January 2022 Digest

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, 403(b) 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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Supreme Court Decision Potentially Opens Floodgates for ERISA Breach of Fiduciary Duty Claims

U.S. Supreme Court, in a unanimous opinion, ruled in Hughes v. Northwestern University that offering an array of allegedly prudent investment choices within the plan does not serve as a categorical defense against claims that other investment options were imprudent or that the plan paid excessive fees. According to Bloomberg Law, at the time of the Supreme Court's decision, around 150 lawsuits have been filed in federal court over the past two years and more than a dozen cases had been stayed pending the outcome of this case. The Supreme Court's opinion provides and/or reinforces several key takeaways, which are reviewed here.

Source: Troutman.com, January 2022

More is Not Always Better: Supreme Court Reexamines Fiduciary Duty of Prudence

The Court remanded the case back to the Seventh Circuit to determine whether the fiduciaries breached their fiduciary duties to monitor plan investments and to remove investments with excessive fees and poor performance based on the standard set out in Tibble v. Edison Int'l. The case makes it clear that having some good investments in a plan will not absolve fiduciaries from liability for bad investment options. Beyond that, the case leaves plan fiduciaries with several questions since the Court did not define a plan fiduciary's duty of prudence in the context of selecting and monitoring ERISA plan investments.

Source: Swlaw.com, January 2022

Supreme Court Ruling Puts 401k Fiduciaries on Guard

Following the U.S. Supreme Court's 8-0 ruling in Hughes v. Northwestern University, employers that sponsor defined contribution retirement plans should step up efforts to ensure that their plans' mutual fund offerings are still prudent investments, retirement plan advisors said.

Source: Shrm.org, January 2022

Judge Cites Recent Supreme Court Ruling in Denying Dismissal of Excessive Fee Suit

Just two days after the U.S. Supreme Court handed down its decision in the Hughes v. Northwestern University lawsuit, a federal court has used the high court's reasoning to deny a motion to dismiss a lawsuit against 403b plan fiduciaries.

Source: Planadviser.com, January 2022*

Bessemer Trust Company Faces ERISA Self-Dealing Lawsuit

A former retirement plan participant of the Bessemer Trust Company 401k and Profit-Sharing Plan has filed a lawsuit against the company and its plan committee alleging breaches of fiduciary duty under ERISA. The plaintiffs say the firm's retirement plan was stuffed full of high-cost, proprietary funds.

Source: Planadviser.com, January 2022

Supreme Court Clarifies ERISA Fiduciary's Duty of Prudence

The decision in Hughes makes clear that merely providing investors with a broad menu of investment options does not excuse a fiduciary's allegedly imprudent decisions. A retirement plan that includes prudent investment options alongside imprudent options may be insufficient because a fiduciary must protect investors by continually monitoring and removing those imprudent investments. This duty is not discharged simply because investors have the choice to select their investments.

Source: Paulweiss.com, January 2022

IRS Issues Required Amendments List for Individually Designed Qualified and Section 403b Plans

The Required Amendments List is an annual list of changes in retirement plan qualification requirements. It also establishes amendment deadlines for individually designed plans. On November 30, 2021, the IRS issued Notice 2021-64, which provides the 2021 Required Amendments List for qualified retirement plans and 403b retirement plans.

Source: Hallbenefitslaw.com, January 2022

Data Privacy and Security: Key Concerns for Benefit Plans

In consideration of Data Privacy Day, it is the perfect time to take stock of retirement and health plan information. Here are some questions benefit plans should be asking concerning plan data.

Source: Groom.com, January 2022

401k Losing Money? Here's Why You Shouldn't Panic

It's been a rough week for stock investors as volatility rocked the market. If you've been peeking at your 401k plan balance, you may be seeing lower numbers than you'd like to. And that can be nerve-wracking. But while it's certainly unsettling to see your 401k plan lose value, it's important not to panic or make any rash decisions. Here's why.

Source: Fool.com, January 2022

U.S. Supreme Court Ruling May Cause More Fiduciary Lawsuits

The U.S. Supreme Court issued a long-awaited opinion (Hughes v. Northwestern University) on issues implicated by the avalanche of lawsuits over the past few years in the lower courts. The bad news is that the Supreme Court's decision likely will result in an increase in the number of lawsuits with these claims, and will make it more difficult for a fiduciary to win at the motion to dismiss stage of litigation. This is critical because most litigation costs are incurred after the motion to dismiss stage and the threat of these costs may result in a higher settlement value to avoid those costs.

Source: Smithdowney.com, January 2022

DC Plans Cannot Include Non-Prudent Investment Options

In a unanimous decision, the U.S. Supreme Court ruled that a fiduciary's duty to monitor investments in participant-directed 403b plans means the plan cannot include non-prudent investments.

Source: Segalco.com, January 2022

Is Your Plan's Matching Contribution Formula Delivering Results?

Offering matching contributions under a 401k plan can serve two purposes: 1) Providing a valuable benefit to your employees, and 2) Encouraging plan participants to play a meaningful role in preparing for their retirements. The trick is to do both in a way that is affordable for both you and your employees. How can your company best perform that balancing act?

Source: Orba.com, January 2022

IRS Updates Annual Determination and Opinion Letter Procedures

Rev. Proc. 2022-4 contains annual updates to procedures for requesting IRS determination letters, private letter rulings, and other tax advice on employee plan matters. Key changes to last year's revenue procedure are reviewed here.

Source: Mercer.com, January 2022

Expect the Breach of Fiduciary Duty Cases to Keep on Coming

Plan fiduciaries that have adopted fiduciary best practices should be able to rely on those processes to satisfy the duty of prudence standard articulated under Tibble. These best practices can minimize the risk of potential litigation. Plan fiduciaries that have not adopted prudent practices and processes should do so now to best position themselves against a potential breach of fiduciary claim.

Source: Icemiller.com, January 2022

The Northwestern Decision: A Win for Plaintiffs but a Possible Turn in the Tide?

While on its face, this decision might appear to be a win for the plaintiffs, the Supreme Court did not go nearly as far as plaintiffs had hoped. And the decision could ultimately signal a harder hill to climb for plaintiffs' claims in the world of 401k fee lawsuits. In the meantime, plan fiduciaries should take note of the court's opinion and consider ways to document a record on fees and expenses that is in line with the Court's decision.

Source: Groom.com, January 2022

The Inclusion of Alternative Assets in DC Plans: What Are the Opportunities and Challenges?

Interest in including private investments in DC plans continues to grow as plan sponsors look for ways to improve participant outcomes by offering alternative diversifiers. On November 10, 2021, four leading industry associations collaborated on a webinar that brought together several industry experts to discuss their experience with adding alternative options to DC plans.

Source: Georgetown.edu, January 2022

The Supreme Court Declines to Establish Pleading Standard for DC Plan Excessive Fee Litigation

To the disappointment of many in the ERISA community, the Supreme Court issued a six-page opinion on January 24th that declined to opine on most of the issues that were before the Court in Hughes v. Northwestern University. It would be an understatement to say that the decision did not live up to the expectations of the ERISA bar when certiorari was granted. But the limited guidance offered at the end of the Court's opinion may provide some added ammunition at the district court level, as the defense bar continues its battle to slow down the current tidal wave of fee and investment litigation.

Source: Erisapracticecenter.com, January 2022

The Supreme Court Holds Process Determines Prudence in 401k and 403b Fee Litigation

This week, the Supreme Court reminded fiduciaries that, while deference to their decisions may be warranted, ERISA's duty of prudence will be satisfied by a fiduciary exercising its judgment after a thoughtful process relative to the issue presented. The decision reinforces that there are no hard and fast rules on the appropriateness of fees in 401k and 403b plans; the determination of whether an ERISA fiduciary has acted prudently in offering investment choices and approving the fees associated with those choices is fact- and context-specific.

Source: Debevoise.com, January 2022

The Supreme Court Weighs in on Northwestern DC Case

The U.S. Supreme Court vacated an appellate court's decision in Hughes v. Northwestern, in a ruling issued Jan. 24. This lawsuit had hinged on the "duty of prudence" outlined in ERISA, related to the selection of the investment options in DC plans and recordkeeping fees. These are common themes in ERISA DC plan litigation, and this ruling may have broad impacts on the industry which are touched on here.

Source: Callan.com, January 2022

What Does the Supreme Court's Newest Fee Decision Mean for Retirement Plans?

On January 24, the U.S. Supreme Court issued a short unanimous opinion in Hughes v. Northwestern University. The importance of the opinion will likely be modest. At a basic level, all the Supreme Court did was reinstate a case that was thrown out of the lower courts too early. But there are two key takeaways from the Hughes v. Northwestern opinion.

Source: Bradley.com, January 2022

Turmoil of Past Year Points to Shifting Retirement Priorities

Even with a long-term view of retirement among savers, the difficulties of the past year were enough to prompt changing outlooks on retirement and a significant shift in employment trends, according to a new survey. According to the findings, Millennials expect to retire at the average age of 61, but 25% are unsure when they will retire. Meanwhile, half of today's retirees report that they retired earlier than expected -- cutting short the typically highest-earning and highest-saving years -- citing health issues and employer decisions as the key drivers of retirement.

Source: Asppa.org, January 2022

Look Around the Corners: A New Perspective for Tomorrow's Retiree

The nature of retirement is evolving. Today's retirement savers need to do more than just look down the road. They need to look around the corners to prepare for uncertainties and avoid making costly mistakes. As pension plan coverage continues to decline, individuals have more responsibility for their retirement outcomes. They also have fewer options and less flexibility to adjust to changing circumstances. This 15-page retirement study focuses on a few key factors that influence retirement outcomes, giving employers and advisors insights to help workers and retirees with retirement decisions.

Source: Allspringglobal.com, January 2022

Finding the Right TPA Partner

To perhaps state the obvious, all third-party administrators are not alike. Those differences can make or break a good working relationship, with you, and your plan sponsor clients. Here are some checkpoints.

Source: Napa-net.org, January 2022

The Problems With Free and Small Retirement Plans

There is no such thing as a free lunch. There is no such thing as free advice or a free retirement plan. Those retirement plans that are geared for small businesses like a SEP-IRA or a SIMPLE-IRA are great options, there is a cost for them even though they are "free." This article is about the costs and caveats for these small business retirement plans.

Source: Jdsupra.com, January 2022

SCOTUS Vacates Northwestern Rulings

In a decision that's almost certainly unwelcome news for retirement plan sponsors, the Supreme Court said lower courts paid too much attention to whether the university's inclusion of some low-cost options in its plans is sufficient to show fiduciaries abided by their duties.

Source: Investmentnews.com (registration may be required), January 2022

After Supreme Court Ruling, Are TDFs a Ticking Time Bomb of Fiduciary Liability?

The Supreme Court did not rule on the viability of Hughes' claim nor on whether the case should be heard. It just stated that the Seventh Circuit cannot dismiss the case in the manner which it did. The Seventh Circuit must now reconsider whether to dismiss the case. Despite the nature of the Hughes case, the wording in the Supreme Court decision may have an impact on how other 401k cases are treated.

Source: Fiduciarynews.com (registration may be required), January 2022

Four Trends to Boost Your 401k Practice in 2022

As we begin 2022, now is an opportune time to set yourself up for success in the coming year. Here are some hot industry trends you can expect to be front and center, as well as thoughts on how to leverage them to scale your practice while managing your client relationships and business more efficiently.

Source: Fiduciarydecisions.com, January 2022

Presenting the Future: Six Retirement Policy Challenges

The author writes, "As the new year begins, here are the big retirement policy challenges we're facing, in my view. Note that these are our long-run problems, as opposed to, say, clarifying the rules on ESG investments or for fiduciaries who provide advice."

Source: Asppa.org, January 2022

DC Plans: Cost Savings After All?

Defined contribution plans have outstripped defined benefit plans in the number of accounts, assets, employers offering them, and participants. But a recent study that examines the cost of both kinds of plans challenges the notion that bigger is synonymous with better. The bottom line is that even if the transition from DB plan prevalence to DC plan prevalence meant that employer costs were reduced, it wasn't due to DC retirement accounts being less costly than a DB plan per dollar of benefit.

Source: Asppa.org, January 2022

2021 Best in Class DC Providers

From an annual survey of approximately 3,000 defined contribution plan sponsors, DC plan providers are measured and evaluated according to feedback from their clients. Major DC plan providers are rated in the various client categories they serve, and benchmark information is collected for plan sponsors to gauge their plans against their peers.

Source: Plansponsor.com, January 2022*

What Plan Documents Must You Surrender if You Are Sued Under ERISA?

When a retirement plan participant files a lawsuit to recover damages from harm due to the plan sponsor's alleged breach of fiduciary duty, employers and plan administrators must furnish certain plan documents on demand. While ERISA requires the production of relevant materials, employers and plan administrators are not required to undertake any extensive searches for irrelevant documents. A recent court case, Theriot v. Building Trades United Pension Trust Fund, offers guidance on the extent to which employers and plans must go to meet their duties and where to draw the line.

Source: Hallbenefitslaw.com, January 2022

401k Compliance Check: Who Makes the Decisions for Your 401k Plan?

For most employers, January kicks off a brand new 401k plan year. Now that all of the year-end plan amendments, participant notices, and new deferral elections are behind you, this is a great time to take a step back and look at the big picture for your 401k plan's governance and decision-making process and make sure your 401k plan decision-makers are properly authorized to make those decisions.

Source: Foley.com, January 2022

401k Nondiscrimination Testing Study: What Percentage of Plans Fail?

401k plans must pass certain IRS-mandated nondiscrimination tests annually to confirm Highly-Compensated Employees do not disproportionately benefit and that no plan participant exceeded certain contribution limits. Often, these tests are completed as soon as possible following a year-end so correction and deduction deadlines are not missed. For calendar-based 401k plans, that means now. What percentage of 401k plans fail these tests? This study looked at 3,217 small business plans to find out. Results from the study of 2020 data -- including key findings -- can be found here.

Source: Employeefiduciary.com, January 2022

Pre-tax vs. Roth 401k: There's More to Consider Than You Think

The start of the year is the perfect time to review your retirement savings, including pre-tax versus Roth 401k contributions. Roughly 86% of 401k plans offered a Roth account in 2020, up from 75% in 2019, according to the Plan Sponsor Council of America. While pre-tax deposits offer a write-off and tax-deferred growth, after-tax Roth contributions may grow levy-free. But there's more to consider than future brackets, financial experts say.

Source: Cnbc.com, January 2022

401k Trading Activity in 2021 Lowest on Record

A bull market extension in 2021 meant better behavior on the part of retirement plan participants. 401k investors were infrequent traders and mostly content to watch their balances grow, according to the Alight Solutions 401k Index. The Illinois-based Alight found net trading activity for the year was 0.53% of balances, the lowest on record for the 401k Index, which started in 1997 and well below 2020's value of 3.51%. There were 3 days of above-normal1 activity, a stark contrast to the 47 seen in 2020 when the market was much more volatile.

Source: 401kspecialistmag.com, January 2022

New Audit Responsibilities for Plan Sponsors Take Effect

Under a new auditing standard, benefit plan sponsors have added responsibilities when preparing for plan audits and face greater liability risks if they fail to meet these new requirements. In general ERISA requires employers that sponsor plans with 100 or more participants to engage a qualified accountant to audit the plan's financial statements. SAS 136 requires plan sponsors to provide additional information and documentation to the auditor in a number of areas.

Source: Shrm.org, January 2022

July 31, 2022 Restatement Deadline for 401k Plans Approaches

The July 31, 2022 deadline for defined contribution plans such as 401k, Profit Sharing, ESOPs, and Money Purchase Plans to be restated is not that far away. If you miss the deadline to restate your qualified retirement plan, the IRS can disqualify it, and take away all its tax benefits. This means contributions might not be deductible or employees will have them immediately included in income. Therefore, restating your document should be a high priority.

Source: Retirementplanblog.com, January 2022

Puerto Rico 2022 Limits

The Puerto Rico Department of Treasury announced the 2022 limits for retirement plan sponsors of dually qualified plans and plans qualified solely in Puerto Rico.

Source: Principal.com, January 2022

New Guidance for Substantially Equal Periodic Payments

The IRS has released Notice 2022-6, which provides updated life expectancy tables used to calculate substantially equal periodic payments from qualified and non-qualified retirement plans as well as Individual Retirement Accounts and Individual Retirement Annuities. The updated tables follow the required minimum distribution tables that were released under final regulations in November 2020.

Source: Principal.com, January 2022

401k Plan Trustees Sue John Hancock Over Retention of Foreign Tax Credits

A federal court has certified a class of trustees, sponsors, and administrators of employee benefit plans that purchased a group variable annuity contract from John Hancock Life Insurance Co. via its Signature platform, which is run by John Hancock's Retirement Plan Services division. Last year, trustees of the Romano Law, PL 401k Plan sued John Hancock over tax credits related to investments they chose for their plan. The plaintiffs allege John Hancock breached their ERISA fiduciary duty of loyalty by receiving and retaining foreign tax credits for the international investment options, resulting in an alleged reduction in the value of the plan's assets.

Source: Plansponsor.com, January 2022

Auto Features, Saver's Credit Boost Could Slash Retirement Deficits

Implementing certain legislative changes and other industry innovations could help significantly reduce the size of retirement deficits and enhance the retirement security of Americans, according to a new issue brief from EBRI.

Source: Napa-net.org, January 2022

Northwestern ERISA Case Highlights Compliance Lessons

Litigation against ERISA retirement plan sponsors and administrators has plagued workplace fiduciaries for the last two decades. Then, in 2020, ERISA lawsuits reached unprecedented levels and affected fiduciaries of ERISA retirement plans nationwide. This article evaluates the issues before the Supreme Court in Hughes. It also provides an overview of best practices for plan sponsors aimed at avoiding costly and time-consuming ERISA fiduciary breach claims.

Source: Hallbenefitslaw.com, January 2022

The DOL's Reversal on ESG for ERISA Plan Fiduciary Investment Decisions

There are many emerging issues for fiduciaries of 401k and 403b plans. These issues include the DOL's regulation of ERISA investment duties and ESG considerations, as well as its recently re-proposed rule regarding the same. Compared to the prior rule enacted by the Trump administration at the end of 2020, the latest proposal represents a significant shift in the DOL's attitude towards ESG factors. If the rule is finalized, it would significantly change the investment landscape for ERISA plan sponsors and fiduciaries.

Source: Hallbenefitslaw.com, January 2022

DOL Refines Its Position Regarding Private Equity in 401k Plans

The door is not closed to plan fiduciaries who are considering adding designated investment alternatives with private equity exposure to their 401k or other DC plans, but it is less open than it was before the issuance of the DOL's Supplemental Statement. Only plan fiduciaries of large 401k or other defined contributions plans who also have experience evaluating private equity in a defined benefit context should conclude that they have the necessary expertise to consider such an option. Even then, they would be well-advised to use a qualified investment adviser in making such a determination. Any decision to offer such a fund should be made through a rigorous and prudent process that should be fully documented.

Source: Frostbrowntodd.com, January 2022

ROBS Funding Is Two Things in One Transaction: Start-up Capital and a Retirement Plan Asset

What is not usually emphasized in ROBS promotional materials is that the joy of the tax savings is followed by strong coffee, in the form of the many compliance activities required of the retirement plan as a tax-qualified retirement plan, in addition to the rules that apply to the ROBS aspects of the plan. Think carefully about the fact that until the plan is terminated, the company must continually ensure that all of the terms of the plan document are implemented in plan operations. You simply cannot have the tax breaks without the compliance hassles.

Source: Erisadc.com, January 2022

2022 Penalty Amounts for ERISA Health & Welfare and 401k Plans

On January 14, 2022, the DOL published its annual announcement of civil monetary penalties for various employee benefits-related violations under ERISA, as in effect for the calendar year 2022. To encourage compliance with the law, ERISA imposes various sanctions, including fines, which are subject to adjustment each year for inflation.

Source: Compliancedashboard.net, January 2022

New Decision Sends Excessive Fee Suit to Arbitration

In the absence of Supreme Court guidance, federal courts dealing with motions to compel arbitration of these disputes have issued inconsistent decisions on the requirements to force arbitration of ERISA fiduciary breach claims and class action waivers. A decision just issued by a federal district court judge in Florida has upheld a plan's mandatory arbitration policy and highlights the importance of adding plan language setting out a plan's mandatory arbitration policy in a plan amendment.

Source: Cohenbuckmann.com, January 2022

January Sees Flurry of State Plan Legislation

In the first six days of 2022, measures were introduced in three state legislatures that would establish retirement plans run by the state, or by third parties with which the state establishes a contract. Shortly after, a fourth measure was introduced to bolster a recently established state plan.

Source: Asppa.org, January 2022

Arbitration Clause Pauses Excessive Fee Suit

The addition of an arbitration clause has -- for the moment, anyway -- paused an excessive fee suit. But what's interesting is how the court applied the terms of that clause. The suit had been brought by plaintiffs against the fiduciaries of the $1.5 billion Baptist Health South Florida 403b Employee Retirement Plan.

Source: Asppa.org, January 2022

$10 Billion 403b Smacked With Excessive Fee Suit

This time the defendants are the fiduciaries (and those who appointed them) of the Consolidated 403b Program of Mass General Brigham and Member Organizations, A plan that "at all times during the Class Period, the Plan had at least 6.4 billion dollars in assets under management." The suit notes that at the Plan's fiscal year-end in 2020 and 2019, the Plan had over $10.2 billion and $9.2 billion, respectively.

Source: Napa-net.org, January 2022

Puerto Rico Announces 2022 Limits on Qualified Retirement Plans

On January 14, 2022, the Puerto Rico Department of the Treasury issued Internal Revenue Circular Letter No. 22-01 announcing the applicable 2022 limits for Puerto Rico qualified retirement plans. According to Section 1081.01(h) of the Puerto Rico Internal Revenue Code of 2011, as amended, the Secretary of the Treasury is required to publish the applicable limits under Section 401(a) of the Internal Revenue Code of 1986, which are incorporated by reference into the PR Code limits, once the IRS publishes its retirement plan limits under the US Code.

Source: Littler.com, January 2022

Survey Finds 40% of Canadians Maintaining Retirement Savings Despite Pandemic

Despite the financial challenges experienced by Canadians throughout the coronavirus pandemic, 40 percent said they've continued to save for retirement, according to a new survey by life insurance provider PolicyMe Corp. More than half (54 percent) of survey respondents said they're adding to their emergency funds, while 48 percent are paying down debt and 45 percent are making regular contributions to their savings.

Source: Benefitscanada.com, January 2022

New Retirement Payment Withholding Procedure Is Final

The IRS released a new withholding form on January 4, 2022: Form W-4R, Withholding Certificate for Nonperiodic Payments, and Eligible Rollover Distributions. The IRS also issued a revised Form W-4P, Withholding Certificate for Pension or Annuity Payments. As a result, payers and individuals will have a new process for calculating and electing federal income tax withholding on retirement distributions. Although the IRS will not require payers to use the new and revised forms until January 1, 2023, payers may start using them in 2022.

Source: Ascensus.com, January 2022

IRS Issues 2022 Procedures for Letter Rulings, Determination Letters, and Other Guidance

The IRS has issued its annual update and restatement of the revenue procedures governing letter rulings, determination letters, and other guidance, including guidance about employee benefit plans. These revenue procedures supersede their 2021 counterparts and are generally effective as of their issuance date. Here are highlights for employee benefit plans.

Source: Thomsonreuters.com, January 2022*

Lawsuit Alleges Choice of Target-Risk Funds Caused Losses to Participants

A participant in Milliman's 401k plan has filed an ERISA fiduciary breach lawsuit against the company, its board of directors, and members of its 401k investment and administrative committees. The proposed class-action lawsuit accuses the defendants of failing to prudently monitor the plan's investments and failing to remove three of the plan's "poorly performing investment options."

Source: Planadviser.com, January 2022

Cybersecurity Preparedness Checklist for Plan Fiduciaries

401k plans face significant cybersecurity risks for which there is no federal safety net. Service providers are very much on the front line, but plan fiduciaries need to treat cybersecurity with the same high degree of diligence that they exercise with investment decision-making and all other plan administrative matters. The key to mitigating risk is conducting a self-assessment using the Cybersecurity Preparedness Checklist for Plan Fiduciaries and building a strategy around the results of that assessment.

Source: Mcdonaldhopkins.com, January 2022

Several New ERISA Lawsuits Target Big Retirement Plan Sponsors

Litigation over retirement plan fees and investments is already occurring at a fast pace in 2022, with three new lawsuits filed this week against sponsors of multibillion-dollar 401ks and 403bs. Litigators this week brought class-action lawsuit claims against PPL Corp., Mass General Brigham, and Milliman.

Source: Investmentnews.com (registration may be required), January 2022

LinkedIn Employees Must Rework Proposed Class Action Lawsuit Under ERISA

In November 2021, a California federal court dismissed a suit claiming that LinkedIn Corp. kept underperforming funds in its $817 million retirement fund. The judge dismissed the proposed class action but with leave to amend and add additional facts. LinkedIn asked the court to dismiss the proposed class action in January 2021, arguing that the plan participants' dislike of the investment options did not implicate LinkedIn with any violation of federal labor law.

Source: Hallbenefitslaw.com, January 2022

DOL Focuses on Misuse of Plan Participant Data

It seems apparent that the DOL is concerned with the misuse of confidential participant data, in addition to the theft of plan data or assets. The DOL has focused on the practice of some service providers using participant data for nonplan purposes. This usage includes selling their own or related products and services outside the plan.

Source: Hallbenefitslaw.com, January 2022

DOL Statement on Private Equity Investment Emphasizes Fiduciary Responsibility

In response to questions and reactions that the DOL received from a range of stakeholders regarding the 2020 Letter, as well as a Risk Alert that the SEC issued in June 2020 regarding compliance issues for managers of private equity and hedge funds, the Supplemental Statement advised that the 2020 Letter should not be "misread . . . as saying that PE -- as a component of a designated investment alternative -- is generally appropriate for a typical 401k plan." So how did we get here, and what does this mean?

Source: Erisapracticecenter.com, January 2022

The Wall Street Journal Takes Aim at Target-Date Funds

A column in The Wall Street Journal citing research circulated by the National Bureau of Economic Research criticizes target date funds' one-size-fits-all approach. Author Mark Hulbert's gripe is that glide paths consider too few variables, something reflected in the research.

Source: 401kspecialistmag.com, January 2022

TriNet ERISA Lawsuit Latest to Clear Dismissal Motion

The U.S. District Court for the Middle District of Florida has issued a ruling against the defense's dismissal motion in an ERISA lawsuit filed against TriNet HR. In considering the defense's dismissal motion, the District Court engages in a substantial discussion regarding the fiduciaries' duties prescribed by ERISA, as well as the various precedents that have been set in such matters in the relevant federal court circuit and by the U.S. Supreme Court.

Source: Plansponsor.com, January 2022

Courts Expand on Rules Regarding the Protection of Retirement Plan Assets

Most people in the retirement plan industry know that, in general, funds in qualified ERISA plans are protected from creditors. However, recent court decisions have expanded on the protections provided in some more specific circumstances.

Source: Plansponsor.com, January 2022

Retirement Plan Advisers Might Help Lessen ERISA Lawsuits by Adding Defensive Provisions

Plan sponsors can apply a trio of defensive provisions to their retirement plan documents that aim to lessen exposure to participant claims brought under ERISA, according to retirement industry experts. Many plans use a basic provision whereby participants must first exhaust whatever the plan's claims procedure is before a lawsuit can be filed. Retirement plan sponsors and advisers should consider adding to the plan limitation periods, implementing mandatory arbitration clauses, and including class action waivers and venue provisions to reduce exposure to lawsuits.

Source: Planadviser.com, January 2022

Tick, Tock, the DC Restatement Clock Is Running Out

Chances are that if you have a 401k plan, the document is on an IRS pre-approved form. One of the "costs" of having a pre-approved plan is that it must be re-stated every six years onto an updated pre-approved document that incorporates recent changes in the law. For DC plans, such a 401k, the current restatement deadline is July 31, 2022. A restatement is generally not something that can be done in a week or two, and vendors are under a great amount of stress trying to get all of their clients restated by this looming deadline. This is why it is so important that the restatement process be started as soon as possible.

Source: Erisadc.com, January 2022

A District Court Weighs in on Private Equity and Hedge Funds in 401k Plans

On January 8, 2022, in a case with a long and complex procedural history dating back almost seven years, the U.S. District Court for the Northern District of California granted a motion to dismiss amended claims brought by participants in two DC plans sponsored by Intel Corporation. The plaintiffs alleged violations of ERISA because the plans offered investment choices with significant allocations to alternative investments including hedge funds, commodities, and private equity.

Source: Debevoise.com, January 2022

ERISA Update and Outlook for 2022

Employers have spent the last two years dealing with many challenges and disruptions, and they are now looking to move forward in 2022 against a backdrop of economic and pandemic-related uncertainty and market volatility. To help plan sponsors navigate the challenging road ahead, this short article outlines four themes those plan sponsors should be keeping a close eye on in 2022.

Source: Bdo.com, January 2022

DC Retirement Plan 2022 Compliance Calendar

Retirement plan sponsors are responsible for compliance with any ongoing reporting, disclosure, and notice requirements. This 4-page Retirement Plan Compliance Calendar summarizes the major requirements that apply to DC plans for 2022. Due dates are based on a calendar year plan year and apply to plans subject to the ERISA.

Source: Usicg.com, January 2022

Can Retirement Plan Service Providers Be Trusted?

Organizations that sponsor employee benefit plans are generally responsible for ensuring that their plans comply with federal law, including ERISA. Many sponsors rely on service providers to advise and assist them with their employee benefit plan duties. But service providers to retirement plans are changing their stripes. That makes the job of selecting and monitoring them more challenging than ever.

Source: Rolandcriss.com, January 2022

Bridging the Gap Between the Retirement Plan Fiduciary Committees and IT

Technology-empowered threats to the security and confidentiality of retirement plan assets and data are exploding. Current fiduciary management methods largely lack a formal interface with the information technology function and its storehouse of expertise. These two realities demand that fiduciary committees embrace their enterprises' information technology departments in a new era of collaboration.

Source: Rolandcriss.com, January 2022

Who to Invite to a Plan Review

Who should be invited to a plan review? The following are parties who can be invited to a plan review. Caveat: keep in mind that options vary according to how a plan is set up.

Source: Ntsa-net.org, January 2022

Running a Plan Review Meeting

What are some tips for running a plan review meeting? One can keep a plan review meeting on track by taking the following steps outlined here.

Source: Ntsa-net.org, January 2022

Opinion: The Real Retirement Fraud

The author writes, "A new paper rehashes (and embraces) some old beliefs, blatantly ignores the full impact of workplace savings, disregards the reality that deferrals are temporary, and kills a lot of trees in the process. The diatribe's author, perhaps because he's affiliated with a law school, perhaps because the paper (provocatively titled 'The Great American Retirement Fraud') is so long (82 pages), managed to get what amounts to a long-winded pontification published by the Social Science Research Network, a network that normally publishes research."

Source: Napa-net.org, January 2022

The Perilous Move From One 401k TPA to Another

Transitioning from one third-party administrator to another can be as traumatic a move as going from home to another. There is a lot to consider in order to avoid the headaches that can develop if you miss any of these points.

Source: Jdsupra.com, January 2022

PTE 2020-02 Compliance: Avoiding Five Common Mistakes

It may be a New Year, but 2022 is going to seem very familiar to Broker-Dealers and their Registered Representatives who advise retirement plans and IRAs. They are going to be spending a lot of time working to comply with new exemptions and new ERISA rules coming from the DOL. As some of these deadlines are right around the corner, this article reviews the five common pitfalls and problems, and how to better address them in disclosures and policies and procedures.

Source: Brokerdealerlawblog.com, January 2022

Considerations for Plan Sponsors Mulling SDBAs

While SDBAs provide retirement plan participants with access to numerous investment options, the resulting investments can also create potential risks to those participants and plan sponsors, according to findings from Cerulli.

Source: Asppa.org, January 2022

Guide to ERISA Individual Prohibited Transaction Exemptions

One of the distinctive features of ERISA is its prohibition of a wide range of specified transactions between a covered ERISA plan or IRA and a far-reaching group of ostensible "insiders" to those arrangements. Since 1996, the US Department of Labor granted more than 1,200 individual exemptions from the ERISA prohibited transaction rules. This guide summarizes and collects individual prohibited transaction exemptions for this period.

Source: Eversheds-sutherland.com, January 2022

Participants Must Follow a Plan's Beneficiary Designation Procedures

When it comes to a beneficiary designation, the only thing that matters is what the participant wrote down. If the participant was clear and followed the plan's procedures for naming a beneficiary, the fiduciaries of the plan are bound by ERISA to follow that result. Of course, the fiduciaries must first determine what the plan's procedures are. The plan language may have requirements or exceptions. Any specific rules or exceptions found in the plan language must be followed scrupulously by the fiduciaries.

Source: Employeebenefitslawblog.com, January 2022*

Ten Steps for DC Plan Sponsors to Consider in 2022

This 7-page paper first reviews strategies to navigate the onerous legal and regulatory issues faced by DC plan fiduciaries today. The paper then shifts to examining tactics to better fund future "liabilities," including increasing savings and creating more efficient investment strategies for both active participants and retirees, with an overall objective of increasing the likelihood that employees will have successful retirement outcomes.

Source: Russellinvestments.com, January 2022

Is a PEP Right for You?

More employees need to be able to contribute to retirement plans, and many employers without plans would like to offer 401k plans to their employees. This article discusses a new option for outsourcing fiduciary responsibility and why more employers should consider PEPs.

Source: Rpaconvergence.com, January 2022

CPAs Shift Audit Risk to Plan Fiduciaries

SAS 136 transfers a significant amount of liability for an audit's accuracy from an auditor to a plan's fiduciaries. SAS 136 intends to enhance the quality of audits of ERISA plans by adding new procedures to CPAs' audits beginning December 15, 2021. The burden for producing the added plan-related documentation required will likely fall to employers' human resources departments.

Source: Rolandcriss.com, January 2022

Finalized Form 5500 Changes Add to Plan Sponsors' Responsibilities

Some updates to the Form 5500 implement changes called for by the SECURE Act, and others will require more review from plan sponsors to ensure completeness and accuracy.

Source: Plansponsor.com, January 2022

Practical Implications of DOL's Latest Private Equity Statement

The DOL's supplemental statement is a tonal shift rather than a substantive change that reflects the continuing courtship for defined contribution plans and private equity investments. For plan sponsors, the clarifying statement's practical implications were to reaffirm that the duties of plan fiduciaries must be executed prudently and that they must always act in the best interest of participants and beneficiaries.

Source: Plansponsor.com, January 2022

Plaintiffs Refile ERISA Lawsuit, Adding Adviser to Defendant List

The plaintiffs in an ERISA fiduciary breach lawsuit known as Fleming v. Rollins Inc. have refiled their complaint in federal court, this time also proposing claims against multiple financial advisory firms that serve their retirement plan.

Source: Planadviser.com, January 2022

401ks Substantially More Costly Than Pensions

401k retirement accounts are substantially more costly than pension plans, according to a new analysis from the national institute on retirement security. Economic efficiencies unique to pensions enable plans to deliver retirement benefits at half the cost of 401k accounts, with four-fifths of the cost differential occurring post-retirement.

Source: Nirsonline.org, January 2022

401k Lawsuit Names LPL, Alliant

A new 401k lawsuit against a nationwide pest-control company stands out from most others by questioning the investment guidance of an adviser to the plan. It also names LPL Financial and Alliant as defendants, in addition to the plan sponsor -- Rollins Inc. -- and the plan committee.

Source: Investmentnews.com (registration may be required), January 2022

How the ERISA Landscape May Shift in 2022

2021 was another busy year for litigation under ERISA, with more than 125 new ERISA class actions filed, more than were filed in 2018 or 2019, but down from the all-time high in 2020, which saw more than 200 class actions filed for the first time in the 45-year history of the statute. As 2022 begins, several key issues working their way through the courts are likely to reshape the landscape of ERISA litigation.

Source: Groom.com, January 2022

Retirement Assets Held Steady in Third Quarter

Despite a number of challenges, total U.S. retirement assets were down only slightly at the end of the third quarter of 2021, according to new data from the Investment Company Institute.

Source: Asppa.org, January 2022

IRS Updates Procedures for Determination Letter Requests

The new procedures are outlined in Revenue Procedure 2022-04. Rev. Proc. 2022-04 is a general update of Rev. Proc. 2021-4, published in Internal Revenue Bulletin 2021-01.

Source: Asppa.org, January 2022

Auto-Enrollment Retirement Plans in OregonSaves

This new study looks at the impact of the first state-sponsored auto-IRA program on those who previously lacked access to a plan. It analyzes participation choices, inflow and outflow data between August 2018 and April 2020, and the evolution of account balances.

Source: Umich.edu, January 2022

2022 DC Retirement Plan Compliance Calendar

For defined contribution plan years starting Jan. 1, this retirement plan compliance calendar lists key IRS and DOL reporting and disclosure deadlines.

Source: Mercer.com, January 2022

401k and IRA leakages May Be More Severe Than Previously Believed

Researchers from the Treasury and Congress' Joint Committee on Taxation have provided new estimates of how much money "leaks" out of 401ks and IRAs based on restricted tax data. The author states that "It's a welcome addition to the literature because the existing range of estimates is enormous."

Source: Marketwatch.com, January 2022

DC Plan Design Can Be Creatively Used to Get Participants Back on Track

Many individuals didn't have a choice but to lower their DC plan savings rates, stop contributing or take loans or withdrawals out of their plans because of the economic impact of the pandemic. A recent podcast, "Plan Designs During Challenging Times," hosted by Bill Harmon, chief client officer, and Heather Lavallee, CEO of wealth solutions at Voya, addressed what employers can do to help participants get back on track with their retirement savings after events like the pandemic or economic recessions.

Source: Plansponsor.com, January 2022

Biden's EBSA Nominee Back on the Docket

While it appeared the nomination of Lisa Gomez to serve as Assistant Secretary for EBSA at the DOL was in jeopardy after having been included in a list of nominees that would not carry over to the new year, the Senate Health, Education, Labor, and Pensions Committee has now scheduled a January 12 nomination hearing for her, along with several other nominees.

Source: Napa-net.org, January 2022

DOL Waves Caution Flag for 401k Private Equity Investing

The DOL delivered a surprise holiday gift on December 21, 2021, to fiduciaries of participant-directed 401k plans subject to ERISA, issuing a supplemental statement to a June 2020 Information Letter regarding the use of private equity investments in investment options. The thrust of the Supplement is that fiduciaries should not read the Letter as endorsing or recommending private equity investments in such plans and should proceed with caution in the use of such investments in a participant-directed 401k plan.

Source: Morganlewis.com, January 2022

The Pension Is Dead: Is the 401k Next?

If you're younger than 40 years old, you may not even know what a pension is. Also called defined benefit plans, pensions used to be the primary source of retirement funding for American workers. Starting in the 1980s, pensions rapidly began disappearing, as the defined contribution 401k plan dominated. Although the 401k plan isn't likely to go the way of the pension plan, there may be significant changes ahead.

Source: Yahoo.com, January 2022*

Opinion: The Great American Retirement Fraud

The author writes, "Despite the benign but misleading rhetoric about enhancing retirement security for everyone, the real beneficiaries of the retirement-reform legislation have been higher-income earners, who would save for retirement even without tax subsidies, and the financial-services industry, whose lobbyists have driven the retirement-reform legislative agenda."

Source: Ssrn.com, January 2022

What to Expect for Retirement Savings Plans in 2022

With a new year often comes new rules. Here's what the federal government has planned for retirement savings plans in 2022.

Source: Smartspublishing.com, January 2022

Avoiding the Rule That Will Cause You Trouble as a 401k Plan Sponsor

There are so many pitfalls that a plan sponsor needs to avoid. And certain rules plan sponsors need to avoid if they want to avoid potential liability as a fiduciary. This article lets 401k plan sponsors know which paths and rules they need to avoid if they want to stay out of trouble.

Source: Jdsupra.com, January 2022

More Employers Put 401k Savings on Autopilot

Employers are increasingly putting retirement savings on autopilot for their workers. About 62% of businesses with a 401k plan used automatic enrollment in 2020, up from 60% the year prior and 46% a decade ago, according to the Plan Sponsor Council of America, a trade group. Auto-enrollment leverages worker behavior (inertia, in this case) to their advantage. Workers receive a paper or digital notification ahead of time and can opt out, but most do not.

Source: Cnbc.com, January 2022

Employers Adding Roth 401k Option at a Fast Clip

The share of employers allowing Roth 401k savings has surged, giving more workers access to the financial benefits that accompany such contributions. But there are some roadblocks to employee use, such as automatic enrollment and the structure of 401k matching contributions.

Source: Cnbc.com, January 2022

2021 Form 5500 Series Informational Copies Released

The DOL, IRS, and the Pension Benefit Guaranty Corporation jointly released the 2021 Form 5500, Annual Return/Report of Employee Benefit Plan, 2021 Form 5500-SF, Annual Return/Report of Small Employee Benefit Plan, and their respective instructions. The IRS likewise released the 2021 Form 5500-EZ, Annual Return of a One-Participant Retirement Plan or Foreign Plan, and instructions.

Source: Ascensus.com, January 2022

403b Plans and RMDs at Age 72

This post includes basic information about tax-deferred investing, RMDs, and IRS tax regulations concerning RMD tax payments and tax penalties. It also describes research findings on how many investors make RMD withdrawals and new life expectancy tables that debut in 2022. It concludes with six take-away action steps.

Source: 403bwise.org, January 2022

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