May 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.

Use the SEARCH feature to located specific items from this digest and from our ARCHIVE.

DENSO International America Faces Multi-Pronged ERISA Suit

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

Source: Planadviser.com, May 2022*

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

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

Source: Mercer.com, May 2022

Understanding the Impact of Russian Sanctions on Retirement Plans

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

Source: Kilpatricktownsend.com, May 2022

2022 Investment Company Fact Book

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

Source: Ici.org, May 2022

Retirement Plan Correction Solution: The Absentee Fiduciary

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

Source: Ferenczylaw.com, May 2022

Legislation to Strengthen Retirement and Emergency Savings Introduced

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

Source: 401kspecialistmag.com, May 2022

IRS Extends Relief From Physical Presence Requirement

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

Source: Compliancedashboard.net, May 2022

Study Finds Plan Advisors Integral to Retirement Plan Participation and Outcomes

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

Source: Businesswire.com, May 2022

401k Loan Protection Helps Address Leakage. How it Works

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

Source: Businessofbenefits.com, May 2022

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

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

Source: Asppa.org, May 2022

New Retirement Bill Amending ERISA Introduced in Congress

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

Source: Plansponsor.com, May 2022

Is the Traditional Fiduciary Insurance Model at Risk?

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

Source: Planadviser.com, May 2022

Understanding the New Defined Contribution Landscape

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

Source: Pimco.com, May 2022

401k Plans Want More Personalized Retirement Solutions

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

Source: Napa-net.org, May 2022

Regulatory Monitor: Department of Labor Update

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

Source: Groom.com, May 2022

Final Form 5500 Revisions Guidance Issued

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

Source: Futureplan.com, May 2022

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

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

Source: Westlaw.com, May 2022*

2023 IRS Limits Forecast

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

Source: Milliman.com, May 2022

Congress Considers Banning Discretionary Clauses in ERISA Plans

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

Source: Littler.com, May 2022

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

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

Source: Investmentnews.com, May 2022

Revisions to Form 5500 Series for 2022 Reporting Released

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

Source: Asppa.org, May 2022

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

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

Source: Americanbar.org, May 2022

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

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

Source: Thomsonreuters.com, May 2022

How Do Employee Benefit Plan Fiduciaries Get That Job?

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

Source: Rolandcriss.com, May 2022

Why Small Business Owners Often Resist 401ks

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

Source: Planadviser.com, May 2022

Schlichter Expands flexPath Targets

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

Source: Napa-net.org, May 2022

Keeping 401k Participants Out of the Lost and Found Box

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

Source: Foley.com, May 2022

Delivering Robust Retirement Communication and Education on a Budget

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

Source: Plansponsor.com, May 2022

Bill Would Further Expand CalSavers

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

Source: Ntsa-net.org, May 2022

Participant Standing Challenged in Excessive Fee Suit

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

Source: Napa-net.org, May 2022

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

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

Source: Conradsiegel.com, May 2022

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

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

Source: Benefitsnotes.com, May 2022

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

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

Source: Benefitslawadvisor.com, May 2022

Enhancement to Savers Tax Credit is Minor

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

Source: Bc.edu, May 2022

Alight Data Finds 401k Plan Balances Hit Record Highs

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

Source: Alight.com, May 2022

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

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

Source: 401kspecialistmag.com, May 2022

Data Breach Suit Targets Consultant

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

Source: Ntsa-net.org, May 2022*

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

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

Source: Natlawreview.com, May 2022

12 Steps to Take Before and During a Data Breach

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

Source: Ifebp.org, May 2022

2022 RCS Fact Sheet: Expectations About Retirement

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

Source: Ebri.org, May 2022

2022 RCS Fact Sheet: Retirement Confidence

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

Source: Ebri.org, May 2022

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

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

Source: Cnn.com, May 2022

Dealing With Undocumented Workers in ERISA Plans

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

Source: Benefitslawadvisor.com, May 2022

IRS Extends Temporary Relief From the Physical Presence Requirement

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

Source: Asppa.org, May 2022

Another Circuit Court Rules on ERISA Arbitration Rules

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

Source: Planadviser.com, May 2022

ERISA Class Action Complaint Targets O'Reilly Automotive

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

Source: Planadviser.com, May 2022

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

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

Source: Hallbenefitslaw.com, May 2022

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

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

Source: Euclidspecialty.com, May 2022

Building a Lifetime Income Product

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

Source: Businessofbenefits.com, May 2022

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

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

Source: Bloombergtax.com, May 2022

Got a Retirement Plan? Race Plays a Role

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

Source: Bc.edu, May 2022

Fiduciary Vulnerability Takes a Hit

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

Source: Rolandcriss.com, May 2022

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

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

Source: Prnewswire.com, May 2022

Key Considerations for Committees Seeking DC Plan Help

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

Source: Planpilot.com, May 2022

401k Investors Display Poise as the Market Struggles

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

Source: Planadviser.com, May 2022

Despite Unrest, 401k Investors Not Making Reactionary Trades

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

Source: Napa-net.org, May 2022

ERISA Advisory Council Confronts Retirement Savings Gaps

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

Source: Mercer.com, May 2022

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

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

Source: Euclidspecialty.com, May 2022

Top Five Operational Errors of 403b Plans

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

Source: Belfint.com, May 2022

Tuberville Introduces Crypto Bill, as Warren Grills Fidelity

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

Source: Asppa.org, May 2022

Challenges Aside, Retirement Confidence Remains High: EBRI

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

Source: Asppa.org, May 2022

401k Plan Investments in Cryptocurrencies

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

Source: Hallbenefitslaw.com, May 2022*

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

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

Source: Hallbenefitslaw.com, May 2022

Hawaii May Say Aloha to Unique Auto-IRA Plan

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

Source: Asppa.org, May 2022

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

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

Source: Wagnerlawgroup.com, May 2022

Lessons From the 2022 Qualified Plan Fiduciary Summit

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

Source: Qualifiedplanadvisors.com, May 2022

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

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

Source: Planadviser.com, May 2022

SEC Greenlights Climate Review of 401k Options

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

Source: Napa-net.org, May 2022

PEPs Pique Small Businesses' Interest, But Hurdles Remain

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

Source: Napa-net.org, May 2022

Sixth Circuit Rejects Arbitration for Proposed Fiduciary Breach Class Action

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

Source: Erisapracticecenter.com, May 2022

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

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

Source: Benefitnews.com, May 2022

State of State-Run Private-Sector Retirement Programs

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

Source: Squarespace.com, May 2022

Benefit Plan Beneficiary Designation Issues

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

Source: Seyfarth.com, May 2022

Recent Changes That Plan Providers May Not Like

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

Source: Jdsupra.com, May 2022

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

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

Source: Ebri.org, May 2022

403b vs. 401k - 2022

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

Source: Consultrms.com, May 2022

IRS Issues Updated Language for Section 403b Plans

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

Source: Bsk.com, May 2022

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

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

Source: Belfint.com, May 2022

Required Participant Notices: A Refresher

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

Source: Asppa.org, May 2022

Younger 401k Participants Really Like TDFs, New Study Finds

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

Source: 401kspecialistmag.com, May 2022

Looking for earlier information? Go to our Archive.

401khelpcenter.com, LLC is not the author of the material referenced in this digest unless specifically noted. The material referenced was created, published, maintained, or otherwise posted by institutions or organizations independent of 401khelpcenter.com, LLC. 401khelpcenter.com, LLC does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com, LLC.

About | Glossary | Privacy Policy | Terms of Use | Contact Us

This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.