July 2022 Digest

This digest contains a wide variety of the freshest source material dealing with current trends, opinion, news, legislative action, investments, marketing, sales, consulting, and legal issues regarding 401k, 403(b) and other retirement plans. Each listing contains a headline (hyperlinked to the source document), description, source of the item, and the month and year posted to this digest.

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Mega DC Plans Nudge Workers to Increase Savings

The 50 largest defined contribution plan sponsors custodied by Northern Trust Asset Management have focused on getting workers to boost their retirement savings with automatic features, according to data from the firm. Plan sponsors are using auto-escalation to boost savings, but they are not focused on retirement income or decumulation options for plan participants.

Source: Plansponsor.com, July 2022*

Retirement Confidence Has Declined Across Generations

Inflation is proving a punch to the gut for workers' retirement confidence, new BlackRock survey data show. The survey found that across generations -- Generation Z, Millennials, Generation X, and Baby Boomers -- more workers feel unprepared or unsure if they are on track for retirement (37%) than in the previous three years. Feeling unprepared for retirement is highest for women, with 47% reporting they lack confidence, according to the survey.

Source: Plansponsor.com, July 2022

State Auto-IRAs Continue to Complement Private Market for Retirement Plans

Pew did an initial examination of data from the annual filings by employer-sponsored plans from 2013 to 2019 to the Department of Labor. The analysis suggested that, in those states that have created auto-IRA programs, employers with plans continue to offer them, and businesses without plans are adopting new ones at rates similar to before the state options were available. Updated data for 2020 show comparable results, despite the impact of COVID-19 on the economy more broadly.

Source: Pewtrusts.org, July 2022

Sixth Circuit Holds That Retail vs. Institutional Share Class Claim Cannot Be Dismissed on Motion

This article discusses a July 22, 2022, decision by the Sixth Circuit, in favor of the plaintiffs and denying the defendant's motion to dismiss, holding that a claim based on the use of a retail share class, rather than a less-expensive institutional share class, was sufficient to survive a motion to dismiss.

Source: Octoberthree.com, July 2022

How to Evaluate a Retirement Plan Recordkeeper

Lawsuits and the threat of regulatory action mean plan sponsors must take special care in choosing a recordkeeper, the entity that manages and accounts for employee investments. Here are some best practices in choosing one and evaluating the incumbent provider.

Source: Hubinternational.com, July 2022

401k Plans and Crypto

Due to the growing popularity of and attractive returns on cryptocurrencies, 401k participants are urging plan fiduciaries to permit these investments. However, crypto investment can be an unpredictable ride. Whether this volatility can be squared with fiduciary duties imposed by ERISA needed clarification. ERISA's fiduciary duties have been described as the "highest known to the law." Fiduciaries wrestle with related issues including: Should crypto be part of the core investment menu available to all plan participants? Do fiduciaries have an obligation to limit crypto investment even in a plan's self-directed brokerage option?

Source: Fisherphillips.com, July 2022

DOL Proposes Amendments to QPAM Exemption

On July 27, 2022, the DOL proposed a set of amendments to Prohibited Transaction Class Exemption 84-14, the so-called "QPAM Exemption," which permits an investment fund holding assets of ERISA plans and IRAs that is managed by a QPAM to engage in transactions with parties in interest to those plans or IRAs, subject to certain conditions. Without an exemption, these transactions generally would be prohibited by ERISA and the Internal Revenue Code. The primary aim of the amendments is to tighten up the conditions which prevent QPAMs that have engaged in certain bad acts from being able to rely on the exemption and to establish procedures that apply when a QPAM is disqualified. However, several of the proposed amendments are unrelated to this aim and would make substantial changes to other aspects of the exemption.

Source: Verrill-law.com, July 2022

Three Senators Challenge Fidelity's 'Immensely Troubling' 401k Bitcoin Plan

In their letter, senators say retirement accounts shouldn't be exposed to "untested, highly volatile assets." Fidelity is "well aware of the dangers" associated with Bitcoin investing, the senators added. Pro-Bitcoin tweets say the senators are on "the wrong side of history."

Source: Thinkadvisor.com, July 2022

DOL Proposes Qualified Professional Asset Manager Exemption Changes

The DOL announced a proposed amendment to the Class Prohibited Transaction Exemption 84-14. As the DOL's summary announcement about the proposal notes, the exemption at issue is commonly referred to as the "Qualified Professional Asset Manager Exemption." The amendment's stated purpose is to ensure the exemption continues to protect plans, participants, beneficiaries, individual retirement account owners, and their interests.

Source: Planadviser.com, July 2022

Inflation Chipping Away at Workers' Ability to Save for Retirement

Inflation is now the top obstacle to saving for a comfortable retirement, according to a new survey from Schwab Retirement Plan Services. In response to rising costs and market volatility, 79% of workers are changing their saving and spending habits, while 44% have altered their 401k investments.

Source: Napa-net.org, July 2022

Crypto in 401k Plans: a Plaintiff Lawyer's Dream?

The prospect of 401k plans adding cryptocurrency to their plan menu is like waiting for "fruit to ripen," according to a plaintiff's lawyer who spoke as part of a July 26 "Lessons from Litigation" panel at the 2022 NAPA D.C. Fly-In Forum. Attorney Mark Bokyo, a Partner with Bailey Glasser LLP, explained that anything which exposes participants to that level of risk, particularly when there's no real way to measure expected return moving forward, is not something that he would put in his plan. "I think the DOL's publicly stated position was carefully worded to just say, 'Hey, do your jobs if you're going to consider adding this.' The fact that participants want it is not a reason to do so any more than adding a lottery ticket fund would be," he noted.

Source: Napa-net.org, July 2022

Who Should Be Trustee of Your 401k Plan?

When a company establishes a 401k plan it is necessary to name a trustee of the plan. This is a very important decision that is not always given the careful deliberation that it deserves. This article covers why it is such a crucial decision and outlines some of the options for naming a plan trustee.

Source: Eforerisa.com, July 2022

2021 Defined Contribution Consultant Research Study

Recent years have presented unprecedented challenges, and the consulting and advisory community is evolving their businesses to address both obstacles and new opportunities. T. Rowe Price, in partnership with Schaus Group, shares insights on retirement trends from their 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.

Source: Troweprice.com, July 2022

SECURE 2.0 Retirement Reform: Focus on DC Plan Provisions

SECURE 2.0, shorthand for three bills that would have significant implications for retirement plans, continues to work its slow but steady path through Congress. It now appears that SECURE 2.0 will be enacted late this year. Plan sponsors should be aware of the many changes included in this pending legislation. This article addresses the most significant provisions that would affect midsize and large DC plans.

Source: Segalco.com, July 2022

2022 401k Participant Survey

Inflation is now the top obstacle to saving for a comfortable retirement, according to a new survey from Schwab Retirement Plan Services. The annual nationwide survey of 401k plan participants finds that workers rank inflation (45%) ahead of other obstacles including keeping up with monthly expenses (35%), stock market volatility (33%), and unexpected expenses (33%). Workers believe they'll need to save an average of $1.7 million for retirement, down from $1.9 million reported in last year's survey, and just under half (47%) feel they are very likely to reach their retirement savings goal.

Source: Schwab.com, July 2022

Communicating on ESG to 401k Plan Participants

A framework for helping 401k retirement plan participants understand sustainable investing is emerging. DC plan sponsors are a frequent first stop for questions from participants, as investor interest in and dollar flows allocated to environmental, social, and governance investing continues to grow, according to a blog post from Megan Yost, a senior vice president and engagement strategist at Segal Benz. In the post, Yost urged plan sponsors to provide a framework that helps plan participants understand ESG, while also cautioning employers to be careful that information is not construed as providing investment advice.

Source: Plansponsor.com, July 2022

Plan Sponsors Signal Concern About Underperformance

The underperformance of plan investment options has heightened the anxiety level of defined contribution plan sponsors, according to a new report. The Cogent Syndicated Retirement Planscape report from Escalent reveals that the top concerns include employees not saving enough for retirement, fiduciary issues, and potential lawsuits. But these challenges create an opportunity for plan providers to offer support.

Source: Napa-net.org, July 2022

DOL Proposes Amendment to QPAM Exemption

The QPAM exemption permits various parties who are related to plans to engage in transactions involving plan and individual retirement account assets if the assets are managed by QPAMs that are independent of the parties in interest and that meet specified financial standards. The DOL says that the proposed amendment would protect benefit plans, participants, and beneficiaries, and would address changes that have taken place in the financial services industry in the past 38 years.

Source: Napa-net.org, July 2022

Great 401k Participant Features That Can Cause You Headaches

Within a 401k Plan, some options are truly beneficial to plan participants when it comes to increasing retirement savings or allowing access for a participant's benefit. The problem with these options is that if you and your plan provider don't keep an eye on them, there may be a compliance headache coming your way.

Source: Jdsupra.com, July 2022

IRS Announces New Pre-Audit Compliance Program

The IRS has announced the implementation of a 90-Day Pre-Examination Compliance Pilot program in its Employee Plans newsletter dated June 5, 2022. As a result of this major development, plan sponsors that receive an initial letter from the IRS should take immediate steps to identify compliance issues, take voluntary corrective action, and prepare a summary of those issues and actions for the IRS. In addition, plans should prioritize any compliance errors to ensure that they can successfully resolve them within the 90-day timeframe and take advantage of the benefits of the Pilot Program.

Source: Hallbenefitslaw.com, July 2022

Sixth Circuit Tosses ERISA Fiduciary Breach Claims

On June 21, 2022, CommonSpirit Health defeated a putative class action brought by former employees who alleged that the company mismanaged their 401k plan by offering higher-cost, actively managed investment options when lower-cost index funds with better returns were available. The plaintiffs also alleged that the plan's recordkeeping and investment management fees were excessive when compared to industry averages.

Source: Erisalitigationadvisor.com, July 2022

Study Shows Workers Struggling Against Inflation to Save and Invest for Retirement

Inflation is now the top obstacle to saving for a comfortable retirement, according to a new survey from Schwab Retirement Plan Services. The annual nationwide survey of 401k plan participants finds that workers rank inflation (45%) ahead of other obstacles including keeping up with monthly expenses (35%), stock market volatility (33%), and unexpected expenses (33%).

Source: Businesswire.com, July 2022

Hawaii to Establish Unique Retirement Program

Hawaii has joined the states that provide retirement plan coverage for private-sector employees whose employers do not offer one, and with a twist. Gov. David Ige signed legislation creating the program into law on July 12. It went into effect immediately.

Source: Asppa.org, July 2022

Fiduciaries Press for a Redo in Excessive Fee Case

The suit in question was filed by a group of participant-plaintiffs in the $5.354 billion Humana Retirement Savings Plan (represented by the law firm of Capozzi Adler). The plan in question may have been large, but the suit filed back in May 2021 was a mere 27 pages long, relying on all-too-familiar claims, specifically that the plan fiduciaries breached the duties they owed to the plan, to plaintiffs, and to the other participants of the plan.

Source: Asppa.org, July 2022

401k Contributions Reason for Strike at Major Company

Employer contributions are the reason behind a looming strike at aerospace giant Boeing after negotiations failed to produce an agreement on Sunday. More specifically, nearly 2,500 members of the International Association of Machinists and Aerospace Workers (IAM) District 837 voted to strike Boeing's facilities in St. Louis, Mo., claiming it failed to "adequately compensate our members' 401k plan."

Source: 401kspecialistmag.com, July 2022

DOL Announces Proposed Changes to 401k Asset Management PTE

The DOL has proposed an amendment to an almost 40-year-old prohibited transaction exemption that allows major financial firms to manage retirement assets. The changes relate to misconduct and convictions involving financial institutions and money managers, as well as their employees and subsidiaries. The proposed amendment, known as the Qualified Professional Asset Manager (QPAM) Exemption, will "ensure the exemption continues to protect plans, participants and beneficiaries, individual retirement account owners and their interests," according to the department.

Source: 401kspecialistmag.com, July 2022

DOL's Rules on Rollover Advice Now in Effect

While aspects of the rule were already in effect, now advisors must also provide the mandated written explanation to rollover clients of the specific reasons as to why the investment professional and/or financial institution believes that the rollover is in the client's best interest, or else face substantial potential liability. This exposure is likely to trigger coverage under professional liability policies, as opposed to fiduciary liability policies which protect plan sponsors.

Source: Wtwco.com, July 2022*

Sixth Circuit Ruling Revives Parts of TriHealth ERISA Lawsuit

The Sixth U.S. Circuit Court of Appeals has reversed parts of a prior ruling in an excessive fee lawsuit against TriHealth Inc and remanded the case for further litigation. The new appellate ruling comes less than a year after the U.S. District Court for the Southern District of Ohio, Western Division issued its order granting dismissal of the amended class action complaint, which was initially filed against TriHealth Inc in August of 2019.

Source: Planadviser.com, July 2022

Inflation Fears Cut Into Retirement Savings, Confidence

More Americans (37%) spanning generations and demographics feel unprepared or unsure if they are on track for retirement compared to the previous three years, and women are even less certain, according to a new survey.

Source: Napa-net.org, July 2022

Why ESG Funds are Used Haphazardly in 401ks

Sustainable funds are seldom used in 401k plans, and new research shows that many people who do select the investment options might have little idea as to what the products are investing in. The findings, from PGIM and the Employee Benefit Research Institute, have potential implications for workers who build their retirement plan portfolios. Among 401k account owners who take a DIY approach to their portfolios, 8.9% opt for at least one sustainable fund when available within their plan, the report found. For those who do select a sustainable fund, their average allocation to it is 18.7% of their overall exposure.

Source: Investmentnews.com, July 2022

Five Administrative Policies Every 401k Plan Needs

401k plans are required to maintain some of these policies either by ERISA or under DOL guidance, and others, while not necessarily required by law, are helpful in the event of a DOL audit or participant litigation. Having clear policies and procedures in place also helps employees involved in plan administration do their job more efficiently by mapping out appropriate steps to take when various situations arise. This article takes a look at five policies or procedures that are important for proper 401k plan administration.

Source: Foley.com, July 2022

Inflation and Retirement: Here's How Plan Sponsors Can Respond

Because inflation has been low for decades, plan sponsors didn't give it much thought. But as inflation rates rise above 7% and even 8%, it's cutting into retirement plan participants' returns. Here's what plan sponsors can do to help employees.

Source: Hubinternational.com, July 2022

Way Too Much Risk in 401k Target-Date Fund Glide Paths: Morningstar

The Morningstar Center for Retirement & Policy Studies found that target-date fund sponsors may expose individual investors to increased risk by not tailoring plan glide paths to their behavior. The center reports that 58% of DC plan assets are invested in off-the-shelf TDFs, many of which are designed for participants to stay in the plan through their retirement, even in cases when they are likely to roll their money out of the plan at retirement. This mismatch could leave participants overly exposed to equities later in their careers.

Source: 401kspecialistmag.com, July 2022

How America Saves 2022

This study is an examination of retirement plan data from five million DC plan participants across Vanguard's recordkeeping business. Saving and investing attention is shifting to how best to provide participants with a holistic financial wellness platform, via advice, which also helps meet another challenge, offering guidance for the income needs of retirees who stay in their employers' plans. Meeting these needs, along with continually encouraging strong saving rates with appropriate investment diversification, are the primary drivers in creating successful retirement outcomes for employees.

Source: Vanguard.com, July 2022

Growing Inclusion of Alts in DC Plans

Defined contribution retirement plans are incorporating alternative investments in custom target-date funds, and access to alternatives has increased thanks to white-label funds.

Source: Plansponsor.com, July 2022

2022 Recordkeeping Survey

The annual PLANSPONSOR Recordkeeping Survey was conducted in June via an online questionnaire. Recordkeepers of DC plans participated in the survey and provided the information outlined on the subsequent pages. The charts and profiles are aggregated and ranked by reported total assets, plans and participants. Specifically, the profiles offer a look into a breakdown of sponsor service offerings, participant services, and related offerings.

Source: Plansponsor.com, July 2022

401k Legal Battles Set to Surge in Second Half of Year

The wheels of justice may turn slowly, but the action in retirement plan lawsuits should ramp up in the second half of 2022 after a pair of big court decisions. There have been 42 Employee Retirement Income Security Act class-action suits filed since the start of this year that allege the mismanagement of 401k and 403b defined-contribution retirement plans. If the rate ticks up slightly, the industry may eclipse 100 lawsuits in 2022, making it the highest year ever. In 2021 there were 54 cases, a nearly 45% drop from 2020's record tally of 97.

Source: Investmentnews.com, July 2022

Temporary Waiver of RMDs Proposed in House

Representative Warren Davidson has introduced HR 8331, a bill that would provide for a suspension of required minimum distributions from retirement plans and IRAs for the 2022 calendar year.

Source: Futureplan.com, July 2022

Sixth Circuit Issues a Mixed Opinion in 401k Plan Investment Litigation

The Sixth Circuit recently issued a mixed opinion in a 401k plan investment litigation. The Court upheld the dismissal of the plaintiffs' fiduciary-breach claims relating to the investment management fees and performance of several of the plan's investment options but reinstated a claim for breach of fiduciary duty based solely on the plan fiduciaries' alleged failure to offer less expensive institutional share classes of mutual funds.

Source: Erisapracticecenter.com, July 2022

Form 5500 Deadline Looming

An important deadline fast approaches for many plans, the Form 5500 is due to be filed by July 31. Plan sponsors of calendar-year plans must file their Form 5500 series returns by the last day of the seventh month after the plan year ends, which for calendar year plans is July 31 of the year after the end of the previous plan year. So plan sponsors of calendar-year plans must file by July 31, 2022, concerning the 2021 plan year.

Source: Asppa.org, July 2022

Appellate Court Finds "Plausible" Fiduciary Claim in Share Class Choice

Noting that "precedent has overtaken some of the debates in the case," a federal appellate court has weighed in on an excessive fee case, affirming the rejection of most, but not all, of the plaintiffs' claims. The defendants, in this case, are the fiduciaries of the Cincinnati-based TriHealth retirement plan -- a relatively small plan ($457 million) -- and the suit filed on behalf of participant plaintiffs by a law firm relatively new to these types of actions.

Source: Napa-net.org, July 2022

A Minnesota Hospital System Targeted in Excessive Fee Suit

Another excessive fee suit -- heavy on definitions and allegations, including a couple of potshots at the providers involved -- has been filed in the U.S. District Court for the District of Minnesota. Minnesota hospital system North Memorial Health Care has been charged by participant-plaintiffs with having breached the duties they owed to the plan, to plaintiffs, and the other participants of the plan.

Source: Napa-net.org, July 2022

Handling Undocumented Workers Who Participate in ERISA Plans

Undocumented workers are increasingly participating in and accruing benefits in ERISA plans, which presents challenges for employers. ERISA does not specifically exclude these employees from participation in ERISA-governed plans. Although the federal government has explicitly stated that other federal laws protect undocumented workers, it also has not stated that ERISA protects undocumented workers. Likewise, court decisions have been inconsistent in their treatment of undocumented workers under ERISA. The lack of clear guidance combined with inconsistent court decisions can lead to confusion and differing approaches from employers dealing with undocumented workers.

Source: Hallbenefitslaw.com, July 2022

IRS Updates Determination Letter Forms for Move to Mandatory Electronic Filing

As of June 2022, the IRS updated two of its forms and related instructions in connection with its determination letter program for qualified retirement plans, including 401k plans. The updates are required as of July 1, 2022, due to the move to the required all-electronic filing of Form 5300, which the IRS announced on May 25, 2022.

Source: Compliancedashboard.net, July 2022

Another Cybertheft Lawsuit Spotlights 401k Recordkeeper Procedures

Several lawsuits have been filed against plan sponsors and their recordkeepers, including Estee Lauder, Abbott Laboratories, and recordkeeper Alight, as a result of the theft of plan participant assets. Those cases have not resulted in final decisions clearly defining the responsibilities of fiduciaries and service providers, but a newly filed lawsuit against Colgate-Palmolive and Alight provides another opportunity to do so.

Source: Cohenbuckmann.com, July 2022

403b and Lifetime Income

With all of the current focus on unique programs designed to enhance the attractiveness to participants and fiduciaries of adopting lifetime income programs under defined contribution plans, there is little discussion about how all of this plays out in the 403b market.

Source: Businessofbenefits.com, July 2022

BlackRock: Read on Retirement

After over two years of rising inflation, market volatility, and a global pandemic, savers are looking for security and guidance when it comes to retirement. The 2022 "Read on Retirement" is more comprehensive than in the past surveys. In addition to fielding data from plan sponsors, retirees, and workplace savers -- those who have access to a workplace plan -- also added are 1,300 independent savers. This new segment is comprised of people who are saving for retirement but without access to an employer-sponsored plan.

Source: Blackrock.com, July 2022

Plan Sponsors' Fiduciary Duty for DC Plan Compliance Testing

As fiduciaries, defined contribution plan sponsors must act in the best interest of all participants and ensure that the plan itself does not cater to one person or group over another. To make sure this rule is being followed, ERISA requires that plans undergo annual compliance tests. To help prevent any potential issues, plan sponsors need to understand the testing requirements and communicate with service providers regarding any changes to the plan. This article presents ways a plan sponsor can potentially avoid testing issues and correct them when they arise.

Source: Bdo.com, July 2022

How to Think About Recent Trends in the Average Retirement Age?

After a century of decline, work activity among older men stabilized in the 1980s and began to rise in the 1990s. This turnaround reflected changes in Social Security, retirement plans, the nature of work, education levels, and health coverage. In response, the average retirement age for men has risen by about three years. The goal of this 10-page paper is to put this three-year increase in context.

Source: Bc.edu, July 2022

Let States Be Savings Laboratories, Says Analysis

We'll pass on that, the U.S. Supreme Court said when asked to review a ruling on a challenge to the legality of CalSavers, California's state-run retirement plan for private-sector employees whose employers do not offer one. Congress should take the hint, suggests a recent analysis, and let the states experiment with similar plans undeterred. The High Court thus indirectly expressed the view that CalSavers does not violate ERISA, and that that bedrock benefits law is not an impediment, writes Edward A. Zelinsky, Morris and Annie Trachman Professor of Law at Yeshiva University, in the research paper "How Should Congress Respond to Jarvis? The Case for Letting States Experiment With Private Sector Retirement Savings Plans."

Source: Asppa.org, July 2022

Retirement Savings Rates Up, but Confidence Down: BlackRock

We've got a classic good news/bad news scenario coming out of BlackRock's just-released seventh annual retirement survey. The annual survey of plan participants and sponsors finds double-digit deferrals, but inflation curtails confidence in retirement readiness.

Source: 401kspecialistmag.com, July 2022

How Planning for Retirement Has Evolved

J.P. Morgan Asset Management has released its annual "Guide to Retirement," providing a detailed update on the retirement landscape and new insights into the saving and spending behaviors of retirees. According to the report, the best way to mitigate such wide-ranging challenges is to develop a comprehensive retirement plan and focus on what can be controlled. This includes maximizing savings as early as possible, understanding and managing to spend, and being well-diversified from an investment and tax perspective.

Source: Plansponsor.com, July 2022*

Nextep Settles 401k ERISA lawsuit for $1.1 million

Nextep Inc. will pay $1.1 million to settle an ERISA lawsuit filed by former participants in a company 401k plan, according to an agreement filed July 8 with a U.S. District Court in Norman, Okla. The parties announced an agreement in principle in May 2022 but didn't disclose the terms then. The settlement requires court approval.

Source: Pionline.com, July 2022

2023 IRS Limits - June Forecast

This is an update to the Milliman 2023 IRS limits forecast using the U.S. Bureau of Labor Statistics report published July 13, 2022. Seven of the 12 expected limits are higher than the forecast in our May report. With only three months remaining for the fiscal year 2022, the 2023 IRS limits forecast will most likely set the record for a one-year increase.

Source: Milliman.com, July 2022

Roughly Half of Americans Lack Access to Workplace Retirement Plans

Roughly half of the workers in the U.S. do not have access to a retirement plan at work, according to a new AARP study released this week. Nearly 57 million people -- 48% of American private sector employees ages 18 to 64 -- work for an employer that does not offer either a defined contribution plan or a pension plan.

Source: 401kspecialistmag.com, July 2022

Retirement Plan Sponsors Should Prepare for the New IRS Pre-Examination Pilot Program

In June 2022, the IRS launched a pre-examination pilot program for retirement plans that could help employers avoid costly penalties. The program aims to reduce the burden of, and time spent on, retirement plan audits, which are typically a time-consuming endeavor for plan sponsors. The program ultimately should be good news for plan sponsors in terms of both financial penalties and, presumably, a more efficient audit process.

Source: Spencerfane.com, July 2022

401k Investors Had an Active Trading Month in June

Alight Solutions has published the June update of its 401k Index, noting that it was another active trading month for investors. There were five above-normal trading days in June, Alight says. All but three days in the month had net trading flows going from equities to fixed income.

Source: Planadviser.com, July 2022

Appellate Court Backs Freedom Funds Fee Suit Dismissal

A federal appellate court has backed the dismissal of an excessive fee suit, rejecting the notion that offering actively managed funds -- even those with disappointing performance -- by itself doesn't support allegations of a fiduciary breach.

Source: Ntsa-net.org, July 2022

Fund Fees Dropped Nearly $6.9 Billion in 2021

Continuing their two-decade decline, the average expense ratio paid by fund investors fell again last year, Morningstar's annual U.S. Fund Fee Study reports. The study, which evaluates trends in the cost of U.S. open-end mutual funds and exchange-traded funds, found that the asset-weighted average expense ratio of U.S. funds fell from 0.42% in 2020 to 0.40% in 2021, saving investors an estimated $6.9 billion as a result.

Source: Napa-net.org, July 2022

Plan Documents: The Lifeblood of Compliance

Plan documents are the lifeblood of compliance. They drive communication, they drive compliance. People get into a lot of trouble when they don't handle plan documents correctly, and that failure to comply on time is one of the biggest compliance issues for the IRS.

Source: Asppa.org, July 2022

Why Missing 401k Participants Are So Misunderstood

"Missing participants" is a label for a problem that's ill-defined and poorly understood, and where fundamental misunderstandings exist, inadequate solutions -- paired with the prospect of unwanted regulatory attention or audits -- can persist. Here's how you can better understand the problem and free yourself from the missing participant treadmill.

Source: 401kspecialistmag.com, July 2022

ERISA Complaint Alleges $751K Retirement Account Thievery

A new ERISA lawsuit has been filed in the U.S. District Court for the Southern District of New York, naming as defendants the Colgate-Palmolive employee relations committee, plan recordkeeper Alight Solutions, and custodian BNY Mellon for their parts in operating the company's defined contribution retirement plan. The entire retirement account balance of a Colgate-Palmolive retirement plan participant who lives in South Africa was distributed to a bank account in Las Vegas.

Source: Planadviser.com, July 2022

Blunders That Can Cost a 401k Plan Sponsor

A blunder is a stupid and careless mistake. History is filled with well-known blunders. Blunders you make as a plan sponsor won't make the history books, they will just cause you headaches and possibly cause you financial harm. This article is all about the blunders to avoid now as a 401k plan sponsor.

Source: Jdsupra.com, July 2022

Navigating the IRS Pre-Audit Retirement Plan Pilot Program

Under the Pre-Examination Compliance Pilot, which went into effect last month, the IRS notifies retirement plan sponsors 90 days in advance that their plan has been selected for an audit. The plan sponsor then has 90 days to review its plan documents and operations and to correct any compliance issues that may be discovered. The pilot program has three main features which are outlined here.

Source: Icemiller.com, July 2022

ERISA Plan Arbitration Clauses Likely Headed to U.S. Supreme Court

Various federal appellate courts have considered cases in which employers attempt to prevent ERISA class action lawsuits by including mandatory arbitration requirements in their plan documents. Due to the varying outcomes of these cases, this issue is likely headed to the U.S. Supreme Court for resolution.

Source: Hallbenefitslaw.com, July 2022

58% of Canadian Pre-Retirees Contributing to Retirement Savings: Survey

While more than half (58 percent) of employees within 10 years of retirement are contributing to retirement savings, only about a third (30 percent) have established a thorough financial plan, according to a new survey by Age Wave and Edward Jones Canada. The survey, which polled more than 1,000 Canadians aged 45 or older who were retired or within 10 years of retirement, only a third (33 percent) of retirees said they're in great shape financially. On average, retirees started saving at age 37 but wished they had started saving at age 28.

Source: Benefitscanada.com, July 2022

Changing Behavior for a More Secure Retirement

One of the keys to financial security in retirement is behavior; in particular, before retirement, and the earlier the better. That was the underlying message of an expert panel in a recent webinar concerning retirement readiness. In a recent EBRI webinar, panelists discussed retirees' views on their situations and how their decisions led to that, as well as what employers can do to empower future retirees to build a sound financial future and retirement.

Source: Asppa.org, July 2022

Out of Sequence: Why TDF Risk Near Retirement Is a Bad Bet

Retirement researchers have documented the importance of Sequence-of-Returns Risk and the Risk Zone. Losses sustained in the five to 10 years before and after retirement can do irreparable harm. It's a gauntlet we each must run once. But target-date funds do not protect against this risk, ending 85% in risky assets at their target retirement date: 50% in equities plus 35% in risky long-term bonds.

Source: 401kspecialistmag.com, July 2022

How the Great Resignation Is Impacting Plan Sponsors

Whether you call it the great resignation or the Great Reshuffle, employees from entry-level associates to C-suite executives are making career moves, motivated by pandemic-prompted introspection, rising wages, and more leverage to negotiate for perks like telecommuting or flexible scheduling. For some plan sponsors, the high quit rates of the past few years -- both internally and at the recordkeepers and advisers with whom they work -- have created some challenges.

Source: Plansponsor.com, July 2022*

Has Vesting Gotten Controversial?

Against all odds, vesting schedules have become the stuff of headlines. Personal-finance writers around the U.S. are offering advice and insight into how employees should regard the schedule in which they vest in their employers' contributions to their defined contribution retirement plans. For workers in businesses that have shorter employee tenures, a long-graded vesting schedule could be seen as unfair to workers. But for plan sponsors, vesting schedules can control costs and help with employee retention.

Source: Plansponsor.com, July 2022

It's Form 5500 Season: Five Common Mistakes That Plan Sponsors Should Avoid

We are just past the "official" start of summer, which means it is time for sponsors of retirement plans and many health and welfare plans to think about preparing and submitting Form 5500. This article examines the most common mistakes encountered when plan sponsors complete Form 5500.

Source: Dickinson-wright.com, July 2022

What to Know if Your Employer Changes 401k Providers

Companies change administrators for their 401k plans every so often. These firms (also known as record keepers) keep track of employees' retirement savings, contribution rates, investments, trades, and other data. Workers likely won't know their company is changing providers beforehand. But there are a few steps investors should take afterward.

Source: Cnbc.com, July 2022

Retroactive Retirement Plan Adoption for New Qualified Plans Under the SECURE Act

This is a considerable change from the original IRS stance that employers had to adopt a plan before the end of their taxable year. This eliminates the time pressure for employers to decide if they can afford a new retirement plan. Now any plan that is adopted before the due date of an employer's tax return (including extensions) is considered to have been established on the last day of the tax year.

Source: Tri-ad.com, July 2022

Hughes v. Northwestern University: A Message to Fiduciaries From the Supreme Court

"That reasoning was flawed." With those four words, the Supreme Court of the United States reaffirmed that retirement plan fiduciaries' responsibilities apply independently to each investment option. Offering a lot of investment options does not eliminate the responsibility related to each of them. Offering some cheap investment options does not excuse expensive ones. Offering some stronger performers does not excuse poor performers. The bad stuff is not okay simply because there's also some good stuff. This 12-page paper underscores why plan fiduciaries must take notice of this ruling.

Source: Qualifiedplanadvisors.com, July 2022

Plan Participants Have Modest Retirement Expectations

It might be time to put to bed the cliched, sunny depictions of retirees traveling overseas or enjoying their golden years carefree on the beach, a survey from Principal shows. A key retirement goal for 71% of workers is now merely to maintain their standard of living, according to the latest update of the Principal Retirement Security Survey. Meanwhile, 44% of individuals cited splurging periodically in retirement as a priority. Between these bookends, 47% of respondents said that not outliving their savings in retirement is a top goal.

Source: Plansponsor.com, July 2022

University 403b Plan Faces ERISA Breach Lawsuit

Northeastern University is the latest plan sponsor to confront a lawsuit alleging breach of fiduciary duty to participants. The plaintiff has alleged excessive fees for recordkeeping, administrative services, and investment management in a new fiduciary breach lawsuit.

Source: Planadviser.com, July 2022

IRS Launches Pre-Examination Retirement Plan Compliance Program Trial

Employers will have the opportunity to review and self-correct retirement plan failures upon being identified for plan examination by the IRS. The IRS announced in early June 2022 the rollout of a new pre-examination compliance pilot program with the intention that it will save resources spent on employee benefit plan audits. The announcement stated that the IRS would evaluate the program at the end of the pilot period, but it did not specify the duration of the period.

Source: Ogletree.com, July 2022

DOL Pushes Back on "Downright Bizarre" Fiduciary Challenge

The DOL is pushing back against litigation challenging specific elements of its FAQs regarding the fiduciary rule. The suit (Am. Sec. Ass'n v. U.S. Dep't of Labor) was one of two filed earlier this year challenging the DOL's PTE 2020-02. While both were filed on behalf of individuals whose businesses were detrimentally impacted by the expanded definition of fiduciary, specifically in this case in FAQs issued after the regulation. The suit alleged that the Labor DOL regulated via the FAQs, rather than going through the standard, required, notice and comment period.

Source: Ntsa-net.org, July 2022

Where Things Stand With Cryptocurrency in 401k Plans

The Congressional Research Service has issued a concise synopsis of the current policy developments surrounding the inclusion of cryptocurrency in DC plans. The CRS explains that in recent months policymakers have paid increasing attention to the prospect of DC plan participants being able to invest in cryptocurrency. "While some contend that cryptocurrency in retirement accounts could benefit participants, others have expressed concern about its appropriateness as an investment option," the researchers observe in Cryptocurrency in 401k Retirement Plans, published July 1.

Source: Napa-net.org, July 2022

Study Finds Disconnect Between Actual and Perceived Retirement Risks

Retirees face many financial risks, such as outliving their money, investment losses, and unexpected health expenses, but a new study finds that they may be overestimating some risks while underestimating others. A new study by Wenliang Hou, a quantitative analyst at Fidelity Investments and former research economist at the Center for Retirement Research at Boston College, develops a lifecycle model of a typical retired household facing five categories of risk.

Source: Napa-net.org, July 2022

Sixth Circuit Provides Guidance on Excessive Fee Claims

On June 21, 2022, the Sixth Circuit in Smith v. CommonSpirit Health provided updated guidance for plan sponsors in excessive 401k fee complaint cases. In their opinion, which affirmed a September 2021 decision from the Eastern District of Kentucky, the court held that whether an ERISA excessive fee claim is plausible "depends on a host of considerations, including common sense and the strength of competing explanations for the defendant's conduct." The Courts decision provides a win for plan fiduciaries, in a growing list of excessive 401k fee lawsuits.

Source: Graydon.law, July 2022

Defendants Secure Motion to Dismiss Victories in Three Post-Hughes Decisions

In April it was noted that there was a discouraging trend of opinions allowing commonly asserted breach of fiduciary duty claims in 401k and 403b plan investment litigation to survive motions to dismiss. While it may be too soon to declare a reversal of that trend, three recent decisions dismissing these types of claims present some hope for plan sponsors and fiduciaries that in appropriate cases they may be able to avoid the costs and burdens of class action discovery. In particular, the Sixth Circuit became the first Court of Appeals to affirm the dismissal of a 401k fee litigation since the Supreme Court's decision in Hughes v. Northwestern University and two district courts dismissed similar claims.

Source: Erisapracticecenter.com, July 2022

Congressional Research Service Report: Cryptocurrency in 401k Retirement Plans

Digital assets, which include cryptocurrencies, crypto-assets, or digital tokens, among others, are digital representations of value and are issued and transferred using distributed ledger or blockchain technology. Bitcoin, Ethereum, and Dogecoin are among the most well-known cryptocurrencies. A November 2021 Pew Research Center and a March 2022 NBC News poll found that around one-fifth of Americans indicated that they had invested, traded, or otherwise used cryptocurrency. In recent months, policymakers have paid increasing attention to the prospect of defined contribution pension plan participants being able to invest in cryptocurrency.

Source: Congress.gov, July 2022

Cybersecurity in the Committee Room

Cybersecurity is not merely a technology issue. For that reason, fiduciary committees must understand they have a legal duty to protect the personally identifiable information, personal health information, and assets of their employee benefit plans from exposure and to protect electronic systems from exploitation by hackers. Read how some fiduciary committees address the challenge.

Source: Rolandcriss.com, July 2022

Hopes Are High for Lame-Duck Passage of SECURE 2.0

One retirement industry policy expert says the conversations she is having on Capitol Hill make her optimistic that the ambitious retirement reform package could pass after the November elections.

Source: Plansponsor.com, July 2022

Keeping Retiree Assets in Plan. Has Your Committee Established a Preference?

This article offers insight into a growing area of focus for plan sponsors, which is whether or not retaining participant assets in the defined contribution plan at retirement is a priority. As DC plans have grown into their role as the primary retirement vehicle for most plan participants, it begs the question: What does that mean for the destination of retiree assets?

Source: Planpilot.com, July 2022

IRS Launches Pre-Examination Compliance Pilot Program

In June, the IRS announced a new 90-day pre-examination compliance pilot program for retirement plans. Under this program, the IRS will notify you by written letter that your plan has been selected for an upcoming examination. Following receipt of the letter, you will then have 90 days to review your plan's document and operations, to determine whether your plan satisfies all current requirements. If you don't respond within 90 days by completing and returning a questionnaire, your plan will be scheduled for a formal examination.

Source: Newportgroup.com, July 2022

Autoenrollment a Boon, Research Confirms

Proponents of automatic features for DC plans have long argued that they boost participation and savings rates, and a recent study confirms that belief. "Automatic enrollment in employer-sponsored 401k savings plans has transformed the way that millions of Americans save for retirement," said Joshua Dietch, Head of T. Rowe Price Retirement Thought Leadership, and Taha Choukhmane, Ph.D., MIT Sloan School of Management Associate Professor of Finance in their report.

Source: Napa-net.org, July 2022

Here's Why It's Vital to be a Consistent 401k Saver

A recent study of the EBRI/ICI 401k database analyzing trends in the average plan account balance of consistent participants underscores the powerful compounding effect of ongoing participation. The study found that at the end of 2019, 33% of the active group had more than $200,000 in their 401k plans at their current employers, while another 20% had between $100,000 and $200,000.

Source: Napa-net.org, July 2022

Kellogg Faces ERISA Managed Account Fee Complaint

The main allegation leveled in the complaint is that the defendants breached their fiduciary duty of prudence by requiring the plan to pay excessive recordkeeping fees and managed account fees, and by failing to timely remove their allegedly high-cost recordkeepers. According to the complaint, the plan contracted with Transamerica Retirement Solutions between 2016 and 2020 before transitioning to Fidelity Investments in 2021. Neither recordkeeper is named as a defendant in the lawsuit.

Source: Planadviser.com, July 2022*

How Retirement Plans Can Correct Required Minimum Distribution Errors

When an error in administering required minimum distributions from a defined benefit or defined contribution plan violates Internal Revenue Code requirements, plan sponsors may be able to fix the problem by making corrective distributions under IRS procedures. This article outlines the solutions available when qualified or 403b plans miss or miscalculate RMDs. The coverage includes streamlined procedures for plans applying for IRS approval of a proposed correction and options for requesting a waiver of participants' excise taxes.

Source: Mercer.com, July 2022

2022 Advisory Council Report on Cybersecurity Insurance and Employee Benefit Plans

The 2022 Advisory Council hopes first to gain an understanding of cybersecurity insurers and the current market for cybersecurity insurance. This will include learning about insurers that are writing cybersecurity insurance coverage, the underwriting standards that insurers use for such insurance, and controls that insurers require or recommend that insureds have in place as a condition to underwriting coverage for cybersecurity risk. The Council also intends to investigate the terms of typical cybersecurity insurance policies.

Source: Dol.gov, July 2022

401k Mutual Fund Expense Ratios Continue to Drop

The downward trend in the expense ratios that 401k plan participants incur for investing in mutual funds continued in 2021, according to a new report from the Investment Company Institute. For equity mutual funds, the average expense ratios incurred by 401k investors declined from 0.39% in 2020 to 0.36% in 2021, the ICI notes.

Source: Asppa.org, July 2022

IRA Investors Pay Significantly More Than 401k Participants

Rolling retirement assets into an IRA can result in far higher costs to the individual retail investor than their institutional 401k participant counterpart. "An analysis of fee differences shows that the routine shifting of billions of dollars each year from 401ks -- which are often able to purchase lower-cost institutional shares -- into IRAs in which savers frequently purchase retail shares can translate into significantly higher costs for retail investors, costs that can eat into their long-term savings significantly," a new Pew Charitable Trusts report finds.

Source: 401kspecialistmag.com, July 2022

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