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June 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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IRS Extends "Physical Presence" Relief

The IRS has extended for one year its temporary option to use e-signatures and video for any participant elections that a plan representative or a notary public must physically witness. In particular, this allows plans to continue to obtain spousal consent to participant waivers of benefit forms for another year without the participant and spouse having to be present in person. Additionally, the IRS is seeking input on this temporary relief.

Source: Segalco.com, June 2021

Plan Sponsors Should Prudently Manage ERISA Accounts

ERISA accounts are created by revenue sharing from funds in a DC plan, and many participant lawsuits have questioned the prudent and fair management of revenue sharing.

Source: Plansponsor.com, June 2021

A DOL Fiduciary Rule and PTE Refresher

No matter if an adviser is a flat-fee registered investment adviser or a commission-based broker/dealer, the DOL says the collection of compensation related to rollover guidance is almost always going to be a prohibited transaction, triggering the need for an exemption.

Source: Planadviser.com, June 2021

Maine Governor Signs State-Run IRA Plan Into Law

Add the Pine Tree State to the growing list of states offering a program to provide coverage to those whose employers do not offer a plan. Gov. Janet Mills signed the "Act To Promote Individual Retirement Savings through a Public-Private Partnership" (LD 1622) into law on June 24.

Source: Napa-net.org, June 2021

State IRA Programs Ignite a New Market for Small 401k Providers

Small businesses are being told to sign up for coverage. Fintech firms and established 401k providers see an opportunity to showcase their services as an alternative to state-run programs before what is essentially a brand-new market.

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

Cybersecurity Enforcement Trends: A Fraught New Reality for Victims of Cyberattacks

The article discusses how regulators have shifted their focus from data breach notifications to overall cybersecurity preparedness. Authors highlight that where regulators previously focused on how companies responded to cyberattacks, they are now focusing more on whether and to what extent victimized businesses were adequately prepared to defend against attacks. They add that if the policies, procedures, and defenses businesses had in place were inadequate, regulators are increasingly pursuing enforcement actions, even in situations where a data breach did not occur or where individual consumers' personal identifying information was not improperly accessed or acquired.

Source: Faegredrinker.com, June 2021

Tech-Forward Recordkeepers Enter the Micro 401k Market

New tech-forward recordkeepers offering low-cost, easy-to-onboard startup plans for small businesses are penetrating the micro 401k provider market, according to the latest Cerulli Edge - U.S. Retirement Edition. As more providers vie for market share, Cerulli expects competition within the micro-market will intensify.

Source: Cerulli.com, June 2021

Master Custodial Accounts and the 403b Self Directed Brokerage Account

Today's 403b plans investment structures can actually be a bit misleading. We have designed these arrangements to "look and act" like investment structures for 401k plans. In fact, the 403b arrangements are actually substantially different than their 401k counterparts. There is a bit of history which helps explain these unique arrangements.

Source: Businessofbenefits.com, June 2021

DOL to Accept Comments on Amendments to 2013 Proposed Class Exemptions

The DOL on June 23 announced that it is reopening the comment period for amendments to class exemptions from prohibited transaction rules set forth in ERISA and the Internal Revenue Code. The proposed amendments, which were originally proposed in 2013, are relevant to certain transactions involving employee benefit plans and IRAs and would remove credit ratings references and create better alignment with the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Source: Asppa.org, June 2021

Could Plan Design Features Increase Abandoned Accounts?

A new research paper suggests that policies that promote retirement saving, such as auto-enrollment, may unintentionally lead to an increase in abandoned retirement savings accounts.

Source: Asppa.org, June 2021

Context and Clarity Key in Communicating With Participants

Communicating with participants is, well, required. But more than that, it's central to helping participants make the most of their participation in a plan. An industry insider argues that an approach that is clear and presents information in a way that makes it real and actionable is best.

Source: Asppa.org, June 2021

2021 401k Participant Study

Plan participants are more positive in 2021 about meeting their retirement goals than they were last year at the beginning of the pandemic. Almost three in ten believe their lifestyle in retirement will improve. On average, participants think they need $1.9 million saved for retirement.

Source: Schwab.com, June 2021*

DOL Ups Game on Cybersecurity Program Oversight, Begins Audit Initiative

In light of a new DOL audit initiative and increasing cybersecurity threats to ERISA benefit plans, ERISA plan sponsors and fiduciaries should be prepared to answer some important questions: Do the cybersecurity programs of you and your service providers comply with DOL guidance? Do your contracts with service providers include appropriate data protection provisions? Are you and your service providers doing enough to protect your employees and ERISA plan participants?

Source: Pillsburylaw.com, June 2021

The DOL Commences Cybersecurity Audit Activity

The Department of Labor is moving quickly to audit cybersecurity protocols. Businesses that have not yet addressed their cybersecurity practices and compliance plans must do so immediately. Example DOL audit questions provided.

Source: Nixonpeabody.com, June 2021

Updated Issue Snapshot - Hardship Distributions from 401k Plans

A 401k plan may permit the distribution of certain contributions (and attributable earnings) on account of an employee's hardship, but only if made following rules contained in the regulations under IRC Section 401(k). This Snapshot examines the criteria for current hardship distributions.

Source: Irs.gov, June 2021

DOL to Act on Credit Rating Use in 401k Fiduciary Decisions

As a result of confusion and manipulation by certain credit rating agencies during the financial crisis of 2008, the Dodd-Frank Wall Street Reform Act blocked the use of credit ratings for exemptions from prohibited transactions. Now the DOL announced it will reopen the comment period on proposed amendments to six class exemptions from prohibited transaction rules related to Dodd-Frank's credit rating prohibition.

Source: 401kspecialistmag.com, June 2021

Duke Reinstates 403b Match, and Takes It One Step Further

Duke University, which recently announced that it will provide a lump-sum contribution to its 403b Faculty and Staff Retirement Plan participant accounts valued at the contributions they would have received from Jan. 1, 2021, through June 30, 2021, in addition to restoring employer contributions effective July 1, 2021.

Source: 401kspecialistmag.com, June 2021

More Plan Sponsors Want to Keep Retiree Accounts: Cerulli

For years, people have been rolling their DC plan assets over to brokerage IRAs at retirement. Many plan providers hated to lose the managed money, but plan sponsors were indifferent. That's changing, a Cerulli analyst writes. Trillions in mobile money are at stake.

Source: Retirementincomejournal.com, June 2021

Protecting Employee Retirement Savings From Cyber Criminals

Companies that sponsor 401k plans have a fiduciary obligation to protect the individual retirement accounts of their employees from cyber theft. Currently, there are approximately 106 million defined contribution plans in the United States, which hold almost $6.3 trillion in employee retirement savings. Unfortunately, over the last couple of years, cyber theft has become an increasing risk for companies that sponsor 401k plans.

Source: Masudafunai.com, June 2021

Offering Cryptocurrency Investments in a 401k Is Irresponsible

Opinion: Recently, a 401k provider, hoping to capitalize on the cryptocurrency fad, announced that it was going to allow 401k plans it works with to access cryptocurrencies as investments. This is a horrible development for 401k plan participants. Here's why.

Source: Lawtonrpc.com, June 2021

Is Your 401k Plan on Course? A Checklist

Keeping your 401k plan on course requires vigilance, and a good plan sponsor navigates more than just the investment climate and daily maintenance of the plan. Tracking a 401k plan includes thorough reviews throughout the year focused on fees and performance, compliance, and participant communication. Here is a concise checklist to keep your 401k plan on course.

Source: Findley.com, June 2021

How to Make Your Investment Committee More Effective

Would you like your investment committee to utilize best practices and produce better outcomes? This is a rundown from a recent episode of a podcast from Fiducient Partners that should prove insightful. Ten Habits of Effective Investment Committees is based on what the author has gleaned over the years from observing many well-run investment committees.

Source: Fiducientadvisors.com, June 2021

IRS Releases Final Regs on Deadline Extensions for Federally Declared Disasters

The IRS issued its Final Regulations on the subject of the mandatory, minimum 60-day postponement of certain tax-related deadlines due to "federally declared disasters" under the Taxpayer Certainty and Disaster Tax Relief Act of 2019, passed as part of the Further Consolidated Appropriations Act of 2020. The Final Regulations, which affect retirement plans (including 401k plans), are substantially unchanged from Proposed Regulations which were issued on January 13, 2021.

Source: Compliancedashboard.net, June 2021

Cybersecurity and Retirement Plans: What Plan Sponsors Need to Know (Webinar Recording)

With participant assets and retirement security on the line, cybersecurity weighs heavily on many retirement plan sponsors' minds. While the recently issued cybersecurity guidance from the DOL provides a roadmap to help prevent cyber threats, the heightened emphasis indicates that cybersecurity will likely remain a DOL focus for years to come. This webinar recording discusses DOL cybersecurity guidance and its impact on plan sponsors, effective approaches to evaluate and monitor plan providers, and the future of information security in the retirement plan space.

Source: Captrust.com, June 2021

401k Survey Shows Sharp Increase in Confidence and Demand for Financial Advice

Workers' confidence about achieving retirement goals has risen sharply since last year according to a new survey from Schwab Retirement Plan Services, and so has their appetite for financial advice. The annual nationwide survey of 401k plan participants finds that more than half (53%) say they are very likely to achieve their retirement goals, compared to 37% in 2020. On average, plan participants in 2021 believe they need to save $1.9 million for retirement, the same amount as in 2020. Ninety-one percent say their financial health is very good or pretty good.

Source: Businesswire.com, June 2021

Plan Terminations: A Refresher

A defined contribution plan can be terminated by a stand-alone resolution to terminate, by plan amendment, or by a combination of resolution and amendment. Kelsey Mayo, ASEA Director of Regulatory Policy and Partner at Poyner & Spruill LLP, suggested reviewing the plan to ensure that any specifically required action is taken and setting the termination date. In this article, Mayo discusses a variety of specific matters relevant to DC plan terminations.

Source: Asppa.org, June 2021

Pandemic Drove Bump in Rollovers

Rollovers from defined contribution plans to IRAs increased by more than 12.6% in 2020, according to a recently released study. The Secure Retirement Institute estimates that rollovers from DC plans to IRAs totaled approximately $623 billion in 2020, up from the $565 billion transferred in 2019.

Source: Asppa.org, June 2021

IRS Again Extends Temporary Relief from Physical Presence Requirement for Retirement Plan Consents

The IRS issued Notice 2021-40, extending guidance released under Notice 2020-42 and previously extended by Notice 2021-03, which provided temporary relief from the physical presence requirements for certain elections that are made by participants and beneficiaries in qualified retirement plans and other tax-favored retirement arrangements. The additional extension provides relief through June 30, 2022.

Source: Ascensus.com, June 2021

Loan Interrupted: What Happens to a Defaulted Plan Loan?

Most DC plans allow participants to take a loan from their plan account. One reason for the popularity of the loan feature is that workers may be more likely to participate in the employer's plan if they know they can access their savings before retirement if a need arises. When a plan loan complies with the tax laws and the plan's loan policy, it is repaid on schedule and the participant restores their savings, with interest, to their plan account. When something goes awry, such as a missed payment that is not made up, the plan loan is in default. To keep the plan in compliance, plan sponsors that allow plan loans must understand the loan rules and what happens when a loan is in default.

Source: Newportgroup.com, June 2021

Has the Tide Finally Turned for Annuities?

Investors apparently are eager for financial protection, but financial professionals continue to underestimate how much their clients are looking for protected income in retirement, according to a new study. As a joint research effort with both investors and financial professionals, the inaugural Protected Retirement Income and Planning Study by annuity proponents the Alliance for Lifetime Income and CANNEX finds that a majority (71%) of all younger investors have some interest in purchasing annuities as part of their overall retirement income plan.

Source: Napa-net.org, June 2021

What Are the Most Common Matching Formulas?

Employer matches in 401k plans are often used as a recruiting tool as part of employee compensation packages, but there are wide variations in the design of matching formulas. For example, consider that in 2020, Vanguard administered more than 180 distinct match formulas for plans offering an employer match, according to the firm's annual How America Saves report.

Source: Napa-net.org, June 2021

3(38) Plan Sponsor Pitfalls

In this article, CAPTRUST's Alysa Cronin takes a deep dive into potential 3(38) pitfalls for plan sponsors. Armed with insights from a few industry leaders, this easy read outlines key takeaways on four common plan sponsor pitfalls when selecting a 3(38) investment manager and how to avoid them.

Source: Captrust.com, June 2021

Technology Driven Retirement Plan Challenges

In the past couple of years, or so is the attention we have had to pay to the growing use of "API" arrangements (or "application programming interfaces") in the retirement plan space. API is fast becoming a major tool in plan administration, as technology demands that computers talk to each other in much more efficient ways. What this growing "API" world is running into is what the author considers a hallmark in plan administration software, particularly in larger, established financial organizations.

Source: Businessofbenefits.com, June 2021

2021 Canadian Retirement Survey

New research from HOOPP and Abacus Data show two of three Canadians have saved nothing for retirement during COVID, retirement tops list of worries. Most Canadians have not set aside anything for retirement in the past year (63%) which is up 5% since last year. The survey also found a widespread belief that better access to workplace pensions is needed to avoid a retirement crisis.

Source: Pensionpulse.Blogspot.com, June 2021*

Maine Poised to Offer State-Run Plan

The Pine Tree State is poised to become the latest state to offer a state-run retirement plan to provide coverage to those whose employers do not offer a plan.

Source: Asppa.org, June 2021

Arbitration of ERISA Retirement Plan Disputes

This 13-page practice note discusses the general enforceability of arbitration clauses in certain disputes, including class actions, with a particular focus upon the enforceability of arbitration clauses involving legal claims made under the Employee Retirement Income Security Act. It also specifically analyzes the advantages and disadvantages of arbitration provisions for retirement plan sponsors.

Source: Wagnerlawgroup.com, June 2021

The IRS Required Restatement of 401k Plans: A Plain Language Explanation in Q & A Format

If you're an employer who has adopted an IRS pre-approved defined contribution plan such as 401k, you'll need to have the Compliant box checked no later than July 31, 2022. Plan document compliance to be specific. It's the IRS requirement that a retirement plan document must be up to date to qualify for favorable tax treatment. IRS pre-approved plans must be rewritten, reviewed, and approved every six years. Once approved, employers who use them must adopt the new plan documents by a certain date. This is called the Restatement process, and as noted in the headline, this Restatement is called Cycle 3 with a July 31, 2022 deadline. The Questions and Answers that follow provide a plain language explanation of what you should know about Cycle 3.

Source: Retirementplanblog.com, June 2021

How Does Your 401k Plan Stack up?

An annual 401k plan benchmarking report finds that the top five industries with the best 401k plans continue to outpace the competition in nearly all metrics. The results of Judy Diamond Associates' fifth annual 401k Plan Benchmark Report show that the top five industries with the best 401k plans in 2019.

Source: Napa-net.org, June 2021

What 401k Plan Sponsors Need to Know About the Investment Policy Statement

When you're a 401k plan sponsor, you hear a lot about an investment policy statement and how you need one. Yet many plan sponsors don't know what it is or what it does. This article breaks down what an IPS is, what it does, and what it doesn't do.

Source: Jdsupra.com, June 2021

The Economics of Providing 401k Plans: Services, Fees, and Expenses, 2020

Key findings: 401k plan participants investing in mutual funds tend to hold lower-cost funds. The expense ratios that 401k plan participants incur for investing in mutual funds have declined substantially since 2000. The downward trend in the expense ratios that 401k plan participants incur for investing in hybrid and bond mutual funds continued in 2020. This is a 32-page report.

Source: Ici.org, June 2021

Using Mandatory Arbitration to Avoid ERISA Class Actions

With the significant increase in fiduciary breach class actions, plan fiduciaries have added provisions, including mandatory arbitrations, to their contracts, to gain control of and rein in litigation. The burning question, however, is where do the courts stand on forcing ERISA plan participants to engage in arbitration.

Source: Cohenbuckmann.com, June 2021

Ten Reasons Why You Need Clean Retirement Plan Data

Sourcing and validating retirement plan data is key to a plan's success. However, the sheer abundance of data coming across the transom can be cumbersome and overwhelming to manage, leading to fiduciary and compliance risks. Having accurate information is important to everyone involved in managing and administering the plan. That's why it's vital to make sure plan data is current and error-free. Here are the top 10 reasons why clean data matters.

Source: Fiduciarydecisions.com, June 2021

Musings of Retirement Plan Fiduciaries on Cybersecurity: Episode One

Plan fiduciaries and their service providers likely have heard about the DOL's cybersecurity guidance. The Department of Labor's stepping into cybersecurity in this way has left plan fiduciaries with some questions. So, what are plan fiduciaries thinking? Here are snippets of conversations between plan fiduciaries that may provide some insight into that question.

Source: Benefitslawadvisor.com, June 2021

Tackling Retirement Risks

Research reveals a remarkable uniformity in the personal risks that people deem important as they approach retirement. Nearly two-thirds of pre-retirees express concern about healthcare costs in retirement; nearly 60% are concerned about depleting their savings; and most place a priority on maintaining a reasonable standard of living. Retirees are also exposed to financial market risks. Two key market risks they may face are a sequence of returns risk and inflation risk. This 10-page paper first describes these four important risks. It then examines four strategies that may help you mitigate these risks.

Source: Bofaml.com, June 2021

Abandoned Retirement Savings: White Paper

Retirement savings abandonment is a rising concern connected to DC systems and default enrollment. Authors use tax data on Individual Retirement Accounts to establish that in 2017, 2.7% of 72.5-year-old account-holders in total abandoned $790 million; the median abandoned account held $5,400. Nearly all of these funds remain with plans and are not sent to state unclaimed property. Regression discontinuity estimates show that abandonment is 10 times higher in automatic rollover IRAs, a type of default account. They nest their findings in a model of retirement savings featuring forgetting to derive implications for passive and active savers.

Source: Ssrn.com, June 2021

What Advisers Would Like Plan Sponsors to Better Understand

Retirement plan sponsors need to be knowledgeable about their investment lineups and deliver documentation to the DOL and IRS on time. Most retirement plan committee members already know this. However, there are some things that advisers and consultants wish their sponsor clients were better at, or that they prioritized more.

Source: Plansponsor.com, June 2021

2021 Target-Date Fund Survey

In the past decade, and particularly since the passage of the Pension Protection Act of 2006, asset allocation funds -- which include target-date funds -- have exploded both in terms of the number of products and assets amassed. They have also become more customized. This Target-Date Fund guide endeavors to present information about these funds and providers in an easy-to-use format for quick reference.

Source: Plansponsor.com, June 2021

DOL Confirms Fiduciary Rule Rewrite, Other Agency Priorities

The 10-year saga of the fiduciary rule will continue. As various administration officials had been suggesting over the past few months, the DOL's Spring 2021 Regulatory Agenda confirms that the Employee Benefits Security Administration plans to issue a Notice of Proposed Rulemaking addressing the definition of fiduciary. The DOL agenda item shows that EBSA plans to issue the NPRM by December 2021.

Source: Ntsa-net.org, June 2021

Court Limits Fiduciary Breach Lawsuit to Claims Against Plan Sponsor and Plan Committee

It is not uncommon for fiduciary claims to be brought initially against every plausible party, including the plan sponsor's board and its members, and various individual employees. An interesting aspect of this case is the relative ease with which the court strips away the claims against individuals and the board in light of the plan sponsor's delegation of investment authority to the plan committee.

Source: Thomsonreuters.com, June 2021*

Excessive Fee Lawsuits Expected to Continue to Rain Down on Plans

There have been approximately 200 "cookie-cutter" ERISA class-action lawsuits filed against retirement plans since 2015, including more than 90 cases filed in 2020 alone. With more "cookie-cutter" cases being filed, especially when the qualified default investment alternative is a "big ticket" target-date fund, there is no sign of these suits slowing down.

Source: Planadviser.com, June 2021

ERISA Excessive Fee Lawsuit Filed Against Generac Power Systems

Generac Power Systems and its board of directors have joined the list of recent targets of an ERISA excessive fee lawsuit. The complaint includes allegations similar to those in many suits filed over the past few years.

Source: Planadviser.com, June 2021

SAS 136: The New Audit Standard for Employee Benefit Plans and Its Impact on Plan Sponsors

The American Institute of Certified Public Accountants issued a new audit standard for employee benefit plans in July 2019. The new standard is commonly referred to as SAS 136. Although SAS 136 imposes new duties on auditors, plan sponsors also have increased responsibilities under this new standard. So plan sponsors may want to become familiar with the new rules now to ensure they are prepared.

Source: Ogletree.com, June 2021

DOL Begins Its Cybersecurity Audit Initiative and It's a Doozy

The DOL has begun issuing information and document requests under their new cybersecurity practices initiative, and the requests are probing and indicate serious inquiry by the DOL. News of the DOL beginning this audit program should not come as a surprise. However, it is fair to say that both the pace with which the DOL has begun its audits and the depth and breadth of the initial round of requests is surprising.

Source: Morganlewis.com, June 2021

ERISA Expense Account Considerations

Many 401k plans contain spending accounts funded by revenue-sharing generated by a plan's mutual fund holdings. These accounts are often referred to as ERISA expense accounts, revenue-sharing accounts, or plan expense reimbursement accounts, and can cause complications for plans if not administered properly. A misstep with the use of these funds could result in participant claims. Accordingly, before utilizing these funds, plan sponsors should use care and consider the questions reviewed here.

Source: Haynesboone.com, June 2021

Eye on ERISA: A Chat With Groom Law's Litigation Chair

Groom principal and head of its litigation practice, Lars Golumbic, recently discussed ERISA litigation trends and how benefits law has evolved over the years in an interview with Law360. In the article, Golumbic shared his thoughts on several topics ranging from what issues he's keeping a close eye on to offering advice to future ERISA litigators.

Source: Groom.com, June 2021

Next CalSavers Deadline Impending

The next deadline for registration with CalSavers, the state-run retirement plan for employees whose employers don't offer one, is coming soon. Employers with 51-100 employers that do not offer a plan have until June 30 to register. Employers that do not register by the applicable deadline face penalties of $250 per employee and additional penalties for sustained non-compliance.

Source: Asppa.org, June 2021

Retirement Plan Fiduciaries and the DOL Investment Advice Rules

The DOL's latest attempt to address these concerns is Prohibited Transaction Exemption 2020-02. This guidance offers important takeaways for employer-plan fiduciaries concerning hiring and monitoring: (1) those who advise you about the investment funds that should be included in the plan; and (2) those who provide advice to participants about their investment fund selection in the plan or on rollovers.

Source: Wnj.com, June 2021

Moving the Needle on Defined Contribution Plans

Does your DC plan need a reset? Learn how plans sponsors can leverage three areas -- inclusion and diversity, plan purpose, and plan management -- to move the needle for their participants.

Source: Willistowerswatson.com, June 2021

Primer on the Code's Required Minimum Distribution Rules: Post SECURE Act

In discussing how monies are distributed from a qualified retirement plan, employees generally fall into one of three camps: those that want distributions as quickly as possible; those that want the distributions during and for the sole purpose of retirement; and those that wish to defer having any distributions paid to them, to continue the tax shelter for as long as possible. This article is directed to the employees within the last camp. In a nutshell, the minimum distribution rules have been devised as a tax penalty provision to prevent employees and their beneficiaries from totally deferring benefits under a qualified retirement plan, an IRA, a 403b plan, or a 457 eligible deferred compensation plan, and thereby transferring such monies income tax-free to the subsequent generations.

Source: Wagnerlawgroup.com, June 2021

Essential Considerations for DC Plan Investment Lineups

Before evaluating investments for inclusion on a DC plan fund lineup, plan sponsors need to decide what types of investments they want to use. The purpose of a retirement plan and the demographics of its participants will help plan sponsors decide what types of investments they need to use to take participants from accumulation to decumulation.

Source: Planadviser.com, June 2021

CDI Corp. Agrees to $1.8M ERISA Lawsuit Settlement

The retirement plan in question in the suit is substantially smaller than many of those that have faced or settled similar lawsuits, and thus the size of the settlement is also reduced.

Source: Planadviser.com, June 2021

Wake Forest University Baptist Medical Center Sued Over 403b Plan Fees

Wake Forest University Baptist Medical Center, its board of directors, and its retirement benefits committee have been sued for allegedly failing to ensure the plan and its participants paid reasonable fees for investments and administration. The complaint alleges that many of the mutual funds in the Wake Forest Baptist Medical Center 403b Retirement Savings Plan were more expensive than comparable funds found in similarly sized plans, those with more than $1 billion in assets.

Source: Planadviser.com, June 2021

Developing Successful Participant Education Strategies

Plan design features that turn employees' inaction into positive savings behavior, like automatic enrollment and automatic escalation, can increase a plan's participation and contribution metrics. But employees who understand the importance of their employer's retirement plan benefits and who are actively engaged in saving for retirement will improve their odds of meeting their retirement income goals. An effective plan participant education strategy can also help workers make informed financial decisions in other areas of their financial lives.

Source: Newportgroup.com, June 2021

Kennedy Introduces Bills to Boost Retirement Savings

Two bills have been introduced in the U.S. Senate designed to help Americans keep -- and have more control over -- their retirement savings. Sen. John Kennedy introduced the Keeping Your Retirement Act and the Increasing Retirement Amount Act on June 7.

Source: Napa-net.org, June 2021

Here Are the Top 10 EBSA Enforcement Categories

A new report from the Government Accountability Office sheds new light on enforcement activities of the DOL's Employee Benefits Security Administration. The 56-page report provides what amounts to a tutorial about EBSA's enforcement activities. It found that the 10 most frequent violation categories account for almost 97% of all violations. In the retirement space, the most common ERISA violation categories are summarized here.

Source: Napa-net.org, June 2021

Roth Conversions May Not Pay Off Until Age 90 for Most

Roth conversions almost always work out in a client's favor, but not necessarily for the reasons that advisers often recommend them, according to an academic study published this week. Contrary to conventional wisdom, tax-rate changes -- up, down, or flat -- have a minimal effect on the long-term financial benefits from converting a traditional IRA or 401k to a Roth account, Edward McQuarrie, professor emeritus at Santa Clara University, wrote in a recent paper. Instead, the overarching factor that gives Roth conversion an edge, given enough time, is compounding, McQuarrie found.

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

Defined Contribution Plan Recordkeeper Data Show Ongoing Commitment to Retirement Saving

Americans continued to save for retirement through DC plans early this year despite uncertain market conditions during the lingering COVID-19 pandemic, according to ICI's "Defined Contribution Plan Participants' Activities, First Quarter 2021." The study tracks contributions, withdrawals, and other activity, based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans.

Source: Ici.org, June 2021

GAO Report Illuminates DOL Enforcement of ERISA

In a report released on May 27, 2021, the US Government Accountability Office published the results of a 15-month inquiry into the enforcement of the ERISA by the DOL. GAO last conducted such an inquiry in 2007. The stated purpose of the inquiry was to examine DOL's management of and strategies to improve the ERISA enforcement process and the immediate and long-term challenges presented by COVID-19. In the process of doing so, the report elaborates or confirms several instructive details about the ERISA enforcement process.

Source: Eversheds-Sutherland.com, June 2021

2021 Retirement Confidence Survey: A Closer Look at Black and Hispanic Americans

The Retirement Confidence Survey was conducted for its 31st year in 2021 to measure attitudes of American workers and retirees about issues surrounding retirement. The 2021 RCS included an oversample of Black and Hispanic Americans to allow for a closer analysis of the challenges that they face in saving and preparing for retirement. New questions were added this year to explore the impact of the COVID-19 pandemic, evaluate priorities regarding preparing for retirement, and understand experiences with the financial system that may affect Black and Hispanic Americans' retirement preparations.

Source: Ebri.org, June 2021

Biden Directs DOL to Consider Rescinding Trump-Era Rule on Environmental, Social and Governance Investing

President Biden signed an executive order on May 20 on climate-related financial risk that seeks to change the rules regarding the use of environmental, social, and governance investments in retirement plans. The order specifically directs the DOL to consider suspending, revising, or rescinding the Trump-era "Financial Factors in Selective Plan Investments" rule regarding ESG retirement investments.

Source: Spotlightonbenefits.com, June 2021

Khan v. PTC, Inc. -- Three Important Lessons From an Otherwise Unremarkable 401k Fee Case

The plaintiffs seek recovery against the plan's investment committee for breach of the fiduciary duties of prudence and loyalty and against PTC's board of directors for failing to adequately monitor the committee. A similar narrative might be found in any of the many dozens of such cases filed each year. Nevertheless, the case merits attention for three reasons.

Source: Mintz.com, June 2021

Cybersecurity Guidance Issued to Retirement Plan Sponsors

This first cybersecurity guidance from the EBSA signals its expectations around cybersecurity. Of note is the focus made on vetting and onboarding service providers. These cautions are particularly helpful when considering vendors who have automated protection processes and/or intimate knowledge of their client's IT systems. Plan sponsors and other fiduciaries with existing cybersecurity programs will want to compare their controls and vendor management programs to these three newly issued guidance.

Source: Eyeonprivacy.com, June 2021

Missing the 401k Plan Match

The key to a successful retirement savings strategy is committing first to consistent savings by deferring a percentage of your pay into a retirement plan. Secondly, it is important to take the time to understand your employer's plan and how the match is calculated. Finally, you should take advantage of any match your employer may provide and make sure that, at a minimum, you contribute enough to receive the maximum matching contribution available.

Source: Tristarpension.com, June 2021

Target-Date Funds: A 'Time Bomb' in a Retirement Tool for the Masses?

A congressional committee has asked the GAO to investigate target-date funds. Ron Surz calls TDFs a "time bomb," saying they hold too much risk near the target retirement date. But many believe TDFs are a valuable tool to help inexperienced investors build sensible retirement portfolios.

Source: Thinkadvisor.com, June 2021

The Strong Case for a Retirement Savings 'Lost and Found'

Past proposals for an Office of the Retirement Savings Lost and Found offered good examples of how the federal government could serve an important, ancillary role alongside the private sector in our nation's 401k system. However, the current proposal for a Lost & Found contained in the draft SECURE 2.0 bill goes too far by including provisions that dramatically expand its purpose, scope, and scale, creating a massive, government-run repository of micro-balance accounts.

Source: Planadviser.com, June 2021

When 'Eating Your Own Cooking' Becomes Self-Dealing

One conclusion that can be drawn from the rash of self-dealing lawsuits filed in the retirement plan services industry is that providers must be just as diligent as their clients when it comes to prudently and loyally delivering workplace retirement benefits, perhaps even more so.

Source: Planadviser.com, June 2021

Empire State Poised to Enact Mandatory Auto-IRA Program

The New York State legislature has taken another big step toward enacting a mandatory auto-IRA program. The State Senate voted 44-19 on June 7 to approve NY A03213-A, legislation that would convert the existing New York state secure choice auto-IRA saving program from being voluntary to mandatory for private-sector employers that do not offer a retirement plan and employ 10 or more employees. The legislation is now cleared for the signature of New York Gov. Andrew Cuomo.

Source: Napa-net.org, June 2021

Collective Investment Trusts: An Important Fiduciary Consideration

CITs are often less expensive to create/maintain and may be more flexible than their mutual fund counterparts given that they are subject to a different regulatory framework. While this may be a benefit to their fee structure, it can also be challenging because CITs often suffer misconceptions when compared to mutual funds. This article reviews some of the most common misconceptions and frequently asked questions by fiduciaries.

Source: Manning-Napier.com, June 2021

Your 401k Plan: Five Smart Moves to Make in 2021

Investing can be difficult, but the 401k is one of the easiest ways to start investing, and it's one of the best ways for Americans to save for their golden years. Many of the actions below focus on small changes, and then you can let stocks do what they do best, go up over time.

Source: Bankrate.com, June 2021

Podcast: Five Intriguing Aspects of SECURE 2.0

Nevin Adams and Fred Reish take a look at five key provisions, their implications for retirement, and for the retirement security of millions of working Americans.

Source: Asppa.org, June 2021

Helping Sponsors Speak in the New Retirement Income Tongue

Ever hear of an annuity rollover service? What about a money-out report, cognitive risk, or global risk? To help retirement plan sponsors that are thinking of offering retirement income options get a better grasp of this new vernacular, the Defined Contribution Institutional Investor Association has issued a glossary of decumulation terms that will likely get sponsors' tongues wagging.

Source: Plansponsor.com, June 2021*

'Secure Act 2.0' Likely to Become a Reality

The U.S. Senate's Improving Access to Retirement Savings Act, which is its version of the House's Securing a Strong Retirement Act, is likely to become law and improve America's retirement savings system in meaningful ways. That's the expectation of retirement plan executives about the bill.

Source: Planadviser.com, June 2021

John Hancock Settles ERISA lawsuit for $14 Million

John Hancock Life Insurance Co. agreed to a $14 million settlement in a lawsuit filed by participants in a company 401k plan who alleged ERISA violations in the plan's management. Terms of the settlement were disclosed in a court filing in the U.S. District Court in Boston.

Source: Pionline.com, June 2021

Missing Participants: What Comes Next?

Washington has shifted again. In 2009, Democrats had complete control of Congress and the presidency. By 2017, complete control had shifted to the Republicans. Now the Democrats are back. One constant is sure to continue: a focus on missing participants in retirement plans. While much of the focus in recent years has been on the DOL, the IRS has a key role to play as well.

Source: Napa-net.org, June 2021

Are ERISA Breach of Fiduciary Duty Claims Arbitrable?

Over the years, attempts to arbitrate breach of fiduciary duty claims under ERISA Section 502(a)(2) have had varying results. This issue is before two circuit courts of appeal this year. So far, the court rulings in the cases seem to provide some guidance while also creating further uncertainty.

Source: Littler.com, June 2021

DOL Issues Guidance on New Fiduciary Rule

The DOL issued guidance that reinforces that the new investment advice regulation in retirement accounts will strengthen oversight of rollover recommendations and require investment advisers to mitigate conflicts of interest.

Source: Jdsupra.com, June 2021

The True Cost of Forgotten 401k Accounts

Experts have suspected that there are a large number of "forgotten" or "left-behind" 401k accounts in the US retirement savings system. These forgotten accounts represent retirement savings that have been left behind by people who have changed jobs or terminated employment. They're often referred to as "inactive" accounts by policy experts, and "stranded" or "orphaned" accounts by the media. This analysis illustrates how large and costly the forgotten 401k phenomenon is.

Source: Hicapitalize.com, June 2021

Cybersecurity: Retirement Plan Sponsors Can Protect Themselves

The digital world has opened many doors, including some to theft and the abuse of information. When it comes to retirement plans and participant assets, cybersecurity has emerged as a significant area of focus. Read this to find out how plan sponsors can protect themselves and their participants while meeting fiduciary obligations.

Source: Captrust.com, June 2021

Lowe's Settles for $12.5 Million and Change

The terms of an excessive fee settlement have come to light, and there's a (relatively) unique twist. The suit was filed nearly two years ago against the plan fiduciaries of the $5.2 billion Lowe's 401k plan and Aon Hewitt Investment Consulting, Inc. (which served as the plan's fiduciary investment consultant) for breach of their fiduciary duties under ERISA for what participant-plaintiff Benjamin Reetz alleged was an imprudent selection and retention of the Hewitt Growth Fund for the plan.

Source: Asppa.org, June 2021

New Research From PSCA Illuminates Common Plan Committee Practices

If there was ever a meeting that couldn't be replaced with an email, it's that of a retirement plan committee, and while those structures are as varied as the companies that sponsor them, a new survey by the Plan Sponsor Council of America uncovers some key consistencies in structure and approach. Indeed, retirement plan committees have always been an essential element in assuring prudent retirement plan operation and administration. While there is perhaps no perfect number of committees -- or committee members -- their construction, monitoring, and maintenance through rotations and training are as critical to their effective operation as it is to the design of the plan functions they oversee.

Source: Psca.org, June 2021

Overwhelming Demand From Workers, Employers, and Retirees for Retirement Income

A large majority of workers saving for retirement through their employers' 401k plans want options that will help them generate income in retirement, according to the fifth annual DC Pulse Survey from BlackRock. According to the survey, 89% of DC plan participants are interested in owning a product designed to generate retirement income, and almost 9 in 10 said having guaranteed income in retirement would have a positive impact on their financial well-being.

Source: Businesswire.com, June 2021

5500 Filing Rejected: How Could Plan Sponsors Have Known Their Auditor Was Deficient?

Each year, the plan sponsor's Forms 5500 get rejected (it had always been previously accepted) when the DOL determined that the plan sponsor's auditor's work was deficient. They are often flabbergasted by the news that they had a responsibility to assess their CPA's qualifications to perform a retirement plan audit. Like going to a new doctor, how can you know whether a licensed professional is good at his or her job? It's not easy.

Source: Belfint.com, June 2021

How to Withdraw Money From a 401k Early

Making an early withdrawal from your 401k might sound like a tempting idea initially, after all, it is your money. But once you know the ramifications, you may feel differently.

Source: Bankrate.com, June 2021

Enhancing Emergency and Retirement Savings Act Introduced

The legislation would provide a penalty-free "emergency personal expense distribution" option from employer-sponsored retirement plans and IRAs. The proposal would allow for one emergency distribution per calendar year of up to $1,000 from the individual's total nonforfeitable accrued benefit under the plan. The bill requires that the withdrawn funds be paid back to the plan before an additional emergency distribution from that same plan is allowed.

Source: Ascensus.com, June 2021

Essential Form 5500 Filing Guidance for 401k Plan Sponsors

It's important to understand that the signer of Form 5500 is considered a plan fiduciary who has potential personal liability for the compliant administration of the 401k plan. This includes being responsible for the accuracy of the information contained on Form 5500. Accuracy is important not only because it's part of operating compliantly but because errors on Form 5500 can raise a red flag for the IRS or the Department of Labor and trigger an audit.

Source: Alliant401k.com, June 2021

Bill Would Allow Penalty-Free Withdrawals From 401ks, IRAs

Sen. James Lankford introduced legislation Tuesday that would allow retirement plan participants to dip into their savings for emergencies. "The Enhancing Emergency and Retirement Savings Act of 2021" would "encourage participation in retirement plans by giving individuals penalty-free access to funds should a family emergency hit," Lankford said.

Source: Thinkadvisor.com, June 2021

Study on 401k Participant Activity and Plan Design Released

T. Rowe Price released Reference Point, its annual 401k benchmarking report featuring year-over-year data and analysis on participant behavior and plan design. The report is based on the firm's full-service recordkeeping client data and this year, it features findings derived through the lens of the global pandemic. Key findings are reviewed.

Source: Prnewswire.com, June 2021

Common Factors Mark the Most Confident Retirees

During a recent webinar, Zahra Ebrahimi, a research associate at the Employee Benefit Research Institute, took a deep dive into her organization's latest white paper. As the title suggests, the analysis offers a close look at the spending patterns and financial behaviors of retirees living in the U.S., grouping them according to the level of financial stability and confidence each feels. The white paper placed retirees into five categories: average retirees, affluent retirees, comfortable retirees, struggling retirees, and just-getting-by retirees.

Source: Planadviser.com, June 2021

U.S. Asks Supreme Court to Weigh in on Excessive Fee Claims

U.S. attorneys argue the Court of Appeals' decision in a case against Northwestern University is incorrect and conflicts with decisions made by the 3rd and 8th Circuits in similar cases.

Source: Planadviser.com, June 2021

Lowe's Reaches Settlement in 401k ERISA Case

Lowe's Cos. has filed a partial settlement with a participant in the company's 401k plan after a lawsuit alleged the company violated ERISA by making imprudent investment choices. Filed in the U.S. District Court for the Western District of North Carolina, the partial settlement was reached with Lowe's Cos. Inc. and its administrative committee. It excludes co-defendant Aon Hewitt Investment Consulting.

Source: Planadviser.com, June 2021

Biden Expected to Advance a More Stringent Fiduciary Rule, Advocate for Retirement Income and ESG Investing

Industry experts reflect on what President Joe Biden has done in his first months in office with respect to retirement plans and what they still see coming down the road from his administration.

Source: Planadviser.com, June 2021

DOL Is Pursuing Fewer Cases, but Much Bigger Payouts

DOL investigations are resulting in the biggest 401k recoveries the agency has ever seen, even as the number of cases it closes has been declining. The agency has been pursuing bigger investigations, part of an initiative started in 2013 to go after plan violations that affect a larger number of participants. The recent numbers suggest that the effort is paying off.

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

"Forgotten" 401k Accounts Amount to Nearly $1.35 Trillion in Assets: White Paper

The white paper explains how these "forgotten accounts" represent 401k savings that have been left behind by people who have changed jobs or terminated employment. According to the company's research, as of May 2021, there are an estimated 24.3 million forgotten 401k accounts in the U.S. By the end of 2021, the company estimates that number will rise to almost 25 million forgotten accounts, with each account holding an average balance of approximately $55,000 and representing nearly $1.35 trillion of assets in total.

Source: Businesswire.com, June 2021

Taking Loans & Withdrawals From Your 401k Plan

During difficult economic times, you may be tempted to tap into your financial future by taking a loan or a hardship withdrawal from your workplace retirement plan. But is it a good idea? Individual circumstances vary, so there is no simple answer to this question. This piece takes a closer look.

Source: Axiaadvisory.com, June 2021

Pitfalls in Evaluating Retirement Plan Fees

Benchmarking investment fees is an important function. It's more than that, it's critical to fulfilling your fiduciary duty. But "essential" does not translate to "easy," and there are some common pitfalls in performing that function. This article identifies common problems with benchmarking fees and mistakes that can be made, and how to avoid them.

Source: Asppa.org, June 2021

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