISA Lawsuit

The U.S. District Court for the Eastern District of Missouri has ruled in favor of the defendants in an ERISA lawsuit filed against the Olin Corp. The plaintiffs in the case put forward substantially similar allegations to numerous other lawsuits filed against employers for alleged fiduciary breaches in the operation of their defined contribution retirement plans. The judge's opinion sides firmly against the arguments made by the plaintiffs in the case, who are among the many litigants currently represented by the law firm Capozzi Adler.

Source: Planadviser.com, June 2022

The Role of the 401k in Today's Tight Labor Market

In his role as managing director and head of retirement plan services at Schwab Retirement Plan Services, Brian Bender spends a lot of time thinking about the interplay of retirement benefits, compensation structures, and employee retention. According to Bender, ongoing cultural shifts have influenced both employees' expectations concerning workplace benefits and the evolving role of the 401k plan in talent management.

Source: Planadviser.com, June 2022

MITRE Corp. Faces Familiar ERISA Fiduciary Breach Allegations

Another group of plaintiffs represented by the law firm Capozzi Adler has filed a proposed class-action lawsuit -- in this case, against their employer, the MITRE Corp., and various related defendants, such as the company's board of directors -- for alleged fiduciary breaches in the provision of retirement plan benefits.

Source: Planadviser.com, June 2022

More Excessive Fee Cases Revived After High Court's Northwestern Decision

The 9th US Circuit Court of Appeals recently revived two ERISA lawsuits by participants and beneficiaries in separate 401k plans challenging plan fiduciaries' decisions to offer retail share class mutual funds instead of cheaper -- but otherwise identical -- institutional share classes. In both cases, district courts dismissed the claims after finding the plaintiffs needed to allege more than the mere availability of similar lower-fee funds. However, two different three-judge panels of the 9th Circuit disagreed with the lower courts, finding the plaintiffs' barebones allegations sufficed to survive a motion to dismiss.

Source: Mercer.com, June 2022

DOL, Recordkeeper Square Off in Confidentiality Disputes

The DOL's cybersecurity investigation into Alight Solutions, a retirement plan recordkeeper, has queued up court rulings on the reach of the DOL's subpoena power that may have important implications for ERISA plan sponsors and their respective recordkeepers and service providers moving forward.

Source: Erisalitigationadvisor.com, June 2022

What Would Shakespeare Say About Offering Bitcoin in 401k Plans?

Somehow, Shakespeare seems to have anticipated crypto; the ongoing kerfuffle over offering crypto in the investment menus of 401k plans is seeming more and more to be simply "sound and fury, signifying nothing." Certainly, there are always going to be people who want to be able to make big, bold bets in their 401k plans, but just like most employees learned not to overweight their holdings towards their employer's stock, so too is it likely that most will not want to incur the risk of this type of investment.

Source: Bostonerisalaw.com, June 2022

Sixth Circuit Issues First Published Appellate Opinion Applying Supreme Court's ERISA Ruling in Hughes

The U.S. Court of Appeals for the Sixth Circuit this week decided Smith v. CommonSpirit Health, becoming the first court of appeals to issue a published opinion applying Hughes v. Northwestern University. The court made clear that whether an ERISA fee-and-expense claim is plausible "depends on a host of considerations, including common sense and the strength of competing explanations for the defendant's conduct."

Source: Sidley.com, June 2022

Due Dates for DC Plan Lifetime Illustrations Approaching

All ERISA-covered DC plans with participant direction of investments need to provide benefit statements with benefit illustrations to all participants with account balances by August 14, 2022. DC plans without participant direction have various due dates depending on the plan's plan year.

Source: Segalco.com, June 2022

Senate Finance Committee Advances EARN Act

The committee's unanimous passage of the EARN Act represents another step forward for an ambitious package of retirement planning reforms making their way through the legislative process.

Source: Planadviser.com, June 2022

6th Circuit Backs Defense in Fidelity Freedom Funds ERISA Suit

One expert who works on the fiduciary insurance side of the retirement plan industry calls the appellate ruling 'the best decision ever written in an excessive fee case,' and one which could dissuade other plaintiffs in similar cases.

Source: Planadviser.com, June 2022

DOL Expresses Extreme Concern Over Prudence of Cryptocurrency in 401k Plans

The DOL listed several concerns regarding the prudence of cryptocurrency investments in retirement plans, including their speculative and volatile nature, difficulties in valuation, custodial and recordkeeping concerns, and a lack of a regulatory framework, potentially resulting in unlawful sales through unregistered transactions. Although the Release focused on cryptocurrencies (or any other investment products tied to cryptocurrencies), the DOL noted that the same reasoning and principles would apply to a broad range of digital assets, including but not limited to tokens, coins, crypto assets, and any derivatives thereof. The Release provided several substantial takeaways for plan fiduciaries.

Source: Bsk.com, June 2022

SECURE 2.0 Momentum Surges With EARN Act's Unanimous Committee Approval Today

Comprehensive retirement reform legislation taking shape on Capitol Hill with strong bipartisan support making it likely a final bill will reach President Biden's desk by the end of the year.

Source: 401kspecialistmag.com, June 2022

Which Retirement Plan Participants Can Sue?

Several recent lawsuits brought under ERISA have addressed the issue of which retirement plan participants have "standing" to bring an ERISA action against their plan's fiduciaries. These cases generally focus on the issue of whether the participant-plaintiffs who brought the suit have a "concrete stake" in the dispute, as in two recent cases involving participant-plaintiffs in 401k-type defined contribution plans who did not invest in all the funds for which they are suing. Fiduciaries should consider who would have a stake in litigation.

Source: Shrm.org, June 2022

Form 5500 and Other Retirement/Benefit Plan Reminders and Developments

It is that time of year again. The IRS Form 5500 for calendar year retirement and welfare plans is due to be filed by July 31. Here are some reminders and related developments you might need to know.

Source: Hawleytroxell.com, June 2022

The IRS's New Pre-Examination Pilot Program: Key Features and Questions

Earlier this month, the IRS announced a new pilot program under which retirement plan sponsors will be given a 90-day notice that their plan has been selected for an examination which they may be able to largely avoid by taking certain steps. This article discusses the key features of the pilot program, along with some questions and considerations.

Source: Groom.com, June 2022

Homework and Deadlines Matter: New IRS Pre-Audit Compliance Program for Retirement Plans

As part of a new program, the IRS will send a letter notifying a plan sponsor that its retirement plan has been selected for an upcoming examination and give the plan sponsor 90-days to identify and voluntarily correct any compliance issues that may be self-corrected. Failure to respond by the 90-day deadline will result in an examination. Retirement plan sponsors who receive a pre-examination notice should immediately begin working with their lawyers and other advisors to determine the best way to respond to the IRS notice.

Source: Employeebenefitsblog.com, June 2022

Agencies Release Final Form 5500 Revisions for MEP Reporting

On May 23, 2022, the IRS, DOL, and the PBGC released final regulations that make revisions to Forms 5500 and 5500-SF applicable to annual reports for retirement plans (including 401k plans) filed for plan years beginning on or after January 1, 2022.

Source: Compliancedashboard.net, June 2022

The Roth 401k

Employers can offer 401k plan participants the opportunity to make Roth 401k contributions. If you're lucky enough to work for an employer that offers this option, Roth contributions could play an important role in maximizing your retirement income.

Source: Captrust.com, June 2022

2023 IRS Limits Forecast Update - May

This is an update to the Milliman 2023 IRS limits forecast using the U.S. Bureau of Labor Statistics report published June 10, 2022. With only four months remaining for the federal fiscal year 2022, our forecast of the 2023 IRS limits could set a record one-year increase, both in dollars and percentage, even if inflation transitions to 3.0% annually (0.25% per month) for June through September 2022.

Source: Milliman.com, June 2022*

401k Compliance Check: Have You Recently Checked Your 401k Plan's Definition of Compensation

401k plan sponsors are required to include a legally compliant definition of compensation within the plan document. Unfortunately, compensation-related failures are common occurrences in connection with 401k plan administration. These failures may result in time-consuming and expensive corrections being required through the IRS's Employee Plans Compliance Resolution System to maintain the 401k plan's tax-qualified status.

Source: Foley.com, June 2022

New IRS Pre-Audit Compliance Program for Retirement Plans

Retirement plan sponsors should be aware of a new IRS pilot program, which permits plan sponsors to conduct a pre-examination "check-up" of retirement plan administration before the IRS begins a plan examination. As part of the program, the IRS will send a letter notifying a plan sponsor that its retirement plan has been selected for an upcoming examination and give the plan sponsor 90 days to identify and voluntarily correct any compliance issues that may be self-corrected. Failure to respond by the 90-day deadline will result in an examination.

Source: Employeebenefitsblog.com, June 2022

Access to CITs Creates Opportunity for 403b Plans

The topic of making CITs permissible investment vehicles in 403b plans has been covered extensively over the past several years. This 5-page paper focuses the dialogue on what will be the most important innovations and their potential outcomes should 403b plans be allowed to use CITs, namely: potentially lower costs and opportunities for greater administrative efficiency, flexibility for more investment innovation, and more choice in short-term investing options.

Source: Dciia.org, June 2022

RISE and SHINE: The Senate's Initial Response to House-Passed SECURE 2.0

On March 29, 2022, the House of Representatives passed the Securing a Strong Retirement Act of 2022. SECURE 2.0 is a comprehensive bill designed to increase access to retirement savings and includes a variety of provisions that would affect employer-provided retirement plans. On June 14, 2022, the Senate Health, Education, Labor, and Pensions Committee unanimously approved its version of SECURE 2.0, the Retirement Improvement and Savings Enhancement to Supplement Health Investments for the Nest Egg Act.

Source: Benefitslawadvisor.com, June 2022

Starter 401k Bill Introduced in the U.S. House

Bipartisan legislation that would make it easier for small businesses to offer retirement plans and that has the backing of the American Retirement Association has been introduced in the House of Representatives. Reps. Linda Sanchez and Darin LaHood -- both of whom are members of the tax-writing House Ways & Means Committee -- introduced the Starter-K Act on June 16.

Source: Asppa.org, June 2022

Bipartisan Bill Backs Auto-Portability

Bipartisan legislation introduced in the U.S. Senate on June 15 seeks to stem retirement plan leakage, backing auto-portability and a tax credit for adopting employers.

Source: Napa-net.org, June 2022

How to Prepare Your Clients for 401k Statement Shock

Most investors will be in no rush to tear open the envelopes when their monthly retirement account statements arrive in early July. The S&P 500 has dropped 9% from the May 31 close through the market’s big sell-off on June 13th, while the Nasdaq has sunk just over 10%. With 401k savers likely to be getting some unpleasant news in their next statement, their financial advisers might want to reach out in advance.

Source: Investmentnews.com, June 2022

A Kinder, Gentler IRS Employee Plans Office? Introducing the New Pre-Audit Compliance Pilot Program

The IRS says its goal is to reduce taxpayer burden and reduce the amount of time spent on retirement plan examinations. The pilot program can make the audit process more efficient, and perhaps less expensive, but it certainly won't a plan sponsor avoid the hard work of audit-proofing its plan. If plan sponsors receive a pilot program letter, they should make sure their plan is in order before responding.

Source: Cohenbuckmann.com, June 2022

The Problem of Access to Retirement Plans in Small Companies

Thoughts on small companies providing retirement plans. First, there are many important issues in the world when it comes to retirement security for employees, but the lack of access to retirement plans in many smaller businesses is as important as any of them. Second, one barrier to small companies providing retirement plans is the difficulty for small businesses in accessing quality third-party administrators and other resources.

Source: Bostonerisalaw.com, June 2022

Yellen Weighs in on Crypto and 401ks

U.S. Treasury Secretary Janet Yellen has weighed in on the notion of including cryptocurrency in retirement plans. Bloomberg Law reports that, in response to a question about Fidelity's April 26 announcement that it would provide a crypto option on its retirement plan platform, Yellen responded: "It's not something that I would recommend to most people who are saving for their retirement. To me it's a very risky investment."

Source: Asppa.org, June 2022

Senate HELP Committee Approves RISE & SHINE Act

Legislation that builds off the House-passed SECURE Act 2.0 bill and includes provisions advanced by the American Retirement Association has taken an important step in the Senate. The Senate Health, Education, Labor and Pensions (HELP) Committee approved the legislation by a unanimous voice vote on June 14.

Source: Asppa.org, June 2022

Retirement Plan Record Retention: Keeping Your Data Clean

Maintaining a well-organized archive of your participants' retirement records sounds easy in theory, but can be difficult in the real world. It's easy to grow lax about keeping up with the deluge of data for which you're responsible, but careless record retention will always come back to haunt you. Whether it's the unnecessary and laborious administrative process needed to perform daily functions, a legal action, or a government audit, inaccurate data can cost you plenty.

Source: Segalco.com, June 2022

SECURE 2.0 Surprise: The ROTH Catch-Up Contribution and ROTH Employer Match Proposal

SECURE 2.0 would reclassify all catch-up contributions as Roth-only in 2024, increase catch-up contributions to $10,000 only for ages 62 to 64, optionally treat employer matching contributions as Roth contributions, and offer a new safe harbor correction for auto-enrollment plans' unintentional administrative flaws.

Source: Milliman.com, June 2022

How to Choose Your Retirement Plan Provider

Selecting competent plan providers is part of your fiduciary duty as a plan sponsor. So selecting a provider must be through an actual process where you review potential providers in each area (administration, financial advisory, ERISA attorney, and auditors) before selecting one and documenting the entire method of selection. This article is about what you should consider in selecting a retirement plan provider.

Source: Jdsupra.com, June 2022

Sixth Circuit Rules Derivative ERISA Claims Not Arbitrable Without Plan Consent

On April 22, 2022, the U.S. Court of Appeals for the Sixth Circuit issued its decision in Hawkins v. Cintas Corporation holding that ERISA claims for breach of fiduciary duty belong to the plan. As a result, plan members alleging harm to their individual retirement accounts in defined contribution plans, cannot be forced to arbitrate their claims without the plan's consent.

Source: Hallbenefitslaw.com, June 2022

Brokerage Window Fiduciary Duties in Light of DOL Cryptocurrency Guidance

The DOL recently issued a warning about its intention to launch an investigative program into those plans that offer cryptocurrency and related products as investment options. The DOL's investigative program would include those products offered through brokerage windows, implying that plan fiduciaries might be responsible for those investments. Therefore, plan fiduciaries need to carefully consider their potential responsibilities concerning brokerage windows, both concerning cryptocurrency and investments.

Source: Hallbenefitslaw.com, June 2022

Universal Health Loses Appeal to Undo 60,000-Person Class in Excessive Fee Case

The Third Circuit Court of Appeals recently held that as the plan fiduciary of Universal's defined contribution plan, Universal Health Services Inc. and its plan investment committee must face a class-action claiming its retirement plan included imprudent investment options charging excessive fees to more than 60,000 participants, even though the three named plaintiffs only invested in seven of the 37 plan investment options challenged by their lawsuit.

Source: Erisalitigationadvisor.com, June 2022

Shareholder Climate Activism Comes for 401k Plans: Lessons Learned From Amazon and Comcast

The SEC permitted the shareholders of Amazon and Comcast to vote on proposals to evaluate the alignment of the companies' 401k plans with the companies' climate action goals, finding that these proposals transcend ordinary business matters. Although the shareholders of both Amazon and Comcast have voted against the shareholder proposals, there are important lessons to be learned from the SEC's decision allowing the proposals to proceed.

Source: Debevoise.com, June 2022

More Pushback Against CAR 2022-01: ForUsAll's Suit Against the DOL

ForUsAll continues to maintain that cryptocurrency could be an appropriate plan investment to provide account diversification and considers its business targeted by the DOL guidance. On June 2, ForUsAll filed suit in the District of Columbia to invalidate the CAR because it was issued in violation of the Administrative Procedure Act. This is the same statute that was used by the Fifth Circuit Court of Appeals to invalidate the DOL's Fiduciary Rule.

Source: Cohenbuckmann.com, June 2022

How to Prepare for the IRS's New 90-Day Pre-Examination Compliance Pilot Audit Process

Carlton Fields tax attorney Lowell Walters provides an overview of the IRS's new 90-Day Pre-Examination Compliance Pilot audit process and explains what you can do to prepare for it.

Source: Carltonfields.com, June 2022

Universal Availability Audit Steps

Universal Availability violations often result in material adjustments to the financial statements due to the size of the corrective contributions that must be funded by the employer when eligible employees are improperly excluded from participation. For that reason, auditors do need to see census and payroll data for all employees who have been excluded from plan participation, as well as annual notices of the opportunity to defer for those who are eligible but not contributing.

Source: Belfint.com, June 2022

Don't Be Afraid of DOL, IRS Audits

During the second day of the 2022 PLANSPONSOR National Conference in Orlando, a duo of expert panelists tackled the challenging topic of regulatory audits, explaining what to expect in an audit and how to effectively prepare for that inevitable knock on the door. Assuming no malfeasance or criminal activity is going on, the process of a DOL or IRS audit does not have to be unpleasant, even if minor issues are discovered.

Source: Planadviser.com, June 2022*

401(k)ology: Know Your Participant Notices

If you are a service provider, plan sponsor, or participant in a retirement plan, then you are keenly aware of the numerous participant communications required to be provided regularly. Unless and until the disclosure requirements change, employers should know which notices are required for your plan type, when must the notices be provided, who must receive the notice, how the notice can be distributed, and what happens if the notice was not provided.

Source: Newfront.com, June 2022

The SECURE Act's DC Plan Lifetime Income Disclosure Requirements

The deadline for complying with the defined contribution plan lifetime income disclosure requirement is quickly approaching. Now is the opportunity for plan sponsors and retirement committees to reacquaint themselves with the requirements and prepare for how to proactively use the changes to promote plan participation, education, and conversation regarding their retirement plans.

Source: Milliman.com, June 2022

401k Plans Are Failing Middle-Class Americans

A new report finds that the tax breaks designed to encourage Americans' retirement savings disproportionately benefit high-income households and do little to assist middle-class families. More than half of the tax breaks for defined-contribution plans, such as 401ks and individual retirement accounts, go to those whose income puts them in the top 10%, according to new research from the National Institute on Retirement Security, a nonprofit, nonpartisan organization established to contribute to informed policymaking.

Source: Investmentnews.com, June 2022

Cybersecurity and Retirement Plans

This learning deck will help you understand the latest guidance on cybersecurity for qualified retirement plans, adapt the tips for hiring a plan service provider, know cybersecurity program best practices for qualified retirement plans, and recognize the role of the financial advisor in cybersecurity.

Source: Fi360.com, June 2022

May Sees a Change of Pace in 401k Trading Activity

Following a month when there were no above-normal trading days despite high levels of market volatility, 401k traders seemingly decided to change course in May. According to Alight's May 2022 401k Index, 12 of 21 days in May had above-normal trading activity, but no day exceeded three times the daily average. In comparison, there were 16 above-normal days in the first four months of the year.

Source: Asppa.org, June 2022

IRS Announces New Pre-Audit Compliance Pilot Program

The IRS announced via newsletter a new pre-audit compliance opportunity for employer-sponsored retirement plans selected for audit beginning immediately. The program as described in the announcement provides some powerful incentives to encourage plan sponsors to voluntarily comply in the 90 days following receipt of the initial letter.

Source: Wagnerlawgroup.com, June 2022

Lack of Standing Trips Up (Another) Excessive Fee Suit

A federal judge has dismissed an excessive fee suit involving a $7.8 billion 401k plan, accepting the argument that the participant-plaintiff wasn't even invested in the funds in question.

Source: Napa-net.org, June 2022

Podcast: New Role(s) With Rollovers

In this podcast Nevin Adams & Fred Reish discuss the new parameters, how they're applied, the conditions that might (and might not) be sufficient to warrant rolling money out of a qualified plan and into an IRA, and the new requirement that the justification as to why that move is in the interests of the plan participant.

Source: Napa-net.org, June 2022

Senate HELP to Kick Off SECURE 2.0 Push

The Senate Health, Education, Labor, and Pensions (HELP) Committee is set to move forward on legislation intended to build off the House-passed SECURE Act 2.0. After formally introducing the "Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg" (RISE & SHINE) Act on June 7, the committee announced that it will hold a markup on Tuesday, June 14 to consider the legislation.

Source: Napa-net.org, June 2022

Taking 401k Plan Design to the Next Level

In a testament to the willingness of plan sponsors to implement smart plan design, retirement plan participants broke new savings records in 2021, yet there is still more to be done, according to Vanguard's newest edition of How America Saves.

Source: Napa-net.org, June 2022

State-Mandated Retirement Plans: Coming to a State Near You?

With approximately 30% of all private-sector employees not having access to a workplace retirement plan, some states and some bigger cities have decided that our current system, which lets employers decide whether they want to adopt a retirement plan for their employees, is not working well. In response, at least 12 states and three cities have developed some form of private employer workplace retirement plan, with some of these plans mandatory for certain private employers.

Source: Frostbrowntodd.com, June 2022

New IRS Compliance Program Should Be on Every Plan Sponsor's Radar

Every employer that receives the new 90-day notice should immediately engage in a comprehensive review of its retirement plan with its third-party administrator and legal counsel. Correction of any plan document defects or operational failures discovered should be made a top priority to ensure timely compliance and response to the IRS.

Source: Foxrothschild.com, June 2022

Why Minority Groups Have Less Access to Workplace Retirement Savings Plans

People of color are a lot more likely than white Americans to lack access to a pension, IRA, or 401k at their jobs, according to a study by John Sabelhaus of the Brookings Institution. Nationally, two-thirds of Hispanic workers (63.6%) are without a work-based retirement plan, as are more than half (53.2%) of Black employees. Those percentages are substantially higher than those of Asian employees (45.2%) and white workers (41.6%) whose employers haven't set up payroll-based retirement savings accounts for their employees.

Source: Financial-planning.com, June 2022

DOL Proposes Tougher Prohibited Transaction Exemption Procedures

On March 15, 2022, the DOL published proposed amendments to its regulations specifying the procedures for applying for class and individual exemptions and the processing of such applications. If finalized as recently proposed, these changes would impose significant new requirements on applicants and other actors (such as appraisers and independent fiduciaries) who are involved in transactions that require an exemption.

Source: Wagnerlawgroup.com, June 2022

IRS Announces New Pilot Program for Retirement Plan Audits

The IRS announced a new pre-examination compliance pilot program beginning in June 2022. Under the pilot program, the IRS will notify a plan sponsor by letter that its retirement plan has been selected for examination and will provide the plan sponsor with 90 days to review its retirement plan documents and plan operations and to correct any issues that may be found. This article provides background and describes the pilot program in more detail.

Source: Verrill-law.com, June 2022

How America Saves 2022

Using data from How America Saves, Vanguard's annual comprehensive look at Americans' retirement saving habits, Vanguard helps plan sponsors and consultants take action to optimize plan design to better serve employees through their entire investing journey.

Source: Vanguard.com, June 2022

Anonymous Correction Guidance Still Available Under EPCRS

New EPCRS procedures have replaced the anonymous submission under VCP with a Pre-Submission Conference. The plan sponsor's representative can submit a VCP Pre-submission Conference request with the IRS. Unlike the anonymous VCP submission, there is no fee for a Pre-Submission Conference.

Source: Graydon.law, June 2022

IRS Unveils New Pre-Examination Compliance Pilot Program for Retirement Plans

The IRS Employee Plans division announced a new pilot program whereby it will notify retirement plan sponsors 90 days in advance that their plan has been selected for an upcoming examination. The pilot program has three key features. Although it is only a pilot, this pre-examination pilot program marks a potentially helpful new tool for plan sponsors to ensure tax-qualification compliance for retirement plans.

Source: Erisapracticecenter.com, June 2022

2021 Defined Contribution Consultant Research Study

This study shares insight on retirement trends from our latest survey of the nation's 32 leading consulting and advisory firms that provide services to more than 33,000 plan sponsor clients and report nearly $7.2T of assets under advisement. The study was conducted at the end of 2021 during the continued coronavirus pandemic. Recent years have presented unprecedented challenges, and the study finds the consulting and advisory community evolving their businesses to address both obstacles and new opportunities.

Source: Troweprice.com, June 2022*

Retirement Plan Provider Sues DOL in 401k Cryptocurrency Row

A retirement plan provider that championed cryptocurrency for 401k plans has brought a lawsuit against the Department of Labor for dismissing cryptocurrency as a reasonable investment for retirement plans.

Source: Plansponsor.com, June 2022

Managed Accounts in 401k Plans: Their Value and Their Dangers

A "managed account" is a discretionary portfolio management service that makes investment decisions for individual participants within the confines of a 401k plan and its fund options. Managed accounts are in concept a good thing. However, in reality, managed accounts raise potential pitfalls for plan sponsors.

Source: Dorseyerisa.com, June 2022

401ks With Bitcoin Should Expect Lawsuits

Bitcoin in 401ks would test the prudence standard of the Employee Retirement Income Security Act, a lawyer said. Plan sponsors that allow cryptocurrency in their 401ks could be exposing themselves to a "very serious risk of a fiduciary breach."

Source: Wagnerlawgroup.com, June 2022

Missing 401k Contributions Must Be Restored, Court Rules

A federal court in Maryland has entered a consent judgment that requires a Baltimore logistics, engineering, and management support company and its owner to restore more than $150,000 in missing contributions and interest to the firm's 401k plan. The consent judgment is the result of an investigation by the DOL which found that Bicallis LLC and its owner Bryan Hill did not forward employees' pay deductions for plan contributions and failed to collect matching and safe harbor contributions the company owed the plan from October 2017 through December 2019.

Source: Plansponsor.com, June 2022

Suit: DOL Overstepped Its Authority in Warning Against Cryptocurrency in 401ks

Retirement plan provider ForUsAll alleged in a lawsuit Thursday that the federal government overstepped its authority in cautioning employers against offering cryptocurrency investment options. The suit asserts that the DOL's warning was an "arbitrary and capricious attempt to restrict the use of cryptocurrency in defined contribution retirement plans, in excess of its authority under the Employee Retirement Income Security Act."

Source: Hrdive.com, June 2022

Wells Fargo Settles ERISA Breach of Fiduciary Duty Suit for $32.5M

After a Minnesota federal district court judge denied its motion to dismiss a proposed ERISA class-action suit in May, Wells Fargo & Co. has agreed to settle the case by paying $32.5 million. The employees claimed that Wells Fargo had violated ERISA by mismanaging their 401k plan. More specifically, the workers alleged that Wells Fargo had breached its fiduciary duty by offering expensive proprietary investment options despite better performing and lower-cost options.

Source: Hallbenefitslaw.com, June 2022

IRS Provides Guidance for Late Pre-Approved Plan Restatements

This IRS clarification allowing correction of these late adoptions without requiring a corresponding VCP filing is very helpful. While the IRS did not specifically address pre-approved defined contribution plans, for which the deadline to adopt a restatement for the current cycle is July 31, 2022, it is reasonable to conclude that this guidance will apply to those plans as well.

Source: Groom.com, June 2022

What's Next for QDIA?

More than 15 years after the passage of the Pension Protection Act of 2006, Qualified Default Investment Alternatives and target-date funds are now a core offering for many plan sponsors. While target-date innovation may have slowed down in recent years, interesting things are happening elsewhere in the world of QDIAs.

Source: Captrust.com, June 2022

Canadian Plan Sponsors Uncertain About Balancing ESG Factors, Fiduciary Responsibilities

Defined benefit pension plans and defined contribution pension plans are uncertain about how to incorporate environmental, social, and governance issues into their investment processes in a way that's consistent with fiduciary duties, according to a new white paper from the Association of Canadian Pension Management.

Source: Benefitscanada.com, June 2022

Self-Directed 401k Balances Down in Q1: Schwab Report

Reflecting recent market volatility, average self-directed brokerage account balances at Charles Schwab dropped in the first three months of 2022, down 6.25% from the end of 2021 and down 0.51% year over year.

Source: 401kspecialistmag.com, June 2022

Yet Another State IRA Program Set to Debut Mid-2023

Virginia's new state-facilitated private retirement program, called RetirePath Virginia, will open by July 1, 2023, according to a June 2 statement from Virginia529, charged with establishing and overseeing the program by state legislation. The program has selected Vestwell as the program administrator and BlackRock as the investment manager.

Source: 401kspecialistmag.com, June 2022

A Wait-and-See Approach for 401k Plan Fiduciaries Interested in Cryptocurrency Options

Many plan fiduciaries may not anticipate including cryptocurrency options in their participant-directed account plans now or in the future. For those fiduciaries who might consider them, the Department of Labor's Compliance Release combined with initiatives supported by the Executive Order strongly counsels a wait-and-see approach today.

Source: Verrill-law.com, June 2022

How to Communicate With Your Plan Participants Right Now

With ongoing market volatility and increasing chatter about a potential bear market, some retirement savers may be feeling more anxious about their investments than they have in the recent past. For plan sponsors, the recent economic turmoil is an opportunity to connect with plan participants to educate them on the current markets and the best moves for their financial security. Experts say that using in-person and virtual one-on-one consultations and communicating across different media, including text messaging and email, can reach the broadest swath of participants.

Source: Plansponsor.com, June 2022

How Retirement Is Changing as We Live Longer

A new study by Edward Jones and Age Wave, "Longevity and the New Journey of Retirement," examines what it means to experience well-being and thrive in retirement, a journey that is not one-size-fits-all, and instead has many possible paths and variations. The study of more than 11,000 U.S. adults found that despite Americans' worries about health care and long-term care costs in retirement, they still desire to live longer, and nearly seven in 10 Americans (69%) want to live to age 100.

Source: Planadviser.com, June 2022

How Plan Sponsors Feel About Financial Advisers

In its new survey, "The Value of a Financial Advisor," Morgan Stanley examines how plan sponsors feel about financial advisers and how advisers affect employee outcomes. For plan sponsors, having dedicated financial advisers to help with investment oversight brings added peace of mind, a survey says.

Source: Planadviser.com, June 2022

Arbitration of ERISA Claims Under the Microscope. Where are the Courts and Congress Headed?

Due to the lack of Supreme Court guidance on these issues, it is still not clear the extent to which particular arbitration provisions may apply to ERISA fiduciary breach claims. However, several Circuit Courts of Appeal have now weighed in and a bill called the Employee and Retiree Access to Justice Act has been introduced in the House and Senate (H.R. 7740 and S. 4219) with the express purpose of making predispute and nonconsensual post-dispute arbitration clauses unenforceable. What is a plan sponsor favoring arbitration to do?

Source: Cohenbuckmann.com, June 2022

403b Universal Availability Rules

The 403b plan regulations realized the benefits of inclusion a long time ago, providing that if any employee can elect to make elective deferrals, then all the plan sponsor's employees must be allowed to defer, with very limited exceptions. For this universal availability requirement of the Internal Revenue Code to be satisfied, ensuring that employees have an effective opportunity to make elective deferrals at least once a year is imperative. Having a plan and not telling anyone or telling only the "cool kids" is not enough.

Source: Belfint.com, June 2022

How to Handle the DOL's New IRA Rollover Rule

The rule requires written disclosures to your prospects and clients that outline the reason the rollover recommendation is in their best interest. The author poled the advisor community and received 25 detailed responses. He says that "at first it was bewildering because none of the disclosure forms or checklists looked like any of the others. But when I looked closer, there were some commonalities that I fit into a composite disclosure document that the profession can rally around. At the very least, it shows you the thinking of people who have put a lot of thought into this issue. I can offer an even dozen of observations from the responses."

Source: Advisorperspectives.com, June 2022

DENSO International America Faces Multi-Pronged ERISA Suit

Plaintiffs have filed a new Employee Retirement Income Security Act lawsuit in the U.S. District Court for the Eastern District of Michigan against DENSO International America Inc., the U.S. division of the global manufacturer of automotive components and technologies. The complaint includes not just allegations of excessive fees, but also a charge that fiduciaries offered an underperforming stable value fund.

Source: Planadviser.com, May 2022*

Sixth Circuit Finds Participants Don't Have to Arbitrate Excessive Fee Claims

A DC plan sponsor can't require participants to resolve their ERISA excessive fee claims through binding arbitration, despite arbitration provisions in the participants' employment agreements, the 6th US Circuit Court of Appeals recently ruled. The court found that the participants brought these fiduciary breach claims not as individuals but as representatives of the plan, which didn't include an arbitration provision and hadn't otherwise agreed to arbitrate.

Source: Mercer.com, May 2022

Understanding the Impact of Russian Sanctions on Retirement Plans

As part of their oversight responsibilities over plan investments, retirement plan fiduciaries should discuss the impact of sanctions on the plan and its investment portfolio with their service providers. Institutional service providers have likely already considered this issue and taken appropriate steps to ensure compliance with sanctions, but plan fiduciaries should understand these measures as part of a prudent monitoring process. Plan fiduciaries may consider asking the questions noted here.

Source: Kilpatricktownsend.com, May 2022

2022 Investment Company Fact Book

This year's ICI Fact Book offers a wealth of information on our industry, with nearly 70 data tables providing a long history of the number and types of mutual funds, ETFs, closed-end funds, and unit investment trusts; their assets and flows; and a wide array of other statistics, many of which are broken down by the fund's investment objective and other fund categories. You will also find detailed discussions of recent industry trends, both in the United States and around the globe.

Source: Ici.org, May 2022

Retirement Plan Correction Solution: The Absentee Fiduciary

Eleanor has operated her fledgling business, The Good Place, for about seven years. She established a 401k plan somewhere around year two at the recommendation of her CPA. The CPA set up the plan for her with a bundled service provider. Whatever the CPA put on the paperwork (without ever discussing it with Eleanor), was how the Plan was established and how it remains. Relying on her payroll manager to just keep the contributions flowing, Eleanor was very pleased with herself. But, the Good Place gets randomly chosen by the DOL for a fun-filled investigation. In reading over the DOL letter from the investigator, Eleanor is baffled by half of the requested items and calls her CPA.

Source: Ferenczylaw.com, May 2022

Legislation to Strengthen Retirement and Emergency Savings Introduced

The flurry of retirement and savings-related legislation continued Thursday with the release of a draft bill designed to "strengthen people's emergency savings and retirement security." Senate Health, Education, Labor, and Pensions Committee Chair Senator Patty Murray and Ranking Member Senator Richard Burr released the draft of the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg (RISE & SHINE) Act.

Source: 401kspecialistmag.com, May 2022

IRS Extends Relief From Physical Presence Requirement

The IRS released Notice 2022-27, granting a six-month extension to the temporary relief from the "physical presence requirement" for tax-qualified retirement plans, including 401k plans, that was previously announced in June 2021. The Notice extends the relief -- originally scheduled to expire on June 30, 2022 -- by an additional six months, through December 31, 2022.

Source: Compliancedashboard.net, May 2022

Study Finds Plan Advisors Integral to Retirement Plan Participation and Outcomes

Morgan Stanley released new research from its inaugural workplace retirement study that shows plan sponsors see a positive impact and value in having a plan advisor oversee their workplace retirement plan to boost retirement plan participation and outcomes.

Source: Businesswire.com, May 2022

401k Loan Protection Helps Address Leakage. How it Works

Retirement plan leakage has been a pressing issue for policymakers and practitioners for several years. A report issued to the Senate Special Committee on Aging by the GAO in 2021 showed plan participants ages 25 to 55 withdrew $9.8 billion from retirement plans without rolling the account over into another qualified plan or individual retirement account. However, the most significant element of this leakage, by far arises from plan loans that default upon the termination of the participant's employment.

Source: Businessofbenefits.com, May 2022

IRS Addresses Impact of Missing a Pre-Approved Plan Restatement Deadline

The IRS in a May 23 edition of Employee Plan News provides a comprehensive discussion of the impact of missing a deadline for restating a pre-approved 401(a) or 403(b) plan and how such a situation can be handled. To maintain a plan's status as a pre-approved plan and retain uninterrupted reliance on its opinion letter, an employer must adopt each applicable cycle's restatement by the due date for that cycle, the IRS reminds.

Source: Asppa.org, May 2022

New Retirement Bill Amending ERISA Introduced in Congress

Plan sponsors could be making more trips to court for retirement plan fiduciary breach claims instead of settling through arbitration, under a proposed bill. Representative Mark DeSaulnier and Senator Tina Smith have introduced the Employee and Retiree Access to Justice Act, which seeks to prohibit arbitration of claims challenging the administration and fiduciary management of benefit plans regulated under the ERISA.

Source: Plansponsor.com, May 2022

Is the Traditional Fiduciary Insurance Model at Risk?

One legal professional at a fiduciary insurance firm argues that the "indiscriminate nature" of recent ERISA lawsuit filings could eventually culminate in a crisis for the retirement plan industry's current approach to risk management and fiduciary insurance.

Source: Planadviser.com, May 2022

Understanding the New Defined Contribution Landscape

In its 16th year, the PIMCO US Defined Contribution Consulting Study seeks to help consultants, advisors, and plan sponsors understand the breadth of views and consulting services available within the defined contribution marketplace.

Source: Pimco.com, May 2022

401k Plans Want More Personalized Retirement Solutions

Personalized solutions reportedly are becoming more attractive for plan sponsors who are encouraging those saving for retirement to remain with their 401k provider after they leave the workforce. That's according to PIMCO's 16th Annual Defined Contribution Consulting Study, which surveyed 36 consultants and advisory firms that serve more than 37,000 clients with $6.9 trillion in total assets in DC plans.

Source: Napa-net.org, May 2022

Regulatory Monitor: Department of Labor Update

In this article, Groom Principal David Kaleda explains the significance and contents of the "Supplemental Statement on Private Equity in Defined Contribution Plan Designated Investment Alternatives" issued by the DOL in December, including the Department's position concerning such investment alternatives, and its emphasis on several important fiduciary principles discussed in the Information Letter.

Source: Groom.com, May 2022

Final Form 5500 Revisions Guidance Issued

This guidance focuses primarily on defined benefit reporting changes affecting Schedule MB Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information, Schedule SB Single-Employer Defined Benefit Plan Actuarial Information, and Schedule R Retirement Plan Information. Additionally, the final revisions add plan characteristic codes reported on Form 5500 and Form 5500-SF by sponsors of multiple employer plans, to indicate the type of MEP arrangement.

Source: Futureplan.com, May 2022

District Court Rules in Favor of 401k Plan Recordkeeper in Lawsuit Over Foreign Tax Credits

In a case involving novel issues around foreign tax credits in the ERISA setting, a federal district court held that a 401k plan's recordkeeper did not have an obligation under the ERISA to provide plans with rebates for the foreign tax credits that the recordkeeper received.

Source: Westlaw.com, May 2022*

2023 IRS Limits Forecast

Inflation in the 12 months ending April 30, 2022, was 8.3%. With only five months remaining for FFY 2022, the 2023 IRS retirement plan limits could show the highest one-year increase, both in dollars and percentage, even if inflation transitions to a more reasonable 3.0% annually for the final five months.

Source: Milliman.com, May 2022

Congress Considers Banning Discretionary Clauses in ERISA Plans

On May 12, 2022, the "Employee and Retiree Access to Justice Act" was introduced in the House of Representatives by Mark DeSaulnier. Senator Tina Smith introduced a companion bill in the Senate. The bill seeks to ban arbitration and discretionary clauses in employer-sponsored benefit plans governed by the ERISA. The bill seek to prohibit benefit plans from requiring arbitration of claims challenging the administration and fiduciary management of the plan, thereby forcing plan disputes into the judicial system.

Source: Littler.com, May 2022

DOL Continues to Have Qualms About Fidelity's Crypto 401k Product

A Labor Department official said he still has qualms about Fidelity Investments' cryptocurrency product for retirement savings following talks with the company. Ali Khawar, DOL acting assistant secretary and head of the Employee Benefits Security Administration, said he's spoken to Fidelity officials about the Digital Assets Account the company announced last month. The product will allow retirement plan participants to allocate a portion of their assets to Bitcoin through an option on their employer's 401k investment menu.

Source: Investmentnews.com, May 2022

Revisions to Form 5500 Series for 2022 Reporting Released

The DOL, Treasury, and Pension Benefit Guaranty Corporation on May 20th released the final revisions to the forms and instructions for the Form 5500 series to be used for reporting concerning plan years beginning on or after Jan. 1, 2022. They also indicated, however, that the review of additional considerations and revisions will continue.

Source: Asppa.org, May 2022

Federal District Courts Disagree on Compelling Individual Arbitration of ERISA Class Action

In recent years, it has become more common for ERISA governed benefit plans to include arbitration and class action waiver provisions in their plan documents. These provisions have engendered litigation, with plan participants and beneficiaries challenging plan fiduciaries' ability to enforce these terms, which require the participants and beneficiaries to arbitrate their claims individually. Federal courts have not responded uniformly to these challenges.

Source: Americanbar.org, May 2022

IRS Again Extends Relief From Physical Presence Requirement for Witnessing Electronic Signatures

The IRS has extended, through the end of 2022, its temporary relief from the requirement that certain signatures be witnessed in the physical presence of a plan representative or notary public. According to the IRS, a further extension of the relief beyond the end of 2022 is not expected to be necessary.

Source: Thomsonreuters.com, May 2022

How Do Employee Benefit Plan Fiduciaries Get That Job?

If you aspire for an appointment to serve on your employer's committee that oversees its retirement, pension, and health plans, you are in a select company. Surveys reveal that few managers and executives who serve on these committees sought their appointment. But let's say that you are appropriately ambitious and would enjoy cracking the circle of an elite group of managers by gaining assignment to your enterprise's fiduciary committee. What do you need to know?

Source: Rolandcriss.com, May 2022

Why Small Business Owners Often Resist 401ks

At a time when many companies are boosting 401k benefits to attract and retain employees in a tight labor market, 74% of small businesses still do not offer a retirement plan for their employees, according to survey data published by ShareBuilder 401k. According to the survey, many small business owners mistakenly believe their business is simply too small and that 401ks are too costly.

Source: Planadviser.com, May 2022

Schlichter Expands flexPath Targets

The law firm of Schlichter Bogard & Denton has a new target in an excessive fee suit, the plan's investment advisor. More specifically, plaintiffs -- who just two months ago filed suit against the plan fiduciaries of the Molina Salary Savings Plan -- have now filed suit on behalf of the Plan against Defendant NFP Retirement, Inc. for breach of fiduciary duties under ERISA.

Source: Napa-net.org, May 2022

Keeping 401k Participants Out of the Lost and Found Box

This article focuses on the issue of how to handle a situation where the 401k plan is unable to reach a plan participant, i.e., "missing participants."

Source: Foley.com, May 2022

Delivering Robust Retirement Communication and Education on a Budget

Plan sponsors can get creative to deliver effective, low-cost retirement communication and education to plan participants. Minding the budget, and aided by trusted plan sponsor partners, employers can take advantage of interesting ideas to communicate with and educate participants for maximum impact.

Source: Plansponsor.com, May 2022

Bill Would Further Expand CalSavers

A bill is before the California Senate that would expand CalSavers, the state-run retirement plan that provides coverage to those whose employers for not, to cover almost all employers in the Golden State. SB 1126, introduced by Sen. Dave Cortese, would expand the definition of "eligible employer" for purposes of the CalSavers Retirement Savings Trust Act from a person or entity that has at least five eligible employees to a person or entity that has at least one eligible employee and that satisfies the requirements to establish or participate in a payroll deposit retirement savings arrangement.

Source: Ntsa-net.org, May 2022

Participant Standing Challenged in Excessive Fee Suit

According to the defendants here (Nohara v. Prevea Clinic Inc.), Nohara didn't have that legal right to bring suit because "she could not have sustained an injury-in-fact that is anything but de minimis." Prevea explained that she only participated in the plan for two weeks at the time she brought suit and "…this action results in alleged damages of, at most, $0.22 and that federal jurisdiction is not available for such de minimis claims."

Source: Napa-net.org, May 2022

Common 401k Plan Mistakes: Running the Plan Based on Your Employee Handbook

Employee handbooks are great for communicating an employer's basic policies and procedures. However, a retirement plan sponsor will always want to check the actual plan document to confirm proper plan operations. When it comes to retirement plans or benefits in general, an employee handbook will not get into some of the details, and this can cause issues, both minor hiccups, and major problems. Here are several situations encountered in working with retirement plans.

Source: Conradsiegel.com, May 2022

Time is Running Out to Meet the July 31, 2022 'Cycle 3' Deadline

Employers sponsoring 401k or other types of defined contribution plans "pre-approved" by the IRS should be aware that the restatement deadline is quickly approaching. The IRS requires pre-approved plans to be amended and restated every six years to incorporate recent law changes. The deadline for the current restatement cycle, "Cycle 3," is July 31, 2022. You should have received one or more notices from your current document provider. Failing to timely adopt a Cycle 3 restatement may jeopardize a plan's favorable tax status.

Source: Benefitsnotes.com, May 2022

Crypto, SDBAs, and Your 401k Plan: What Now?

Plan sponsors may see more cryptocurrency investment options available to plans in the future. The hope, of course, is the DOL will continue to evolve its guidance around this growing trend, especially as it relates to SDBAs. For now, there is much for a plan sponsor to weigh and discuss with its advisors when it comes to offering cryptocurrency investment options and determining the proper level of oversight associated with implementing or maintaining an SBDA.

Source: Benefitslawadvisor.com, May 2022

Enhancement to Savers Tax Credit is Minor

The Savers Tax Credit sounds great on paper. Low-income people get a federal tax credit for saving money for retirement. But this part of the tax code always seems to disappoint. The House recently overwhelmingly passed a bill, the Secure Act 2.0, that -- along with numerous other retirement provisions -- makes the saver's credit more generous for some low-income workers.

Source: Bc.edu, May 2022

Alight Data Finds 401k Plan Balances Hit Record Highs

A new report by Alight Solutions found that after a few years of turbulence, retirement savings are on the rise for US employees. Alight's 2022 Universe Benchmarks report revealed that the average defined contribution plan balance hit an all-time high of $144,280 at the end of 2021, up 10% from 2020. Median plan balances also increased, from $28,426 to $29,607, another record high.

Source: Alight.com, May 2022

Hawaii Approves State-Run IRA, but Minus Auto-Enrollmen

Hawaii is the latest state to approve the creation of a state-run IRA program to encourage residents to save for retirement, but unlike programs in most other states that have them, the Aloha state's program will not mandate auto-enrollment for those eligible to participate. This one decision is raising some eyebrows.

Source: 401kspecialistmag.com, May 2022

Data Breach Suit Targets Consultant

A consulting firm's data breach has triggered a second class-action lawsuit by an affected participant on behalf of a class of some 2,500,000 individuals. The suit, brought by plaintiff Greg Torrano, claims that 2,537,261 individuals signed up for benefits plans through their employers only to subsequently find out personally identifiable information, including names, birthdates, and Social Security numbers, had been stolen in a data breach.

Source: Ntsa-net.org, May 2022*

DOL Stance on Cryptocurrency in 401k Plans Becomes a Political Football

A recent release by the DOL raising concerns about plan sponsors allowing cryptocurrency investments in 401k plans has gotten the attention of both sides of the Congressional aisle as well as industry groups. Some of the reactions to the release have sought to convince the DOL to take a step back, but the DOL has indicated on several occasions that it has no intention of doing so.

Source: Natlawreview.com, May 2022

12 Steps to Take Before and During a Data Breach

Employee benefit plans are attractive targets for hackers because they contain sensitive data, including health care information. The article outlines 12 steps to take before and during a data breach to ensure the best possible outcome for your employees and benefit plan participants as well as your organization as a whole.

Source: Ifebp.org, May 2022

2022 RCS Fact Sheet: Expectations About Retirement

Many workers continue to say they are behind in their retirement preparations, including saving for retirement. Consequently, what sources of income do workers expect to receive in retirement? How do workers' expectations align with retirees' experiences?

Source: Ebri.org, May 2022

2022 RCS Fact Sheet: Retirement Confidence

One in three Americans feel very confident about their ability to have enough money to live comfortably throughout their retirement years. Workers who say debt is a problem are, not surprisingly, less confident, while those who have a retirement plan are remarkably more confident.

Source: Ebri.org, May 2022

Here's How the Senate Could Change Your 401k plan

The US Senate has retirement on the brain, and it's not because the average age of the legislative body is 64. A group of new bills that could change the way Americans save for retirement have landed on lawmakers' desks this spring. The proposals have broad, bipartisan support and a clear path forward, say experts. If Senators can reconcile their ideas into a concise package, President Biden could sign the changes into law before Congress' August recess. Here's a look at the changes under consideration.

Source: Cnn.com, May 2022

Dealing With Undocumented Workers in ERISA Plans

Dealing with such plan participation adds yet another layer of administrative difficulty and legal exposure for employers who hire employees not authorized to work in the U.S. ERISA does not exclude individuals otherwise qualifying as common law employees from plan rights and protections simply because of their immigration status. However, although the DOL has affirmed that other federal statutes, such as the FLSA, protect undocumented workers, it has conspicuously failed to formally state that ERISA does too.

Source: Benefitslawadvisor.com, May 2022

IRS Extends Temporary Relief From the Physical Presence Requirement

The IRS announced that it is extending to the end of 2022 the temporary relief from the requirement that certain participant elections be witnessed in the physical presence of a plan representative or a notary public. In Notice 2022-27 the IRS says that due to the pandemic, it is extending the temporary relief provided in Notice 2021-40 from the requirement that certain participant elections be witnessed in the physical presence of a plan representative or a notary public, the physical presence requirement.

Source: Asppa.org, May 2022

Another Circuit Court Rules on ERISA Arbitration Rules

The 6th U.S. Circuit Court of Appeals has ruled that certain types of ERISA claims, while brought by individual participants, ultimately belong to the plan as a whole, meaning individual arbitration agreements cannot as a matter of course prevent such claims from proceeding in court.

Source: Planadviser.com, May 2022

ERISA Class Action Complaint Targets O'Reilly Automotive

A new ERISA fiduciary breach lawsuit has been filed in the U.S. District Court for the Western District of Missouri, naming as defendants the O'Reilly Automotive company, its board of directors, and the committee tasked with operating the firm's 401k plan. The lawsuit closely resembles numerous others previously filed by the law firm Capozzi Adler but adds new argumentation based on a recent Supreme Court ruling.

Source: Planadviser.com, May 2022

DOL Urges 7th Circuit to Vacate Dismissal of Northwestern ERISA Case

The DOL recently sent a letter to the U.S. Court of Appeals, for the 7th Circuit, urging the court to vacate its dismissal of an ERISA class action concerning Northwestern University's 403b retirement plan. An Illinois federal district court originally dismissed the ERISA suit filed by Northwestern employee retirement plan participants for failure to state a valid claim. The 7th Circuit agreed and upheld the district court's decision. The U.S. Supreme Court then disagreed.

Source: Hallbenefitslaw.com, May 2022

The O'Reilly Automotive Excessive Fee Case is Based on False Recordkeeping Fees

The author writes, "Plaintiff law firms and their clients have the correct numbers, but continue to file misleading lawsuits... This time it is a case filed by the Capozzi Adler law firm on May 2, 2022, against O'Reilly Automotive, Inc. The lawsuit of former O'Reilly employees alleges that the recordkeeping fee was $49.55 per participant in the last year listed in the lawsuit. But that number is wrong. Plaintiffs ignored the truthful data from their participant fee disclosure that the actual recordkeeping fee was a very reasonable $31 per participant."

Source: Euclidspecialty.com, May 2022

Building a Lifetime Income Product

There are substantial efforts underway throughout the retirement market, attempting to wrap minds around the various aspects of providing lifetime income from DC plans. This includes efforts to design new programs and how to explain them to sponsors, fiduciaries, and advisers who must make the ultimate selection election between competing choices.

Source: Businessofbenefits.com, May 2022

The Saver's Credit: A Tax Credit to Promote Retirement Security

Twenty years since its establishment, the Saver's Credit has proven to be an important financial incentive for retirement savers. However, fewer than half of U.S. workers are aware of the Saver's Credit, according to a 2021 survey by Transamerica Center for Retirement Studies in collaboration with Transamerica Institute. The author shares recommendations for policymakers to enhance and expand the Saver's Credit so that more people can benefit from it and help improve their retirement security.

Source: Bloombergtax.com, May 2022

Got a Retirement Plan? Race Plays a Role

A new study takes a close look at who these people are and shows stark differences along racial lines. A large majority of Hispanic workers in the private sector -- two out of every three -- do not have access to a pension or 401k-style plan, and more than half of Black workers do not have access. Although the numbers are lower for Asians (45 percent) and whites (42 percent), they are still substantial.

Source: Bc.edu, May 2022

Fiduciary Vulnerability Takes a Hit

The legal community's persistent emphasis on fees paid by retirement plans to their service providers has set the stage for a turn in the vulnerability of the individuals who oversee retirement plans. Fiduciary liability insurers have taken note of the recent surge in lawsuits leveled against employers and their executives for allowing service providers to charge excessive fees to the retirement plans they sponsor and manage. The result is a significant increase in many employers' risk exposure.

Source: Rolandcriss.com, May 2022

Small Business Owners Still Resistant to Starting a 401k Plan: Survey

At a time when many companies are boosting 401k benefits to attract and retain employees in a tight labor market, 74 percent of small businesses are still going without any plan at all. Key findings in new research commissioned by ShareBuilder 401k show that owners believe their business is too small and that 401(k)s are too costly. The survey, that polled 500 small business owners from across the country, reveals that only 26 percent currently offer a 401k plan. Responders cited three main reasons for not starting a plan.

Source: Prnewswire.com, May 2022

Key Considerations for Committees Seeking DC Plan Help

Plan sponsors have the tremendous responsibility of being stewards of DC plan assets on behalf of their participants. Adding to the level of responsibility is the increased fiduciary scrutiny of legislators and regulators, as well as the ongoing evolution of the retirement landscape. It is no wonder that nearly 59% of plan sponsors use an advisor. This article offers a series of themes to help committees assess a DC plan consultant partner and select one that will enhance your plan's oversight activities.

Source: Planpilot.com, May 2022

401k Investors Display Poise as the Market Struggles

Alight Solutions has published the April update of its 401k Index, noting that despite equity markets posting their worst month in over two years, 401k investors were not making reactionary trades. There were no above-normal trading days in April, Alight says. However, net transfers were up slightly compared to March (.10% vs .09%) as investors moved money out of equities and into fixed income.

Source: Planadviser.com, May 2022

Despite Unrest, 401k Investors Not Making Reactionary Trades

In April, equity markets posted their worst month in more than two years, but 401k investors were holding firm, according to Alight's April 2022 401k Index. Surprisingly, there were no above-normal trading days in April, and on average, 0.011% of 401k balances were traded daily, the firm reports. In comparison, there were 16 above-normal days in the first three months of the year.

Source: Napa-net.org, May 2022

ERISA Advisory Council Confronts Retirement Savings Gaps

A recent ERISA Advisory Council report on gaps in retirement savings based on race, ethnicity, and gender contains recommendations for addressing the significant disparities in retirement security for women and people of color. The recommendations would help employers take a more active role in providing financial wellness education and implementing plan features to mitigate some of these disparities. However, the council concluded that larger systemic issues outside the authority of the DOL also contribute to retirement savings gaps and warrant broader policy discussions.

Source: Mercer.com, May 2022

Insights From the First Twenty-Five Excessive Fee and Investment Imprudence Cases of 2022

The most common excess fee claim filed this year is against plans that allegedly have high recordkeeping fees and investments in high-fee retail share classes, led by a concerted attack against plans in the active Fidelity Freedom target-date funds. From the author's perspective, the most concerning development are that plaintiffs have been filing cases challenging isolated actively managed investments in plans with otherwise overall low fees. This article provides insights from the first twenty-five excessive fee and imprudence cases filed against defined contribution plans in 2022.

Source: Euclidspecialty.com, May 2022

Top Five Operational Errors of 403b Plans

No matter how hard we try, there are mistakes we are doomed to make again and again, even when we know the rules all too well. The reasons are valid, and they are countless: mindlessness, being in a rush, employee turnover, deadlines, distractions, the complexity of the rules, and failure to verify the plan provisions. Not surprisingly, the list of common mistakes financial statement auditors find is nearly identical to the list of common errors published by the IRS. Whether you have a large plan or a small plan, you should perform frequent self-reviews to ensure that you are not systematically making the following top five common mistakes.

Source: Belfint.com, May 2022

Tuberville Introduces Crypto Bill, as Warren Grills Fidelity

The DOL's March warning about cryptocurrency, along with Fidelity's decision to move forward with a new "digital assets" capability for 401k plans, has set off a firestorm in Washington. One of the latest developments comes from Sen. Tommy Tuberville who has introduced legislation to address what he describes as preserving the ability of retirement savers to invest their 401k funds as they see fit, including investments in cryptocurrency. In the meantime, Sens. Elizabeth Warren and Tina Smith sent a letter to Fidelity CEO Abigail Johnson in response to the firm's decision to allow Bitcoin investments for 401k plans, given the DOL's warning about allowing crypto investments in 401k plans.

Source: Asppa.org, May 2022

Challenges Aside, Retirement Confidence Remains High: EBRI

Despite the pandemic and inflation, American workers and retirees remain optimistic about living a comfortable retirement and one key factor that has helped is having a workplace retirement savings plan. This is according to the 32nd annual Retirement Confidence Survey measuring worker and retirement confidence conducted by the Employee Benefit Research Institute and Greenwald Research.

Source: Asppa.org, May 2022

401k Plan Investments in Cryptocurrencies

The Employee Benefits Security Administration of the DOL issued Compliance Assistance Release No. 2022-01 on March 10, 2022. This release warns plan fiduciaries to exercise extreme caution before adding a cryptocurrency investment option to their 401k plan's investment menu for participants. EBSA plans to investigate further plans that offer investment options in cryptocurrency and related options. The goal is to take any actions necessary concerning these options to protect the interests of plan participants and beneficiaries. EBSA also wishes to ensure that plans can meet their fiduciary duties when offering these investment options.

Source: Hallbenefitslaw.com, May 2022*

Capital One Seeks to Dismiss Proposed Class Challenging 401k Plan Administration

Capital One Financial Corp. has filed a motion to dismiss an ERISA suit, arguing that there is insufficient evidence that it mismanaged its 401k plan. In Morales v. Capital One Financial Corp. et al., U.S. District Court for the Eastern District of Virginia, the proposed class of Capital One 401k plan participants claims that Capital One violated ERISA by violating its fiduciary duty to make prudent decisions on behalf of plan participants and monitor the committee that oversaw the 401k plan.

Source: Hallbenefitslaw.com, May 2022

Hawaii May Say Aloha to Unique Auto-IRA Plan

The Aloha state is poised to set in motion a state retirement plan that would be unique among its counterparts. Employees would have to opt-in, and a retiree would be among the members of the board administering the program.

Source: Asppa.org, May 2022

Are Brokerage Windows an Effective Way of Limiting Fiduciary Risk After Hughes v. Northwestern?

The high standard of fiduciary responsibility embraced by the Court in Hughes may discourage fiduciaries from designating numerous investment alternatives on participant investment menus. Fiduciaries considering less robust plan investment menus, however, may also be concerned that reduced investment options could discourage participation or could trigger challenges from participants that investment options are too restrictive. Could adding brokerage window options expand investment options while reducing fiduciary responsibility for reviewing investment menus?

Source: Wagnerlawgroup.com, May 2022

Lessons From the 2022 Qualified Plan Fiduciary Summit

The 2022 Qualified Plan Fiduciary Summit connected plan sponsors with retirement industry thought leaders, advisors, recordkeepers, ERISA attorneys, money managers, and other service providers. This article recaps the key themes from the event and items for plan fiduciaries to consider as they navigate a challenging labor market, an active litigation and regulatory environment, and increased employee needs and expectations.

Source: Qualifiedplanadvisors.com, May 2022

Can Employers, Wary of 401k Costs, Find the Right Retirement Plan

Small businesses often don't offer retirement benefits because of the cost and the administrative burden. But working with a retirement plan adviser, retirement plan consultant or recordkeeper can help the plan sponsor understand what retirement benefits arrangement is best for employees, owners, and the company bottom line.

Source: Planadviser.com, May 2022

SEC Greenlights Climate Review of 401k Options

As You Sow, a group that describes itself as the nation's non-profit leader in shareholder advocacy, recently received backing from the SEC in its bid to include a proposal for a shareholder vote that, if approved, would require Amazon (and Comcast, according to the Philadelphia Inquirer) to "at reasonable expense and excluding proprietary information, prepare a report reviewing the Company's retirement plan options with the board's assessment of how the Company's current retirement plan options align with its climate action goals." As You Sow, a group that describes itself as the nation's non-profit leader in shareholder advocacy, recently received backing from the SEC in its bid to include a proposal for a shareholder vote that, if approved, would require Amazon (and Comcast, according to the Philadelphia Inquirer) to "at reasonable expense and excluding proprietary information, prepare a report reviewing the Company's retirement plan options with the board's assessment of how the Company's current retirement plan options align with its climate action goals." As You Sow, a group that describes itself as the nation's non-profit leader in shareholder advocacy, recently received backing from the SEC in its bid to include a proposal for a shareholder vote that, if approved, would require Amazon (and Comcast, according to the Philadelphia Inquirer) to "at reasonable expense and excluding proprietary information, prepare a report reviewing the Company's retirement plan options with the board's assessment of how the Company's current retirement plan options align with its climate action goals."

Source: Napa-net.org, May 2022

PEPs Pique Small Businesses' Interest, But Hurdles Remain

A new survey finds that small employers are interested in learning more about pooled employer plans, although there is still some hesitancy on the road to implementation. More than half of smaller employers surveyed by the Secure Retirement Institute that are considering a DC plan are interested in learning more about PEPs, regardless of whether they have a retirement plan currently in place.

Source: Napa-net.org, May 2022

Sixth Circuit Rejects Arbitration for Proposed Fiduciary Breach Class Action

The Sixth Circuit, in a matter of first impression for that Circuit, held an arbitration clause contained in an individual employment agreement did not apply to ERISA fiduciary breach claims brought on behalf of a defined contribution plan. The case is Hawkins et al. v. Cintas Corp.

Source: Erisapracticecenter.com, May 2022

Targeting Small, Uncashed 401k Distribution Checks Can Generate Big Savings

Harnessing auto portability to mitigate, and eventually eliminate, automatic cash-outs of sub-$1,000 terminated accounts, and the uncashed checks for those distributions, can help ensure participants receive all of the retirement savings to which they are entitled -- and improve their retirement outcomes -- while reducing fiduciary liability for sponsors.

Source: Benefitnews.com, May 2022

State of State-Run Private-Sector Retirement Programs

If your business doesn't sponsor a retirement plan, you may be covered by state or city mandatory auto-IRA programs. These are being established by a growing number of states to help close the retirement savings gap. Carol Buckmann's new article for LEXIS Practical Guidance describes how these programs work and explains other options for businesses that would otherwise be covered by these programs.

Source: Squarespace.com, May 2022

Benefit Plan Beneficiary Designation Issues

Navigating the appropriate handling of a deceased participant's plan benefit is an all too common concern for retirement administrators. What's the big deal? Seems like it should be simple enough -- just pay the beneficiary -- but in practice, it can be a major headache. How do plan administrators ultimately decide who the proper beneficiary is, and who will receive the plan benefit? This podcast discusses the issues.

Source: Seyfarth.com, May 2022

Recent Changes That Plan Providers May Not Like

As far as things in the retirement plan business, there are some trends out there that the author is not too crazy about. He believes retirement plan providers might want to ponder these.

Source: Jdsupra.com, May 2022

401k Plan Asset Allocation, Account Balances, and Loan Activity in 2019

In an ongoing collaborative effort, the Employee Benefit Research Institute and the Investment Company Institute collect annual data on millions of 401k plan participants as a means to examine how these participants manage their 401k plan accounts. This 2022 report is an update of EBRI and ICI's ongoing research into 401k plan participants' activity through year-end 2019. The report is divided into four sections: the first describes the EBRI/ICI 401k database; the second presents a snapshot of participant account balances at year-end 2019; the third looks at participants' asset allocations, including an analysis of 401k participants' use of target-date, or lifecycle, funds; and the fourth focuses on participants' 401k loan activity.

Source: Ebri.org, May 2022

403b vs. 401k - 2022

403b plans are generally subject to fewer technical requirements and less administrative burdens than 401k plans. This chart compares these two plan types.

Source: Consultrms.com, May 2022

IRS Issues Updated Language for Section 403b Plans

The IRS recently issued its List of Required Modifications for pre-approved plan documents that are commonly used by employers that offer and/or contribute to Internal Revenue Code section 403b plans. Insurance companies, recordkeepers, and other providers of such pre-approved documents must now update their documents to incorporate changes reflected in the LRMs and must submit the updated documents to the Internal Revenue Service for approval during the one-year period that begins on May 2, 2022.

Source: Bsk.com, May 2022

Retirement Plan Legislative Update: Act 2 - Scene 1: The SECURE Act

The SECURE Act was signed into law on December 20, 2019, and as you may have known, or as you will soon see, this was significant retirement plan legislation and provides the main portion of our play. The SECURE Act includes provisions that help employers and provisions that help participants. The Act is broken out into four titles, which we'll cover in two articles. The first title covers provisions that will expand and preserve retirement savings.

Source: Belfint.com, May 2022

Required Participant Notices: A Refresher

Providing information and notice to plan participants is not a suggestion, it's a requirement. A recent blog entry provides some reminders as to why it matters and what notices need to be sent.

Source: Asppa.org, May 2022

Younger 401k Participants Really Like TDFs, New Study Finds

Target-date fund investing continues to be prevalent in 401k plans, particularly among younger participants, according to an updated joint study released today by the Investment Company Institute and the Employee Benefit Research Institute.

Source: 401kspecialistmag.com, May 2022


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