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June 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.


Automatic Enrollment's Long-Term Effect on Retirement Saving

This paper finds that 401k savings plans are increasingly offering automatic enrollment coupled with higher employee default deferral rates. Automatic enrollment almost doubles plan participation and successfully gets participants who might not have otherwise saved, saving. Automatic enrollment combined with automatic escalation creates better participation and savings outcomes.

Source: Troweprice.com, June 2022

Excessive Fee ERISA Complaint Targets Cook Group

The plaintiffs allege that, instead of using the plan's bargaining power to benefit participants and beneficiaries, the Cook Group defendants selected and retained high-cost investments and agreed to excessively high compensation for recordkeeping, administration, and other fees compared to available alternatives.

Source: Planadviser.com, June 2022

Communicating About Retirement Benefits Crucial to Retention

Employees say retirement benefits are important when deciding whether to leave an employer, but many employers are missing key opportunities to tell them about their benefits. More than 8 in 10 employees (82%) say their benefits -- specifically their retirement benefits (77%) -- are highly important in deciding whether they will change jobs, according to TIAA's 2022 Employee Retention Survey. And this comes as nearly a third of employees say they are considering leaving their jobs this year.

Source: Napa-net.org, June 2022

A Top Barrier to Retirement Saving: Education Costs

A quarterly tracking survey of experienced investors finds that education costs are having a significant impact on young investors' ability to save for retirement, but legislative relief could be coming soon. According to the results from E*TRADE from Morgan Stanley's most recent wave of StreetWise, the No. 1 reason Millennial and Gen Z investors take early withdrawals from their retirement savings account is to pay for education.

Source: Napa-net.org, June 2022

When Good 401k Plan Providers Stumble

Many great plan providers eventually go bad and are headed for a long-term goodbye. The problem is there are certain characteristics that you can see a mile away, but they can't. These are some of the ways where a good plan provider stumbles and becomes a bad provider.

Source: Jdsupra.com, June 2022

Sixth Circuit Addresses Key Issues in Excessive Fee Lawsuits

The Sixth Circuit's published decision is a major development in the landscape of litigation challenging the investment options and recordkeeping fees in 401k plans. Smith is the first published Court of Appeals decision to articulate the governing standards for evaluating ERISA imprudence claims at the pleading stage after the Supreme Court's recent decision in Hughes v. Northwestern University.

Source: Groom.com, June 2022

What Does Consistent Participation in 401k Plans Generate?

This paper provides an update of a longitudinal analysis of 401k plan participants drawn from the EBRI/ICI 401k database. Because the annual cross-sections cover participants with a wide range of participation experience in 401k plans, meaningful analysis of the potential for 401k participants to accumulate retirement assets must examine the 401k plan accounts of participants who maintained accounts over all of the years being studied (consistent participants).

Source: Ebri.org, June 2022

Financial Privacy Bill Could Affect Providers

A key House Republican has released a discussion draft of financial data privacy legislation that could impact how retirement plan providers and administrators collect and share consumers' personal information. If enacted, it could have any number of implications for the retirement industry, including in relation to the sharing of data with third parties, administering financial wellness programs, or being sued for unauthorized access or sharing of information to name a few.

Source: Asppa.org, June 2022

A Very Scary Case of 401k Participant Theft

A Maryland man was indicted on money laundering charges in early June after he and accomplices allegedly hacked into the 401k account of an employee at a New Jersey-based company. They added a bank account belonging to another individual without the victim's knowledge or authorization.

Source: 401kspecialistmag.com, June 2022

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

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

Source: Ici.org, June 2022

The ERISA Fiduciary Advice Exemption

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

Source: Groom.com, June 2022

What is Missed Deferral Opportunity?

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

Source: Erisadc.com, June 2022

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

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

Source: Eisneramper.com, June 2022

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

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

Source: 401kspecialistmag.com, June 2022

Advisors Unprepared for New 401k Rollover Rules

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

Source: 401kspecialistmag.com, June 2022

State Bill Would Require Multiple 403b Providers

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

Source: Plansponsor.com, June 2022*

Olin Corp. Soundly Defeats ERISA Lawsuit

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

Source: Planadviser.com, June 2022

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

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

Source: Planadviser.com, June 2022

MITRE Corp. Faces Familiar ERISA Fiduciary Breach Allegations

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

Source: Planadviser.com, June 2022

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

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

Source: Mercer.com, June 2022

DOL, Recordkeeper Square Off in Confidentiality Disputes

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

Source: Erisalitigationadvisor.com, June 2022

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

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

Source: Bostonerisalaw.com, June 2022

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

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

Source: Sidley.com, June 2022

Due Dates for DC Plan Lifetime Illustrations Approaching

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

Source: Segalco.com, June 2022

Senate Finance Committee Advances EARN Act

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

Source: Planadviser.com, June 2022

6th Circuit Backs Defense in Fidelity Freedom Funds ERISA Suit

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

Source: Planadviser.com, June 2022

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

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

Source: Bsk.com, June 2022

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

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

Source: 401kspecialistmag.com, June 2022

Which Retirement Plan Participants Can Sue?

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

Source: Shrm.org, June 2022

Form 5500 and Other Retirement/Benefit Plan Reminders and Developments

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

Source: Hawleytroxell.com, June 2022

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

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

Source: Groom.com, June 2022

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

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

Source: Employeebenefitsblog.com, June 2022

Agencies Release Final Form 5500 Revisions for MEP Reporting

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

Source: Compliancedashboard.net, June 2022

The Roth 401k

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

Source: Captrust.com, June 2022

2023 IRS Limits Forecast Update - May

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

Source: Milliman.com, June 2022*

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

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

Source: Foley.com, June 2022

New IRS Pre-Audit Compliance Program for Retirement Plans

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

Source: Employeebenefitsblog.com, June 2022

Access to CITs Creates Opportunity for 403b Plans

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

Source: Dciia.org, June 2022

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

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

Source: Benefitslawadvisor.com, June 2022

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

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

Source: Asppa.org, June 2022

Bipartisan Bill Backs Auto-Portability

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

Source: Napa-net.org, June 2022

How to Prepare Your Clients for 401k Statement Shock

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

Source: Investmentnews.com, June 2022

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

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

Source: Cohenbuckmann.com, June 2022

The Problem of Access to Retirement Plans in Small Companies

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

Source: Bostonerisalaw.com, June 2022

Yellen Weighs in on Crypto and 401ks

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

Source: Asppa.org, June 2022

Senate HELP Committee Approves RISE & SHINE Act

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

Source: Asppa.org, June 2022

Retirement Plan Record Retention: Keeping Your Data Clean

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

Source: Segalco.com, June 2022

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

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

Source: Milliman.com, June 2022

How to Choose Your Retirement Plan Provider

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

Source: Jdsupra.com, June 2022

Sixth Circuit Rules Derivative ERISA Claims Not Arbitrable Without Plan Consent

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

Source: Hallbenefitslaw.com, June 2022

Brokerage Window Fiduciary Duties in Light of DOL Cryptocurrency Guidance

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

Source: Hallbenefitslaw.com, June 2022

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

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

Source: Erisalitigationadvisor.com, June 2022

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

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

Source: Debevoise.com, June 2022

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

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

Source: Cohenbuckmann.com, June 2022

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

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

Source: Carltonfields.com, June 2022

Universal Availability Audit Steps

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

Source: Belfint.com, June 2022

Don't Be Afraid of DOL, IRS Audits

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

Source: Planadviser.com, June 2022*

401(k)ology: Know Your Participant Notices

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

Source: Newfront.com, June 2022

The SECURE Act's DC Plan Lifetime Income Disclosure Requirements

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

Source: Milliman.com, June 2022

401k Plans Are Failing Middle-Class Americans

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

Source: Investmentnews.com, June 2022

Cybersecurity and Retirement Plans

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

Source: Fi360.com, June 2022

May Sees a Change of Pace in 401k Trading Activity

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

Source: Asppa.org, June 2022

IRS Announces New Pre-Audit Compliance Pilot Program

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

Source: Wagnerlawgroup.com, June 2022

Lack of Standing Trips Up (Another) Excessive Fee Suit

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

Source: Napa-net.org, June 2022

Podcast: New Role(s) With Rollovers

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

Source: Napa-net.org, June 2022

Senate HELP to Kick Off SECURE 2.0 Push

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

Source: Napa-net.org, June 2022

Taking 401k Plan Design to the Next Level

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

Source: Napa-net.org, June 2022

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

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

Source: Frostbrowntodd.com, June 2022

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

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

Source: Foxrothschild.com, June 2022

Why Minority Groups Have Less Access to Workplace Retirement Savings Plans

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

Source: Financial-planning.com, June 2022

DOL Proposes Tougher Prohibited Transaction Exemption Procedures

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

Source: Wagnerlawgroup.com, June 2022

IRS Announces New Pilot Program for Retirement Plan Audits

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

Source: Verrill-law.com, June 2022

How America Saves 2022

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

Source: Vanguard.com, June 2022

Anonymous Correction Guidance Still Available Under EPCRS

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

Source: Graydon.law, June 2022

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

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

Source: Erisapracticecenter.com, June 2022

2021 Defined Contribution Consultant Research Study

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

Source: Troweprice.com, June 2022*

Retirement Plan Provider Sues DOL in 401k Cryptocurrency Row

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

Source: Plansponsor.com, June 2022

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

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

Source: Dorseyerisa.com, June 2022

401ks With Bitcoin Should Expect Lawsuits

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

Source: Wagnerlawgroup.com, June 2022

Missing 401k Contributions Must Be Restored, Court Rules

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

Source: Plansponsor.com, June 2022

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

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

Source: Hrdive.com, June 2022

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

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

Source: Hallbenefitslaw.com, June 2022

IRS Provides Guidance for Late Pre-Approved Plan Restatements

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

Source: Groom.com, June 2022

What's Next for QDIA?

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

Source: Captrust.com, June 2022

Canadian Plan Sponsors Uncertain About Balancing ESG Factors, Fiduciary Responsibilities

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

Source: Benefitscanada.com, June 2022

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

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

Source: 401kspecialistmag.com, June 2022

Yet Another State IRA Program Set to Debut Mid-2023

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

Source: 401kspecialistmag.com, June 2022

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

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

Source: Verrill-law.com, June 2022

How to Communicate With Your Plan Participants Right Now

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

Source: Plansponsor.com, June 2022

How Retirement Is Changing as We Live Longer

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

Source: Planadviser.com, June 2022

How Plan Sponsors Feel About Financial Advisers

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

Source: Planadviser.com, June 2022

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

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

Source: Cohenbuckmann.com, June 2022

403b Universal Availability Rules

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

Source: Belfint.com, June 2022

How to Handle the DOL's New IRA Rollover Rule

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

Source: Advisorperspectives.com, June 2022

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