March 2021 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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Fee and Investment Litigation 2015-2020: Five Year Review of Developments and Best Practices to Mitigate Risk

In this two-part article, the authors provide a brief overview of 2020 trends and developments in fee and investment litigation and then explore more closely the key rulings and developments since 2015 and their impact on ERISA fee and investment litigation. This is part one of the article.

Source: Jacksonlewis.com, March 2021

Pandemic Reveals Demand for Virtual and Self-Serve 401k Education: New Schwab Data

With the multiemployer relief legislation cleared from Congress' docket, look for policymakers to turn to efforts to expand retirement plan coverage, ARA staff explained during a March 23 NAPA webcast. Will Hansen, Chief Government Affairs Officer at the American Retirement Association, and Andrew Remo, the organization's Director of Legislative Affairs, offered their take on the legislative outlook for the rest of the year, as well as what retirement policy provisions we may see in forthcoming legislation.

Source: Businesswire.com, March 2021

Expanding Coverage Likely Next Target for Lawmakers

With the multiemployer relief legislation cleared from Congress' docket, look for policymakers to turn to efforts to expand retirement plan coverage, ARA staff explained during a March 23 NAPA webcast. Will Hansen, Chief Government Affairs Officer at the American Retirement Association, and Andrew Remo, the organization's Director of Legislative Affairs, offered their take on the legislative outlook for the rest of the year, as well as what retirement policy provisions we may see in forthcoming legislation.

Source: Asppa.org, March 2021

The Impact(s) of Automatic Enrollment

A new study finds that automatic enrollment not only triples the participation rate of new hires, but that over time the vast majority increase their deferral rates. The report from researchers at Vanguard, found that among new hires, participation rates triple to 91% under automatic enrollment, compared with 28% under voluntary enrollment. Over time, 9 in 10 participants increase their deferral rates, either automatically or on their own, and more than three-quarters of participants remain exclusively invested in the default investment fund.

Source: Asppa.org, March 2021

Longstanding Savings Gaps by Race, Ethnicity Persist

A new EBRI analysis of data taken from the Federal Reserve's Survey of Consumer Finances underscores the persistently and perniciously unequal distribution of retirement savings in the United States.

Source: Plansponsor.com, March 2021*

Coronavirus-Related Distributions: Repayments and Reporting

Among the numerous changes that have taken place last year, the CARES Act added a level of complexity to an already complicated retirement universe. The addition of Coronavirus-related distributions provides participants with the ability to repay qualified distributions anytime over the next three years, following the implementation of the CARES Act. To understand the repayment and reporting of CRDs, it is vital to first understand some of the details regarding these distributions.

Source: Ntsa-net.org, March 2021

Settlement Struck in BlackRock 401k Suit

The settlement -- which will wind up covering some 17,000 participants in BlackRock's Retirement Savings Plan, 70% current participants and 30% former who no longer have an active account, according to the agreement -- comes in a case filed on April 5, 2017, by Charles Baird alleging, as do most of these excessive fee suits, that the defendants breached their fiduciary duties by, among other things (and with the involvement of investment consultant Mercer Investment Counseling) charging excessive hidden fees, picking investments that charged up to 871% more than required and costing hundreds of millions of dollars in losses.

Source: Napa-net.org, March 2021

Non-Enforcement Policy on Recent ESG and Proxy Voting Rules

In a press release issued in conjunction with the policy statement, the DOL stated that the rules may have had a "chilling effect" on plan fiduciaries' inclusion of ESG factors in their financial evaluation of plan investments and the exercise of shareholder rights, even when warranted. As a result, the DOL stated that intends "to conduct significantly more stakeholder outreach to determine how to craft rules that better recognize the important role that environmental, social and governance integration can play in the evaluation and management of plan investments, while continuing to uphold fundamental fiduciary obligations."

Source: Eyeonesg.com, March 2021

Navigating the Number Jumble: A 403b, 401k, and 457b Comparison

Understanding the nuances of employer-sponsored retirement plans can be daunting. This article explores the most significant distinctions of 403b, 401k, and 457b plans and their impact on the availability, benefits, and limitations of these plan types.

Source: Captrust.com, March 2021

A Technical Analysis of How "Small Amount" Cash-Outs Under 403b Plans Work

The minute differences between 403b plans and 401k plans are often inconvenient, at best, and sometimes they produce serious conundrums in plan administration which can be difficult to resolve. Prominent among these is the issue of "small amount" cash-outs from 403b plans.

Source: Businessofbenefits.com, March 2021

More Weak 401k Criticism Doesn't Stand Scrutiny

CBS News is the latest media outlet to take a swipe at 401ks by employing the extremely in-vogue income inequality argument. They conveniently ignore the steep rise in coverage and participation due to auto-enrollment, innovation in the form of target-date funds, and recent legislative success that primarily benefits smaller companies.

Source: 401kspecialistmag.com, March 2021

Eight Mistakes to Avoid When Administering a 401k Plan

Mistakes are common for plan sponsors with no financial experience who are administrating a 401k. Sponsors are the plan fiduciaries with plan documentation or protocols for following ERISA regulations. In some cases, penalties for errors are severe and irreversible, even if those errors were made in good faith. Here are some of the most common mistakes when operating 401k plans.

Source: 401kspecialistmag.com, March 2021

Investment Platform Provider Not Acting as a Fiduciary When Collecting Access Fees From Mutual Funds

The appellate court acknowledged that the provider, as a directed trustee, has some fiduciary duties. But the court also observed that fiduciary status is not an all-or-nothing proposition, and held that the provider's fiduciary duties do not extend to the access fees. According to the court, charging access fees does not translate to control over the compensation paid by participants due to a series of intervening and independent decisions outside of the provider's control.

Source: Thomsonreuters.com, March 2021

Appeals Court Affirms Dismissal of Fidelity "Infrastructure Fee" Lawsuit

The 1st US Circuit Court of Appeals recently upheld the dismissal of a class-action lawsuit against Fidelity over "infrastructure fees" charged to third-party mutual funds on the company's FundsNetwork investment platform. Fidelity describes the fee as compensation for the costs of maintaining the platform. But the plaintiffs alleged the fee is a "pay-to-play" charge for access to Fidelity's retirement plan investors that violates Fidelity's ERISA fiduciary duties. The threshold question in the case concerned whether Fidelity was a functional fiduciary when negotiating the fee. If not, no fiduciary breach could have occurred.

Source: Mercer.com, March 2021

Retirement Planning: What Women Do Right

Women, it seems, have the temperament and resolve to potentially manage their money more effectively than men, character traits that could help counter some of the significant financial headwinds against them as they seek to build a retirement nest egg. Indeed, amid the reality of lower earnings potential and longer life spans, studies reveal women may plan, earmark money for savings, and avoid costly knee-jerk reactions to stock market turbulence better than their male counterparts.

Source: Massmutual.com, March 2021

401k Investors Vulnerable to Cyber Hacks, Watchdog Warns

Firms that oversee retirement plans hold sensitive data like Social Security numbers. A cyber attack could lead to identity theft or monetary loss for savers. And the DOL hasn't done enough to protect 401k savings and data from cyber attacks, according to a Government Accountability Office report.

Source: Cnbc.com, March 2021

Broker-Dealer Services to Plans: Impact of the DOL Fiduciary Advice Exemption

The PTE will likely affect the business of broker-dealers that regularly make investment recommendations to IRA owners, as well as retirement plans and their participants (including rollover recommendations). As a result of these changes, broker-dealers need to re-evaluate whether and when they (and their investment professionals) may be fiduciaries, and where they are fiduciaries, they need to develop compliant practices, policies, and procedures. Here are five key points of which brokerage firms should be aware.

Source: Brokerdealerlawblog.com, March 2021

COVID-19 Creating Huge Challenges for Higher-Ed Retirement Plans

As a result of the pandemic, 41% of higher education institutions have already reduced or stopped their employer matching contribution, and 87% of them believe COVID-19 will have a significant impact on their employees' retirement readiness. Those are among the key findings of an inaugural survey of retirement plans in public and private higher education conducted by Greenwald Research on behalf of Voya Financial.

Source: 401kspecialistmag.com, March 2021

82% Say Pandemic Has Negatively Impacted Retirement Plans

Roughly eight-in-10 Americans (82%) say the events of the past year have negatively impacted their retirement plans, and 55% of Americans said their retirement goals have been delayed by at least two years and one-third estimating it will take 2-3 years to get back on track, due to such factors as job loss or taking retirement withdrawals.

Source: 401kspecialistmag.com, March 2021

Advisor Designations and What They Mean

When looking for a financial advisor, you've probably noticed the "alphabet soup" of letter combinations that can follow an advisor's name. There are over 100 different financial advisor certifications, so it can be confusing to determine what these letters mean, and which advisor might be best for you based on these qualifications. Here is a breakdown of some of the most common financial designations and what they mean for you.

Source: Wealthspire.com, March 2021

Review of DOL Missing Participant Guidance

Up until earlier this year, it wasn't just the participants who were missing, the guidance was missing too. But on January 12, 2021, the DOL finally issued its long-awaited missing participant guidance. This article takes a quick tour of what was included.

Source: Plansponsor.com, March 2021

Collective Investment Funds and 403b Plans

Collective investment funds are regulated by the Office of the Comptroller of the Currency. Are they eligible investment vehicles for 403b plans?

Source: Ntsa-net.org, March 2021

How Participants Weathered the Challenges of 2020

This John Hancock report looks at saving and investing behavior -- and progress toward retirement readiness -- over the course of an unprecedented year. Despite obstacles associated with the pandemic, participants held the line with their retirement savings.

Source: Johnhancock.com, March 2021

The Problems and Perils in Changing Your 401k TPA

When you change third-party administrators, it's like moving and it can be traumatic. This article is all about the TPA change which involves a conversion process that can spawn a whole host of problems for a plan sponsor.

Source: Jdsupra.com, March 2021

DOL's Non-Enforcement Policy for 401k ESG Investments

On March 10, 2021, the DOL announced in an official statement that it will not enforce its recently issued regulations on the investment of 401k plan investments based on nonpecuniary factors, such as environmental, social, and governance factors. The announcement represents an unusual, though not unexpected, change of course concerning the DOL's prior stated position on this issue. Generally stated, the DOL's March 10, 2021 announcement specifies that pending the publication of further guidance the DOL will not pursue enforcement actions against any plan fiduciary based on a failure to comply with the final regulations.

Source: Compliancedashboard.net, March 2021

How Retirement Readiness Fared in 2020; Ideas for Improving

Despite one of the most challenging periods in recent memory, a new study finds that DC plans continued to perform their critical role in preparing workers for retirement. Throughout 2020, the majority of the more than 1.1 million participants in over 1,000 John Hancock open architecture DC plans lost relatively little ground in their efforts to save for a secure retirement, the firm notes in the "State of the Participant 2021."

Source: Asppa.org, March 2021

Putting Technology at the Service of Retirement Plans

A proliferation of technological applications and the need to increase retirement plan participation and savings. Seems like a match made in heaven. A panel of experts recently discussed how that pairing is faring and how it can function better.

Source: Asppa.org, March 2021

2021 Best in Class 401k Plans

For the seventh year, PLANSPONSOR has awarded its Best in Class 401k Plan designation. The Best in Class 401k Plans were rated by way of a proprietary system that weighted usage/implementation of more than 30 criteria related to plan design, oversight/governance, and participant outcomes. Also, because plans must requalify every five years to maintain their Best in Class status, the 26 plans honored in 2016 were likewise reviewed.

Source: Plansponsor.com, March 2021*

Most Retirement Savers Don't Know How Their Money Is Invested

If knowledge is power, many retirement savers in America are feeling pretty powerless. Half of the people in their mid-40s to late 50s saving for retirement don't know how their money is divvied up between stocks, bonds, and cash, according to a survey released on Thursday by Schroders.

Source: Financial-Planning.com, March 2021

Eight Retirement Investing Alternatives to Your Company's 401k

401k plan can be a great way to invest, allowing employees to grow their pre-tax contributions and earnings tax-deferred until retirement. Unfortunately, based on 2019 estimates from the American Retirement Association, more than 5 million employers in the U.S. did not offer a workplace retirement savings benefit. If your employer doesn't offer a retirement plan or if it doesn't measure up, here are eight investing alternatives to consider.

Source: Bankrate.com, March 2021

DC Plans Reign Among Individual Account Plans

A new study by the Employee Benefit Research Institute examining individual account retirement plans finds that defined contribution balances grew modestly between 2016 and 2019, but their prevalence is much higher than they were in 1992.

Source: Asppa.org, March 2021

Self-Directed 401k Balances up 13% Year-Over-Year

Self-directed participants who stood pat in the face of volatility and early 2020 market lows were rewarded with solid gains, according to the latest findings from Charles Schwab's SDBA Indicators Report.

Source: Asppa.org, March 2021

Consolidating Gains from a 401k Portability Program

When research performed eight years ago reveals that your 401k plan, by turning on portability and consolidation for all participants, has halved cashout leakage and dramatically reduced its small account problem, what do you do for an encore? Plenty, it turns out. In a follow-up to the 2013 study by Boston Research Group.

Source: 401kspecialistmag.com, March 2021

GAO Turns to DOL for Additional Cybersecurity Guidance

The U.S. Government Accountability Office has released a report examining cybersecurity in private-sector defined contribution retirement plans and exploring how federal guidance can mitigate cybersecurity risks. The agency is asking the DOL to review its guidance on cybersecurity administration. The GAO report starts by reiterating that DC plans, plan sponsors, and their service providers share personally identifiable information and plan asset data, and therefore increase their risks of cyber hacks.

Source: Planadviser.com, March 2021

Colorado Seeking Investment, Plan Consultants for Auto-IRA

Colorado is moving forward with its automatic-IRA program, seeking bids beginning this week from investment and plan consultants. Last year, the state passed legislation to establish the program, after spending a year considering different approaches to expanding retirement plan access. It is one of a handful of states to begin implementing public retirement-savings initiatives for private-sector workers.

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

CITs Approaching Half of Target-Date Assets

Collective investment trusts are on pace to overtake mutual funds as the dominant target-date vehicle, data from a Morningstar report published today show. CITs represented 43% of target-date assets at the end of last year, up from just 18% in 2014, according to Morningstar's Target-Date Strategy Landscape report. Assets in those investments surpassed $1 trillion last year, reaching about $1.18 trillion, compared with $1.57 trillion in target-date mutual funds.

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

Favorable Features of 403b

403b plans have been known to receive a bad rap related, in part, to the difficulties surrounding the public K-12 marketplace with which they are associated, and also due to the perception that they are a step behind 401k plans concerning marketplace innovations. Despite these challenges, there are several distinctive features of 403b plans that may give them a leg-up on other types of plans.

Source: Cammackretirement.com, March 2021

Consolidated Appropriations Act: What Plan Sponsors Need to Know About Retirement Plan Relief

The Consolidated Appropriations Act, 2021 is mostly known for the $900 billion it provided in additional stimulus funding for pandemic relief. But the law also contains several useful provisions for retirement plans, including non-COVID disaster emergency relief, multiemployer, and defined benefit plan changes, and updates to partial plan terminations. All of these provisions are discretionary and have very narrow applicability. Regardless, plan sponsors should take the time to understand the relevant parts of the law and see whether the various provisions might benefit their organizations and plan participants.

Source: Bdo.com, March 2021

Yet Another MEP Targeted by Excessive Fee Suit

The law firm of Capozzi Adler, P.C. has found another 401k plan to sue, and this one a multiple employer plan. The plan -- more specifically the plan fiduciaries -- targeted are those of Nextep, Inc., a Professional Employer Organization, as well as the firm's board of directors, the investment committee, and members of that committee.

Source: Asppa.org, March 2021

DOL Nominee Says Cybersecurity, Retirement Savings High Priority

Julie Su, who was nominated to serve as Deputy Secretary of Labor, spent much of her nomination hearing defending her record as California's labor secretary, but she did field a couple of questions about retirement policy.

Source: Asppa.org, March 2021

New Data Further Showcases Power of Auto Enrollment

Automatic enrollment triples the 401k plan participation rate among new hires according to some recently updated research from Vanguard. The research shows default decisions made by defined contribution plan sponsors under automatic enrollment indeed have a powerful influence on participant saving and investment behavior.

Source: 401kspecialistmag.com, March 2021

Automatic Enrollment: The power of the Default

According to this 17-page Vanguard study, the default decisions made by defined contribution plan sponsors under automatic enrollment have a powerful influence on participant saving and investment behavior. Among new hires, participation rates triple to 91% under automatic enrollment, compared with 28% under voluntary enrollment. Over time, 9 in 10 participants increase their deferral rates, either automatically or on their own, and more than three-quarters of participants remain exclusively invested in the default investment fund.

Source: Vanguard.com, March 2021

Participants Don't Know Their Fees Are Declining

Nearly three-quarters of Americans surveyed do not know how much they pay in fees for their retirement accounts, according to a survey commissioned by investment management firm Rebalance. More than half of survey respondents (57%) indicated they believe that they pay either no fees, or very low fees, to maintain their retirement investment accounts. Nearly one-quarter said they don't know how much they pay in fees. The survey covered more than 1,000 U.S. adults, age 45-75, and working full time.

Source: Plansponsor.com, March 2021

The Value of Determining a Retirement Plan's Philosophy

A seldom-discussed tool that can help improve retirement plans is determining the plan's philosophy or understanding the underlying reason why a company is offering the plan. Retirement industry executives say that while it may sound lofty, determining a sponsor's philosophy for their plan can be very instructive in strengthening the design of the plan and, as a result, improve the outcomes for participants.

Source: Planadviser.com, March 2021

403b Plans and Modeling Tools

Many 403b plan providers offer participant tools to help assess risk tolerance and investment preferences, based on their 401k plan service models. Some tools go as far as to suggest specific investment allocations or model portfolios, and offer options to elect periodic rebalancing to keep allocations in line with original targets. Is this a problem?

Source: Ntsa-net.org, March 2021

Help Employers Address Plan Testing Failures

Even during good business years, some companies struggle to pass the annual nondiscrimination tests required for 401k plans. But throw in layoffs and reduced savings rates triggered by the economic uncertainty caused by a global pandemic, and many more plans may now be finding they did not pass year-end testing for 2020. Retirement plan advisors can make certain a failed test is simply a minor compliance issue easily remedied providing that your client attends to it right away.

Source: Newportgroup.com, March 2021

Cybersecurity Guidance for 401k Fiduciaries Is Lacking, GAO Says

The GAO concluded that plan sponsors, recordkeepers, and others have little to go on as far as guidelines from the Department of Labor and that it isn't clear whether fiduciaries have the responsibility to minimize cybersecurity risks.

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

Managed Account Programs Help DC Participants Tackle Retirement Readiness

Some defined contribution participants, particularly those nearing or living in retirement, stand to benefit from the professional, personalized investment management and advice offered through a managed account program, according to the latest Cerulli Edge - U.S. Retirement Edition.

Source: Cerulli.com, March 2021

Don't Forget About Mandated Retirement Plans for California Employers

Back in 2016, California passed legislation that employers who do not sponsor an employee-retirement plan must participate in a state-run retirement program. Employers who fail to comply with the requirements of the California mandate may be fined by the California Franchise Tax Board. As such, it is important for employers with employees in California to either adopt a retirement plan and file an exemption or register with CalSavers to ensure they comply by the applicable deadline.

Source: Benefitslawadvisor.com, March 2021

Hardship Distributions: What Retirement Plan Sponsors Need to Know About Complying With Recent Changes

Efforts to keep up with the myriad of challenges that retirement plan sponsors faced in 2020 may have caused some to overlook significant changes related to hardship distributions that were enacted before the onset of the COVID-19 pandemic. Now is the time for plan sponsors to examine whether they are complying with these changes in how they administer their plans and whether their plan documents accurately reflect these changes.

Source: Bdo.com, March 2021

Does the Pandemic Have a Silver Lining for Retirement Planning?

While it seems clear the pandemic has caused financial strain to many, a new study suggests there are signs of hope when it comes to retirement planning activity.

Source: Asppa.org, March 2021

Study Finds Misplaced Concerns About COVID and Retirement

While there is a lot of discussion about how COVID-19 has affected retirement security, a new paper suggests that things could have been a lot worse. COVID could have worsened the picture for 401k plans if financial markets had collapsed, the recession had led to widespread withdrawals, or more employers had suspended their match. But these things did not happen, according to the report by the Center for Retirement Research at Boston College.

Source: Asppa.org, March 2021

ABC Releases 401k Fast Facts

401k Fast Facts pulls together studies and statistics from the largest and most trusted researchers in the employee benefits field, including the federal government, to give the clearest picture of how these plans are working.

Source: Americanbenefitscouncil.org, March 2021

How to Settle a 401k "Future Debt"

Beware the Ides of March! In addition to the assassination of Julius Caesar in 44 BC, this day is one marked by Roman religious observances. It was also notable as a deadline to settle debts. In that vein, it may be time for you to reexamine certain benefits with an eye on helping workers "settle a debt" with their future self before it comes due.

Source: 401kspecialistmag.com, March 2021

Sustainable Scam: Is ESG About Responsibility or Higher Fees?

Environmental, social, and governance investing is all the rage, but understanding why large asset managers have embraced the strategy is now more readily apparent. While, in part, an effort to develop ESG options in keeping with societal and environmental good, and partly an accurate reflection of consumer demand, the higher fees they bring shouldn't be dismissed.

Source: 401kspecialistmag.com, March 2021

Important Benefit Plan Provisions of the American Rescue Plan Act of 2021

Although not the primary focus of the American Rescue Plan Act of 2021 and, at least with respect to the multiemployer relief measure, having little direct relationship with the pandemic, there are some benefit plan provisions that will affect plan sponsors and contributing employers.

Source: Wagnerlawgroup.com, March 2021*

DOL Announces Non-Enforcement Policy for Trump-Era ESG and Proxy Voting Rules

The statement from the DOL does not offer any clear indications of how they will modify these rules; however, it notes how commenters have raised the possibility that the rules may have been "rushed" and have had a "chilling effect" on investment activity, both of which may indicate that the DOL will engage in a substantive rewrite or modification of the rules.

Source: Ropesgray.com, March 2021

DOL Announces Non-Enforcement Policy and Intent to Revisit ESG, Proxy Rules

On March 10, 2021, the DOL announced that it will not enforce or otherwise pursue enforcement actions on two recently issued final rules amending the "investment duties" regulation under Title I of ERISA. It further announced plans to revisit these rulemakings. Plan sponsors should be aware that the Department's non-enforcement policy has no impact on a plan participant's ability to bring a private cause of action under these final and effective rules. Plan sponsors should additionally be on the lookout for further updates to the Department's policies in this area.

Source: Littler.com, March 2021

New Coronavirus Bill Proffers Guidance for Partial Plan Terminations and Other COVID-19 Related Distributions

The Consolidated Appropriations Act, 2021 was signed into law on December 27, 2020. This major funding bill included the COVID-Related Tax Relief Act of 2020 and the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which contained provisions reviewed here affecting partial plan terminations and other COVID-19-related distributions.

Source: Hallbenefitslaw.com, March 2021

DOL Announces It Won't Enforce ESG, Proxy-Voting Rules

The DOL announced that it will not enforce the Financial Factors in Selecting Plan Investments rule (commonly known as the ESG rule) and the Fiduciary Duties Regarding Proxy Voting and Shareholder Rights rule, both of which were published in the final months of the Trump administration.

Source: Callan.com, March 2021

What Advisers Should Know About RMD Rule Changes

A new research report out of the Wharton School suggests changes to required minimum distribution rules might not have as big an impact in practice as many might expect, though one subset of clients seems likely to benefit the most from an older RMD age.

Source: Planadviser.com, March 2021

DOL Says It Won't Enforce Final Rules on ESG and Proxy Voting

The DOL said that until it publishes further guidance, it will not enforce either final rule or pursue enforcement actions against any plan fiduciary for failing to comply with them. The DOL said it will update the EBSA website as more information becomes available.

Source: Planadviser.com, March 2021

Johnson & Johnson Prevails in Fiduciary-Breach Suit

A U.S. District Court in Newark, N.J., dismissed a complaint by participants in three Johnson & Johnson 401k plans, who alleged that plan fiduciaries failed to protect their investments in company stock offered as a plan investment option. The participants argued that Johnson & Johnson fiduciaries should have acted following allegations that talc and asbestos had been found in some company products. The resulting controversy depressed Johnson & Johnson's stock price.

Source: Pionline.com, March 2021

$40 Million Excessive Fee Settlement Okayed

One of the largest 401k excessive suit settlements has been approved. The settlement arose in a case involving Reliance Trust and its role regarding the Insperity 401k Plan, in which the plaintiffs were enrolled. The plaintiffs are four participants in this plan for Insperity clients. However, the settlement did not actually involve Insperity but was an agreement between Reliance Trust and the plaintiffs.

Source: Napa-net.org, March 2021

DOL Won't Enforce Trump-Era ESG and Proxy Voting Rules

The two rules were among the most heavily contested measures instituted by the DOL under former Secretary Eugene Scalia, with the 401k rule drawing nearly 9,000 public comments, most of them opposing it. The Biden administration had made clear that it would seek to unwind the rules, and Labor Secretary nominee Marty Walsh last month said he would direct the DOL to reexamine them.

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

Cybertheft Lawsuit: Court Dismisses Fiduciary Breach Claims Against Plan Sponsor for a Second Time

On February 8, 2021, in the latest turn in the saga of a closely-watched ERISA cybersecurity lawsuit, the Northern District of Illinois again dismissed fiduciary breach claims against Abbott Laboratories relating to the cyber theft of $245,000 from a participant's account in Abbott Laboratories Stock Retirement Plan. The decision marks the second time the court has dismissed claims against Abbott Labs.

Source: Groom.com, March 2021

IRS Posts Small Business Retirement Plan Publication

The IRS has posted the 2020 tax year version of Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). It is useful to employers that are considering establishing a retirement plan, as it describes operational requirements, contribution opportunities, etc., of the different plan types.

Source: Futureplan.com, March 2021

DOL Won't Enforce the New Rule on Financial Factors in Selecting Plan Investments

The DOL has released a short statement announcing that it will not enforce the final rule on "Financial Factors in Selecting Plan Investments" that it published on November 13, 2020. The statement also notes that the DOL will not enforce the final rule on "Fiduciary Duties Regarding Proxy Voting and Shareholder Rights" that it published on December 16, 2020. As reasoning for its change of heart, the DOL noted concerns brought by a variety of stakeholders as to whether the two final rules properly reflected the scope of fiduciaries' duties of prudence and loyalty under ERISA.

Source: Bradley.com, March 2021

Quick Reference Guide to the Taxation of Retirement Plan Distributions

A major benefit to employees who are participating in a qualified retirement plan is the deferral of taxes. Pre-tax deferrals, employer contributions, and the related earnings grow tax-free until the amounts are distributed from the plan. Unfortunately, when a participant takes a distribution upon retirement or an early distribution that is not rolled over, the federal government expects to receive its fair share. The taxation of retirement plan distributions is complex, so the article provides a chart to help keep them straight.

Source: Belfint.com, March 2021

Retirement Ages Geared to Life Expectancy

For most of the 20th century, life expectancy was on the rise. Yet older Americans were retiring at younger and younger ages. That changed in the 1990s. Life expectancy continued to rise, but retirement ages started increasing too. Given the change, Urban Institute researchers wondered whether the dramatic longevity gains experienced by the people who make it to their 50s and 60s could be counted as another reason for the delayed retirement trend. Their evidence suggests that growing lifespans are keeping men over age 55 in the labor force longer and postponing their retirement, particularly in areas with strong job markets and more opportunity.

Source: Bc.edu, March 2021

DOL Won't Enforce Financial Factor, Proxy Voting Rules

A March 10 announcement by the Department of Labor's Employee Benefits Security Administration provides a precursor to the direction it plans to take on the recently finalized rules. Released as an enforcement policy statement under Title I of ERISA, the DOL advised that it will not enforce the final rules on Financial Factors in Selecting Plan Investments and Fiduciary Duties Regarding Proxy Voting and Shareholder Rights.

Source: Asppa.org, March 2021

Fidelity Fends Off FundsNetwork Fiduciary Appeal

A federal appellate court has again rejected claims that Fidelity's relationship with those fund companies in its FundsNetwork made it a fiduciary. Ultimately, while the appellate court acknowledged that Fidelity does have some fiduciary duties vis-à-vis the plans and their participants, it pointed out that "Fidelity's actions in a fiduciary capacity are not the subject of plaintiffs' complaint."

Source: Asppa.org, March 2021

Over Half of Americans Surveyed Falsely Believe They Pay Low or No Fees to Manage their Retirement Accounts

Nearly three-quarters of Americans surveyed do not know how much they are required to pay in fees to manage their retirement accounts, according to a recent survey commissioned by investment management firm Rebalance. Over half of Americans surveyed (57%) falsely believe that they pay either no fees, or very low fees, to maintain their retirement investment accounts. Also, nearly one-quarter don't even know how much they pay in fees.

Source: Prnewswire.com, March 2021

Sponsors' Retirement Plan Priorities Shift Due to Pandemic

Callan surveyed plan sponsors and found that their priorities for their DC plans shifted considerably due to the pandemic. Sixty-nine percent of sponsors said they are now most interested in supporting their employees' immediate financial needs. In years past, employers' overriding priority has always been "aspirational goals for their total benefits or total rewards."

Source: Plansponsor.com, March 2021

IRS Opine on PEP Plan Documents

The IRS in their January 20, 2021 edition of Employee Plans News opined that pre-approved qualified retirement plan documents may be used to establish arrangements known as pooled employer plans or PEPs.

Source: Jdsupra.com, March 2021

401k Plan Fees Continued to Decline in 2020

The average total plan cost for a small retirement plan declined to 1.20% from 1.23% over the past year, according to the latest 401k Averages Book. The average total plan cost for a large retirement plan also declined, to 0.90% from 0.91%, Joseph Valletta, the author of the book, said in a release. Valletta defines small plans as those with fewer than 100 participants and up to $5 million in assets and large plans as those with more than 1,000 participants and more than $50 million in assets.

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

DOL Issues Missing Participant Guidance After Years-Long Enforcement Initiative

On January 12, 2021, the DOL issued sub-regulatory guidance detailing what steps plan sponsors should take to locate and distribute retirement benefits to missing or non-responsive participants (missing participants). While this guidance has been a priority request for retirement plan sponsors, service providers, and trade associations, there are mixed opinions as to its impact.

Source: Groom.com, March 2021

ERISA Regulation of ESG Investment: A Counter-Theory

The author writes, "The DOL's effort to set limits on ESG investing implicates three ERISA duties -- prudence, diversification and loyalty. For me the headline issue is prudence and (as DOL itself claims in what I just quoted) the question of value. And that is where I want to start unravelling this seemingly endless argument we're having over 'social investing.'"

Source: Asppa.org, March 2021

Is Auto-Enrollment "Not Optimal"?

A recent industry trade article questions the efficacy of saving early for retirement and notes that there "may even be such a thing as saving too much." What launches that premise is a research paper titled "Is Automatic Enrollment Consistent with a Life Cycle Model?" That turns out to be a relatively fancy academic title for a simple concept: Does automatic enrollment make sense for younger adults?

Source: Asppa.org, March 2021

Withdrawals and Loans From DC Retirement Plans

In reaction to the current volatility in the economy due to the coronavirus pandemic, there have been many questions from defined contribution plan sponsors regarding ways participants can access money in their accounts. While recognizing such leakage may cause future headaches for participants in their retirement, many individuals do not have the resources to weather this storm and have no other options but to access their retirement accounts.

Source: Rethinking65.com, March 2021*

Tax Credit for Small Employer Start-Up Plans

Many employers are unaware that, in certain circumstances, they may be eligible for a valuable tax credit in connection with their establishment of a retirement plan. Although this particular tax credit has been available for almost two decades, it is still surprising to see the general lack of awareness that most plan sponsors have regarding this tax-saving opportunity. This article is intended to familiarize readers with this tax credit so that they can attempt to evaluate its application to their (or their client's) tax situation.

Source: Legacyrsllc.com, March 2021

Increased Penalties for Late 5500 Filings

As part of the release of the 2021 annual adjustment to the civil monetary penalties, the DOL has provided benefit plans with the ever-important reminder of the severity of the penalties that can be assessed for failing to file Form 5500. Effective for penalties assessed after January 15, 2021, the DOL per day penalty for failure to properly file an annual report has increased from $2,233 to $2,259, with no maximum. In addition to the DOL penalties, the IRS can also assess a penalty for late filers up to $250 a day, up to a maximum penalty of $150,000 per plan year.

Source: Graydon.law, March 2021

401k Plan Asset Allocation, Account Balances, and Loan Activity in 2018

Since 1996, the Employee Benefit Research Institute and the Investment Company Institute have worked together on collecting and analyzing annual data on millions of 401k plan participants' accounts. This new 36-page report reflects the year-end 2018 update of these data and EBRI and ICI's ongoing research into 401k plan participants' activity.

Source: Ebri.org, March 2021

A Checklist for Retirement Plan Committees

Given that there are so many considerations to weigh when overseeing a retirement plan, it is important for plan sponsors to have a checklist for their committees -- whether the sponsor has a single retirement plan committee or dual investment and administrative committees -- to cover in quarterly meetings. Experts discuss what main facets of a retirement plan that a committee should cover in its quarterly meetings.

Source: Plansponsor.com, March 2021

Practice of Rebranding Investments Questioned in ERISA Lawsuit

The American Red Cross is accused of allowing excessive investment and recordkeeping fees in its 401k plan. The defendants are also accused of failing to timely consider available collective investment trusts that were identical to the funds offered by the plan and lower in cost. The complaint explains that the plan has engaged in a rebranding process in which it contracts with providers of CITs to offer each provider's CIT bearing the Red Cross name with the only difference being additional cost.

Source: Planadviser.com, March 2021

Women Outperform Men in Managing DC Plans: Morningstar

Women who are administrators of DC plans do a better job of managing than their male counterparts in key areas considered progressive practices by Morningstar. The research firm found that female administrators were more likely than their male counterparts to use auto-enrollment, offer default investments, and practice good governance according to ERISA guidelines.

Source: Pionline.com, March 2021

Oklahoma Latest State to Consider Employer-Mandated IRA

Oklahoma lawmakers have begun the process of establishing a statewide program requiring most employers without a workplace retirement plan to offer one to employees, according to legislation posted on the Oklahoma State Legislature website.

Source: Pionline.com, March 2021

"Astronomical" RK Fees, Branded CITs, Draw Excessive Fee Suit

Just when you thought all the $1 billion 401k plans had been sued, another one shows up. This time the target is none other than the American Red Cross, sued by four of the 22,000 participants (with account balances) in the plan that had over $1.2 billion in assets at the end of 2019 (according to the suit). The case presented is relatively straightforward; plan participants paid higher fees than participants in a "jumbo" 401k plan should have.

Source: Napa-net.org, March 2021

Another Lawsuit Concerning 401k Theft

Theft of 401k account balances by cybercriminals or other types of criminals is an actual thing and they will become more and more popular as long as third-party administrators fail in their role and don't use common sense. The latest lawsuit by Raymond J. Mandli and Mandli Communications, Inc. claims that the TPA, American Trust made an unauthorized distribution in the total amount of $124,105 from Mr. Mandli's plan.

Source: Jdsupra.com, March 2021

SECURE Act Changes and Understanding the Risks and Opportunities

The SECURE Act was enacted into law in December 2019, marking the most significant set of changes to the U.S. retirement system since 2006. There's something for everyone: plan sponsors, employees, and savers alike. The Act puts a variety of significant (and not necessarily related) changes in place that may or may not affect your organization. Start by learning about key provisions, and then think about logical next steps.

Source: Hubinternational.com, March 2021

Evaluating Target-Date Funds Is a Fiduciary Responsibility

Many fiduciaries responsible for selecting their 401k plan's target-date funds don't understand how these funds work. The risk of staying ignorant is increasing. Lawsuits challenging target-date fund selection are on the rise, and plan fiduciaries need to be able to defend their choices in response to these suits. New products, such as target-date funds that provide lifetime income options or make private equity investments are becoming available. For all of these reasons, if target-date funds are included in a plan's investment menu, fiduciaries need to develop a prudent process for evaluating the funds in partnership with their investment professionals.

Source: Cohenbuckmann.com, March 2021

Year-End 2020 Self-Directed 401k Balances Up Despite Ongoing Volatility: Schwab Report

According to Charles Schwab's SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts, the average account balance across all participant accounts finished Q4 2020 at $331,664, a 13% increase year-over-year and a 10% increase from Q3 2020.

Source: Aboutschwab.com, March 2021

Target-Date Funds Continue Their 401k DC Plan Domination

Little surprise, target-date funds are a popular choice for 401k plans' investment lineups, especially among younger participants. An updated study from the Investment Company Institute and the Employee Benefit Research Institute found that younger 401k plan participants have large allocations to target-date funds, being both more likely to hold target-date funds than older participants.

Source: 401kspecialistmag.com, March 2021

Freeze on 401k Contribution COLAs Removed From Stimulus Bill

The American Retirement Association announced Thursday that, after a week of intense lobbying by the industry advocacy organization, the freeze on the annual cost-of-living adjustments (COLAs) for contributions to defined contribution plans contained in the stimulus bill supported by President Biden has been pulled.

Source: 401kspecialistmag.com, March 2021

The Benefits of Enacting a Plan Sponsor Philosophy

Overwhelmed by a lengthy to-do list, including the perpetual need to meet ERISA regulatory obligations, plan fiduciaries often lose sight of the foundation for sponsoring a retirement plan: its purpose. Enacting a Plan Sponsor Philosophy is an effective way for committee members to remind themselves of this basic goal. Unlike a Committee Charter, which sets the lines of authority, or an Investment Policy Statement, which outlines acceptable actions, a philosophy defines a retirement plan's purpose, making it a useful reference tool for committees during the decision-making process.

Source: Porteval.com, March 2021

Plan Sponsors Should Do Their Homework Before Offering Student Loan Assistance

Jay Schmitt, with Strategic Benefits Advisors, discusses plan sponsor considerations for benefits that help employees with student loan debt.

Source: Plansponsor.com, March 2021

How to Effectively Measure Retirement Plan Success

According to Vestwell's "2020 Retirement Trends Report," plan advisers and sponsors use different metrics to determine the success of retirement plans. But it is important for plan sponsors to define plan goals and what they are going to measure, and the defined metrics should be things they can influence.

Source: Plansponsor.com, March 2021

Pandemic Forcing Many to Retire Earlier Than Anticipated

Allianz Life's 2021 "Retirement Risk Readiness Study" finds that the COVID-19 pandemic is having a detrimental impact on people's retirement, with 68% of those who have retired in 2021 saying they retired earlier than they had wanted to, up from 50% in 2020. Exactly one-third, 33%, said health care issues were the reason for their early retirement, up from 25% in 2020. However, only 22% said it was due to unexpected job loss, down from 34% in 2020.

Source: Planadviser.com, March 2021

Principal Life Insurance Named in Self-Dealing ERISA Suit

A new ERISA lawsuit filed in the U.S. District Court for the Southern District of Iowa accuses the Principal Life Insurance Co. of committing various fiduciary breaches in the operation of two retirement plans open to its employees. Related self-dealing claims made against other national financial services providers by participants in their retirement plans have met varying degrees of success.

Source: Planadviser.com, March 2021

Guide to Retirement -- 2021 Edition

Updated annually, this Guide to Retirement provides an effective framework for supporting retirement planning conversations with clients. It includes charts and graphs to help you explain complex topics clearly and concisely. A description and audio commentary are available for every slide.

Source: Jpmorgan.com, March 2021

DOL Clarifies One-Year Limitation on COVID-19 Deadline Extensions -- New Notices May Be Required

In EBSA Disaster Relief Notice 2021-01, the DOL has issued a critical interpretation of prior guidance that extended certain deadlines for employee benefit plans, participants, and beneficiaries due to COVID-19. In coordination with other agencies, the DOL has interpreted the underlying one-year limitation on the ability of the agencies to extend deadlines through regulatory action to essentially apply on an individualized, rolling basis to each applicable deadline.

Source: Bradley.com, March 2021

COVID-19 Deadline Extensions -- No More Time Outs but No Single Deadline Either

The DOL has released Disaster Relief Notice 2021-01 that attempts to resolve a potential conflict with other statutory guidance under ERISA Section 518 and Code Section 7508A, which technically limits the allowable deadline extension period to a maximum of 1 year. Unfortunately, this Notice now results in new deadlines that can apply immediately and will differ based on individual events.

Source: Benefitslawadvisor.com, March 2021

What Plan Sponsors Need to Know About Upcoming Changes to ERISA Plan Audits

Employee benefit plan sponsors and their auditing firms need to begin preparing for the adoption of Statement on Auditing Standards No. 136. This auditing standard was enacted by the American Institute of Certified Public Accountants, and was effective for years ending after December 15, 2020. While the AICPA delayed the effective date by one year due to the COVID-19 pandemic, auditing firms may choose to adopt the standard on the original effective date. Plan sponsors will need to take the time to understand SAS 136 and its effect on the audit process.

Source: Bdo.com, March 2021

COVID-19 Relief for Employee Benefit Plans, Participants, and Beneficiaries Continued for Limited Time

The DOL has released Disaster Relief Notice 2021-01 giving guidance on the duration of COVID-19-related relief previously provided. This article reviews the Notice.

Source: Ascensus.com, March 2021

The Consequences of Excessive Matching Contributions and the Truth About True-Ups

Some employers match participants' deferrals after the end of the plan year, while others match those deferrals throughout the year. When matches are made on each payroll, over and under contributions can result. An excessive employer match is a compliance issue. It's important to have a conversation with your plan's TPA to help identify the possible actions and deadlines should excessive matches occur, as well as whether the plan allows for true-ups.

Source: Alliant401k.com, March 2021

As Retirement Income Needs Grow, DC Plan Sponsors Weigh Solutions

As more plan participants worry about retirement income security, demand for guaranteed income solutions is growing and plan sponsors are pondering the options. While there are many ways to measure the benefits, the author believes that some approaches, like in-plan and default options, have distinct advantages.

Source: Alliancebernstein.com, March 2021

When Lightning Strikes, How to Create Great Content

Ever have a great idea and just run with it? Whether it's a new blog article, lead generation email campaign, or a new prospect presentation deck. Those are magic moments when everything just clicks. Awesome, keep the ideas flowing. Then stop. Take a moment to look at what you've created. Then before you share with your clients, prospects, centers of influence, and compliance teams, ask yourself, how does this reflect my 401k advisor brand?

Source: 401k-marketing.com, March 2021

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