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September 2020 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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DOL Lifetime Income Disclosure Regulation

The new regulation applies to defined contribution plans whether or not they provide annuities as a form of distribution. The regulation is not effective until September 18, 2021, one year after it is published in the Federal Register, at which time the next benefit statement that is issued after that date must contain the required disclosures. Although issued as an interim final regulation, the DOL is allowing a 60-day comment period, and it hopes to improve the regulation, before its effective date, based on the responses it receives to those comments.

Source: Wagnerlawgroup.com, September 2020

IRS Provides SECURE Act Guidance

On September 2, 2020, the IRS issued IRS Notice 2020-68 to provide guidance relating to certain provisions of the SECURE Act and the Bipartisan American Miners Act of 2019. The guidance is not intended to provide comprehensive guidance on the specific provisions but provides guidance to assist with implementation of these provisions.

Source: Retirepru.com, September 2020

Judge Tosses Second Class Action Against Trader Joe's

A federal judge in Los Angeles dismissed another class action filed against Trader Joe's and other related parties that alleged a series of ERISA violations in managing the grocery store chain's $1.7 billion 401k plan.

Source: Pionline.com, September 2020

Schlichter Sanctioned for "Reckless" Litigation

Determining that the decision to pursue litigation was "objectively reckless," a federal judge has sanctioned the law firm of Schlichter Bogard & Denton with a fine of (up to) $1.5 million.

Source: Napa-net.org, September 2020

Four Tips for Managing Your 401k During a Recession

Recessions can bring financial hardship, whether it's unemployment, rent increases, sudden alimony and child support payments due to divorce, or the increased price of goods. It can be tempting to think of your 401k as a big pile of money sitting there, ripe for the taking. Before you throw away future security for greater peace of mind today, consider all your options for managing a 401k wisely during a recession.

Source: Myubiquity.com, September 2020

Why 401k Adviser RFPs Have Not Taken Off

If an organization has the right adviser, then it is more likely that the committee will be better educated and more functional. So why aren't more retail DC plans conducting a formal request for proposals, or even benchmarking their retirement plan advisers, as they regularly do with recordkeepers and money managers?

Source: Investmentnews.com (registration may be required), September 2020

After Layoffs, Employers Might Owe Unvested 401k Money

With mass layoffs commonplace during the COVID-19 pandemic, employers asked the IRS for advice on how to deal with the partial termination rule relating to employer contributions to their employees' 401k workplace retirement accounts. It's an obscure issue, but it's a big deal for the employees that it affects: It could mean thousands of dollars more credited to an employee's 401k account.

Source: Employeebenefitsblog.com, September 2020

403b Retirement Plan Fee Litigation Update

Despite the COVID-19 pandemic, there have been no signs of a slowdown in the litigation arena. Since the last comprehensive update on 403b retirement plan fee litigation in April, there have been some significant updates.

Source: Cammackretirement.com, September 2020

MGM Resorts Hit With 401k Plan Excessive Fee Suit

MGM Resorts International has been sued by participants of its 401k plan alleging breaches of ERISA fiduciary duties by allowing excessive recordkeeping and investment fees. The allegations are similar to many other pieces of litigation challenging the use of actively managed funds over passive funds and the use of higher-cost share classes.

Source: Plansponsor.com, September 2020*

Few Owned Stocks Outside of 401ks in 2019

As analysts start to consider what an economic recovery might look like and who is likely to benefit, disparities across income groups in the United States come into stark relief, particularly when it comes to those who own stocks and those who do not. Only about one-third of U.S. adults (35%) said they owned stocks, bonds, or mutual funds outside of retirement accounts in a Pew Research Center survey from September 2019. And upper-income Americans were much more likely than lower-income Americans to be invested in the market.

Source: Pewresearch.org, September 2020

Older Women Report Facing a Financially Uncertain Future

In all 14 focus groups GAO held with older women, women described some level of anxiety about financial security in retirement. Many expressed concerns about the future of Social Security and Medicare benefits, and the costs of health care and housing. Women in the groups also cited a range of experiences that hindered their retirement security, such as divorce or leaving the workforce before they planned to. Women in all 14 focus groups said their lack of personal finance education negatively affected their ability to plan for retirement.

Source: Gao.gov, September 2020

Growing Your Retirement Money Using 401k Dollar-Cost Averaging

At least four major functions inside the 401k plan are important to understand: tax-advantaged saving, systematic investing through payroll deduction, compounding of the gains from investing, and using the funds, which are often called distributions or withdrawals. This article covers systematic investing, which is also known as dollar-cost averaging, or more simply, saving the same amount every paycheck.

Source: Forbes.com, September 2020

The Best Ways to Manage Your 401k Wisely

The employer-sponsored 401k plan can be an excellent way to save for retirement when you're working and supplement your Social Security benefits when you're retired. But investing in a 401k and managing it wisely can be agonizingly hard. There are many questions you might scratch your head over.

Source: Forbes.com, September 2020

Combined 401k Plan and IRA Balances by Age and Time

Owning both a 401k plan and an individual retirement account leads to larger balances, but missed opportunities to contribute and leakage reduce those balances. One-page report.

Source: Ebri.org, September 2020

Pooled Employer Plans: Where Do We Stand?

The IRS and DOL have not issued much-needed comprehensive guidance on PEPs. With such a short time before the rules become effective, practitioners are worried that we may not have timely guidance to make decisions regarding the addition of PEP services to their businesses. This is a two-page overview of what we currently know.

Source: Asc-net.com, September 2020

DOL Expands Electronic Delivery Rules for Retirement Plans

The DOL finalized a new safe harbor rule for the use of electronic media to furnish information to participants and beneficiaries of employee retirement plans subject to ERISA. The new safe harbor is a welcome change for retirement plan sponsors and administrators because it broadens the availability of electronic notices, thereby reducing the costs associated with furnishing hard-copy notices.

Source: Akerman.com, September 2020

Am I Saving Too Much for Retirement?

While many individuals may not be putting away enough in their nest egg, the flip side could also be true. After reaching their goals, supersavers may go above and beyond the amount needed to carry out their lifestyle as retirees. While saving too much isn't necessarily a negative habit, it can be helpful to understand where you stand with your level of savings. Use these signs to determine if you're saving too much for retirement.

Source: Usnews.com, September 2020

Dudenhoeffer Strikes Again: Eighth Circuit Dismisses Two Stock Drop Cases Based on Nonpublic Information

The Eighth Circuit has affirmed the dismissal of two cases in which plan participants claimed that their plan's fiduciaries breached their duties of prudence and loyalty by failing to act on nonpublic information about events that later caused a substantial drop in the value of their employer's stock. In each case, the participants argued that they met the pleading standard established in the Supreme Court's Dudenhoeffer decision.

Source: Thomsonreuters.com, September 2020

Duke Energy Sued for Allegedly Excessive 401k Fees

A former participant in a Duke Energy Corp. 401k plan sued the company and plan fiduciaries alleging they violated ERISA rules in managing the plan. The plaintiff argued that the Duke plan paid recordkeeping fees that were well above "competitive marketplace rates." The 401k plan has had the same recordkeeper "for at least the past decade, and the fees remained "roughly the same between 2014 and 2018 while marketplace rates were dropping," the former participant alleged.

Source: Pionline.com, September 2020

Avoiding ERISA Lawsuits Isn't Hard

Proposed class-action lawsuits by retirement plan participants against their employers are on track for a fivefold increase between last year and this year, according to a Bloomberg Law analysis. Sixty-five class-action suits have been filed so far in 2020 and many of these suits are for excessive fees and/or the use of overpriced share classes. Often the reason for these lawsuits is simple neglect. Here are a few simple actions that can improve fiduciary processes and reduce litigation risk.

Source: Nwpsbenefits.com, September 2020

CARES Act: How Are Plan Sponsors and Participants Reacting

Despite widespread anxiety in the first few months of the COVID-19 pandemic, most 401k plan sponsors and participants are staying the course, according to new data. Data from Principal shows that as of Aug. 31, only 3.2% of participants with a coronavirus-related distribution available have taken one for the period March-August 2020. The average amount taken for a coronavirus withdrawal is $16,500.

Source: Napa-net.org, September 2020

Latest Excessive Fee Suit Strikes Utility Chord

You might think there couldn't be another multibillion-dollar 401k plan to be sued and yet there is. The 25-page suit presents a relatively succinct case regarding its claims that the Duke plan defendants breached their fiduciary duties of loyalty and prudence, and that Duke energy failed to monitor the actions of the plan fiduciaries.

Source: Napa-net.org, September 2020

The Buck Stops With Retirement Plan Sponsors

Plan sponsors can blame the problems of their plans on others, but ultimately they bear the brunt of liability as plan fiduciaries. A plan sponsor must be aware of all their fiduciary duties or at least, hiring several plan providers that do. Liability is avoided by understanding the responsibility as a retirement plan sponsor. Like with the sign on Harry Truman's desk, "The Buck Stops Here" with retirement plan sponsors.

Source: Jdsupra.com, September 2020

COVID-19 401k Loans End With a Fizzle

The expanded 401k loan provisions under the CARES Act have come and gone and few people have likely noticed. The increased loan-size provision was part of a package to provide financial relief to people who have been affected by COVID-19. But very few have taken out loans, especially in the expanded amount allowed by the CARES Act, according to several 401k recordkeepers that track the data.

Source: Investmentnews.com (registration may be required), September 2020

DOL Creates Path for 401k Plans to Offer Private Equity Investment Options

In June 2020 the DOL issued an information letter indicating that, in limited circumstances, it will allow defined contribution retirement plans to indirectly invest in private equity funds. While information letters are not binding, the DOL uses these letters to call attention to well-established principles or interpretations, making them helpful guidance on which retirement plan fiduciaries and their advisers frequently rely.

Source: Internationallawoffice.com, September 2020

DOL Guidance on Lifetime Income Illustrations: Coloring Within the Lines

The lifetime income stream illustration required by SECURE Act Section 203 must provide the monthly amounts that both a single-life annuity and a qualified joint and survivor annuity would pay based upon the participant or beneficiary's account and subject to certain assumptions. Because providing this type of inexact illustration is inherently risky, Section 203, in turn, provides a “safe harbor” from liability to plan sponsors or fiduciaries who comply with the requirements of the lifetime income disclosure and use the model language that the DOL is required to develop. Section 203 required the DOL to issue guidance on the assumptions that should be used in the lifetime income illustrations and to provide a model disclosure within a year. The Interim Rule represents the DOL's satisfaction of this requirement.

Source: Frostbrowntodd.com, September 2020

Cybersecurity for Retirement Plans

The monetary assets of the participant accounts are plan assets, and a plan fiduciary must exercise prudence to protect them from theft, including theft through a cyber breach. Plan sponsors have a fiduciary duty to ensure that their recordkeepers are providing appropriate security measures for protecting plan assets from unauthorized activity. If an employee's personal information has been compromised, or her identity stolen, her retirement accounts are at risk.

Source: Employeebenefitslawblog.com, September 2020

FAQ on New 401k Coverage Rules for Long-Term, Part-Time Workers

With a stated goal of encouraging retirement savings, the SECURE Act expands eligibility to make salary deferrals under a 401k plan to long-term, part-time workers. This "Frequently Asked Questions" walks you through the new rules, including those contained in IRS Notice 2020-68, published on September 3, 2020.

Source: Eforerisa.wordpress.com, September 2020

Three Ways to Know if Your 401k Is Too Aggressive

A 401k retirement plan is one of the most popular ways to save money for retirement and score some tax breaks for doing so. But often these plans don't provide a lot of guidance on how to manage them, and participants end up with wildly aggressive portfolios or a portfolio so conservative that it barely budges year after year. Here's how to see if your 401k is too aggressive and, if so, some steps you can take to fix it.

Source: Bankrate.com, September 2020

Investment Policy Statement Must Stop Short of Promises

An Investment Policy statement can do more harm than good if it moves from policy to guaranteed results. The policy can become more of a liability than a benefit if it steps over this line. Should you even have an Investment Policy Statement for your retirement plan? Yes. Should you throw everything in and include the proverbial kitchen sink? Absolutely not.

Source: 401ktv.com, September 2020

AutoZone ERISA Challenge Drives Ahead

The U.S. District Court for the Western District of Tennessee, Western Division, has ruled against AutoZone's motion to dismiss an ERISA lawsuit accusing the firm of a variety of fiduciary breaches. The fiduciary breach lawsuit does not name Prudential as a defendant, but it does extensively discuss Prudential's GoalMaker investment solution.

Source: Plansponsor.com, September 2020

Fiduciaries of Mutual of Omaha 401k Plan Agree to Pay $6.7M to Settle Suit

Parties in a lawsuit accusing Mutual of Omaha Insurance Co. and its subsidiary United of Omaha of self-dealing in Mutual of Omaha's 401k plan have agreed to settle. The suit alleged 401k plan fiduciaries selected numerous investment options not to benefit the plan or its participants, but because they paid fees to Mutual of Omaha or its subsidiaries. The settlement agreement calls for a cash payment of $6.7 million as compensation to a class of participants.

Source: Planadviser.com, September 2020

Women's Retirement Confidence Has Ebbed Since Start of Pandemic

Nearly a quarter, 24%, of women who are working or who have recently lost their job say their confidence in their ability to retire comfortably has declined amid the pandemic, according to "Women and Retirement: Risks and Realities Amid COVID-19," a report by the Transamerica Center for Retirement Studies. A mere 17% of women say they are very confident they will be able to fully retire with a comfortable lifestyle.

Source: Planadviser.com, September 2020

Workers Need Help on Retirement Income

Roughly 33% of retirement plan participants are not sure how long their retirement savings will last, according to Charles Schwab's "2020 401k Participant Survey" of 1,000 currently employed 401k plan participants. This uncertainty jumps to 40% for women, compared with only 25% of men. Half said they would benefit from financial advice.

Source: Planadviser.com, September 2020

DOL Allows Private Equity Investments in 401k Plans

The DOL has issued an information letter stating that a fiduciary that complies with the requirements of Title I of ERISA may include private equity as an investment option for 401k plan participants. When determining a private equity component, the DOL recommends that a plan fiduciary consider three things.

Source: Hallbenefitslaw.com, September 2020

Round One of SECURE Act IRS Guidance Clarifies Some Key Issues for Retirement Plans

IRS Notice 2020-68 provides the first round of guidance on several provisions under the SECURE Act and the Bipartisan American Miners Act of 2019. The key qualified plan provisions are highlighted and summarized here.

Source: Groom.com, September 2020

Interim Final Rule Published for Lifetime Income Projections

Published in the Federal Register is a DOL interim final rule to guide DC retirement plans that must begin to furnish projections of potential lifetime income streams to participants. Lifetime income projections are required under provisions of the SECURE Act, which mandates that a participant's accrued benefit must periodically be reflected on their benefit statements as an estimated lifetime income payment stream.

Source: Futureplan.com, September 2020

DOL Publishes New SECURE Act Guidance Regarding Lifetime Income Disclosures

The DOL has announced new guidance, in the form of an interim final rule, implementing the lifetime income disclosure requirement for DC plans that was added to ERISA by the 2019 SECURE Act.

Source: Insidecompensation.com, September 2020

How the Coronavirus Pandemic Is Affecting Retirement Saving

The coronavirus pandemic is exacerbating an already troubling societal retirement saving shortfall as workers look to long-term retirement savings to solve short-term financial problems. While the percentage of participants taking advantage of CARES Act provisions such as distributions and expanded loan options is low, doing so may undo years of retirement savings. Solutions like financial wellness can help shape future financial behaviors when balancing and reconciling short-term needs and long-term financial goals.

Source: Troweprice.com, September 2020*

The Growing Burden of Retirement

Addressing the twin retirement challenges of more risk and rising costs, along with the decline in overall retirement savings, will require a concerted societal effort. This 24-page report offers a roadmap to the various hurdles that make retirement security difficult to achieve. Stepping back and viewing the entire picture of the different retirement challenges can help to understand just how much the burden has grown.

Source: Nirsonline.org, September 2020

Evaluation Scorecard for Retirement Income Products

Retirement income strategies are the most recent innovation to hit the participant-directed retirement industry. Just a few years ago, target-date funds were new and untested. Plan sponsors and their consultants needed to develop a framework for evaluating that new strategy. The same creativity must now be applied to these new retirement income strategy products. In this paper, the authors have attempted to outline the criteria that they believe should be evaluated and offered some guidelines on how the evaluation should be conducted.

Source: Newportgroup.com, September 2020

Back to Reality: The Role of Active Management in DC Plans

In this paper, the authors challenge five common misconceptions that have led to the increased prevalence of passive investments in defined contribution plans. To help fiduciaries weigh the pros and cons of active management, they perform a reality check on each misconception, referencing fiduciary principles, and market and participant survey data.

Source: Mfs.com, September 2020

Laid Off? Your Employer Might Owe You Unvested 401k Money

How much of your 401k retirement account balance is yours to keep? It turns out that's a tricky question if you've been laid off this year. With mass layoffs commonplace during the Covid-19 pandemic, employers asked the IRS for advice on how to deal with the partial termination rule relating to employer contributions to their employees' 401k workplace retirement accounts. It's an obscure issue, but it's a big deal for the employees that it affects. It could mean thousands of dollars more credited to an employee's 401k account.

Source: Forbes.com, September 2020

Should You Rollover Your Roth 401k?

If you've invested in a Roth 401k at work and are leaving your job, you may want to do a Roth 401k rollover. A Roth 401k rollover allows you to move your money from your current retirement account to a new retirement plan without any immediate tax consequences, as long as you follow certain rules.

Source: Fool.com, September 2020

Advisors Mixed on Biden's Plan to Replace 401k Deductions With Flat Tax Credit

The Biden proposal restructures the 401k contribution incentive by replacing the deduction with a tax credit, which is estimated to be 26%. Presumably, the tax credit would be refundable so that even workers with no tax liability would benefit from putting $1,000 into a 401k plan. As under current law with non-Roth plans, earnings would continue to accrue tax-free, and withdrawals at retirement would continue to be taxed as regular income. The proposal, which Biden has yet to flesh out, may have more negatives than positives, according to one advisor.

Source: Fa-mag.com, September 2020

The Rule of 55 for 401k Early Withdrawal: What It Is, How It Works

It's easy enough to contribute to a 401k or 403b plan. But getting your money back out of these workplace retirement accounts can be more difficult. Unless you're at least 59 1/2 years old, it usually triggers taxes and penalties. But those who have reached the age of 55 have a special option to access their funds penalty-free. This "rule of 55" could save serious money if you want to retire early or need to make a onetime withdrawal from your plan to cover a major expense.

Source: Businessinsider.com, September 2020

Five Simple Strategies for Retirement Investing

Investing for retirement can be intimidating, especially when you're first starting. With hundreds of tips and suggestions and even more investment options, many people procrastinate because they simply do not know how to begin. Here are these five simple strategies for retirement investing.

Source: Unifiedtrust.com, September 2020

Schlichter Targets Another MEP

The law firm of Schlichter Bogard & Denton has a new target, multiple employer plans. They've just filed their second excessive fee suit in that genre. This time the target is the Pentegra Defined Contribution Plan for Financial Institutions, a multiple employer plan, or MEP.

Source: Napa-net.org, September 2020

Webinar Recording: Recordkeeping Vendor Searches: More than Just Fees

Recordkeepers are a critical partner in a successful retirement plan and monitoring their services and fees is one of the most important duties of a fiduciary. Periodic benchmarking can help keep a plan's fees in line with the marketplace but is not a replacement for a full vendor search process, especially in light of the recent findings in the Banner Health case. This webinar covers the benefits of running a vendor search, the timeline for running a search, and best practices.

Source: Multnomahgroup.com, September 2020

What's Next After Empower's Acquisition of MassMutual's Retirement Unit?

The sale of MassMutual's retirement business feels different than all the other transactions in well over a decade of defined contribution business consolidation. Retirement plan advisers should pay close attention. Here are a few thoughts on how they should react.

Source: Investmentnews.com (registration may be required), September 2020

How One 401k Firm Says It Is Bulking Up Amid the Pandemic

An online 401k provider is striving for growth during the recession and part of its strategy is to eliminate all transaction fees. Human Interest, which has raised more than $80 million in funding since its 2015 inception, according to data from Crunchbase, has been adding new clients during the pandemic and has pledged not to lay off any staff, CEO Jeff Schneble has said.

Source: Investmentnews.com (registration may be required), September 2020

Are Cybercriminals Stalking Your 401k Plan?

The answer is yes. The assets of 401k and other retirement plans represent a significant financial asset and present an inviting target for cybercriminals. Employers who sponsor these plans are almost always plan fiduciaries and likely targets of suits over unauthorized plan withdrawals. Plan sponsors should consider their cybersecurity protective measures and make sure that plan service providers have taken appropriate steps to secure the confidentiality of participants' personal information.

Source: Gct.law, September 2020

Time Is Running Out for Expanded 401k Loans Under CARES Act

The expanded 401k plan loan provisions included in the CARES Act are quickly coming to an end! The last day to take advantage of the increased 401(k) loan limits is Tuesday, September 22, 2020.

Source: Compliancedashboard.net, September 2020

Why "Six is the New Three" When It Comes to Automatic Enrollment

Instead of auto-enrolling participants at a 3% salary deferral rate, which traditionally has been the case, why not auto-enroll them at a more meaningful 6%? After all, they can still opt-out, and 6% will provide a far more meaningful benefit at retirement than a 3% default rate ever could. While this could backfire if more participants opt-out of auto-enrolment because of the higher rate automatic deferral rate, according to John Hancock's State of the Participant 2020 report, the opposite is the case.

Source: Cammackretirement.com, September 2020

IRS Provides Additional SECURE Act Guidance

The SECURE Act's primary goals include expanding retirement savings, simplifying existing rules, and preserving retirement income. As with any major legislation, the SECURE Act created numerous outstanding questions. While the IRS has previously provided some answers, no SECURE Act guidance has been as detailed as the recently released IRS Notice 2020-68.

Source: Ascensus.com, September 2020

Lifetime Income Disclosures for DC Plans: Interim Final Rule

The clock is ticking for DC plans to begin to provide a "lifetime income disclosure" on at least one benefit statement a year. Beginning in 2021, plan administrators must show each participant an estimate of the single life annuity and joint and 100% survivor annuity that the participant's current account balance could purchase. Importantly, account-based plans are still not required to offer an annuity form of distribution option or investment.

Source: Vorys.com, September 2020

New Defined Contribution Plan Disclosures

Retirement plan participants may soon better understand how account balances translate to retirement readiness. The SECURE Act requires DC plans to show participants the value of their account balances if converted into a monthly lifetime stream of income. The disclosures are aimed at reminding participants that retirement plan balances are meant to last for life and busting the "wealth illusion" that single sum account balances present. The details on the disclosures are starting to take form following an interim final rule recently released by the DOL.

Source: Employeebenefitslawblog.com, September 2020

Americans Are Raiding Retirement Savings During Coronavirus Pandemic

As households struggle to make ends meet, more Americans have been forced to halt or raid their retirement savings in this coronavirus-induced recession. Nearly 3 in 10 people have decreased the amount of money they're setting aside for retirement or stopped saving altogether due to the economic fallout of Covid-19, according to a FinanceBuzz survey published in August.

Source: Cnbc.com, September 2020

2020 401k Participant Survey Part II: Retirement Saving and Spending

The area where 401k participants say they could most use help is understanding how much they'll need to save for retirement, according to a nationwide survey of 1,000 401k plan participants from Schwab Retirement Plan Services. Over two thirds (68%) of participants gave an estimate of how long their retirement savings will last, with the average being 24 years. The remaining 32% say they do not know how many years their retirement savings might last, and the level of uncertainty is higher among women (40%) than men (25%).

Source: Schwab.com, September 2020

T. Rowe Price Publishes Latest Findings On 401k Investor Behavior During Recent Economic Downturns

A recent study by T. Rowe Price found retirement savers who were saving at an adequate rate before the 2008 Global Financial Crisis, and who continued to save throughout the crisis, saw the best outcomes. The 67% of retirement savers who practiced this behavior were able to weather the volatility and stay on track with their savings. Meanwhile, 44% of individuals who lacked retirement savings before the GFC and increased their savings in response to it, still had to consider delaying their retirement 10 years after the downturn.

Source: Prnewswire.com, September 2020

Relief for Distributing Summary Plan Descriptions

2020 is the year that ERISA 403b plan must issue summary plan descriptions to plan participants. Experts from Groom Law Group and Cammack Retirement Group answer questions concerning SPD distribution due to the COVID-19 pandemic.

Source: Planadviser.com, September 2020

More Sutter Health 403b Plan Participants Challenge Plan Investments

A second lawsuit has been filed against fiduciaries of the Sutter Health 403b Savings Plan for breaches of their fiduciary duties under ERISA. As in a lawsuit filed in July, the plaintiffs in the recent case challenge the use of an actively managed TDF suite over an index suite.

Source: Planadviser.com, September 2020

New Fiduciary Rule Ahead

The main theme of the DOL's new rule proposal is in alignment with other regulators -- the SEC and FINRA in particular -- but the agency is not surrendering its jurisdiction over tax-qualified retirement plans.

Source: Planadviser.com, September 2020*

People of Color Report Limited Retirement Investments

Americans who identify as people of color report that they have limited retirement investments and say they're not making progress toward achieving important retirement goals, according to the 2020 Retirement Risk Readiness Study from Allianz Life Insurance Co. of North America.

Source: Planadviser.com, September 2020

IRS Issues Guidance on Qualified Birth or Adoption Distributions

In recent guidance, the IRS addressed several issues under the SECURE Act, including qualified birth or adoption distributions (QBOADs). While QBOADs have been permissible since January 2020, many employers have been waiting for some IRS guidance on how these distributions would be implemented before deciding as to whether to include a QBOAD as a plan feature.

Source: Wagnerlawgroup.com, September 2020

401k Plan Concerns From the Auditor Perspective

401k plans are often missing key items and are therefore exposing both management of the plan sponsor, as well as the fiduciaries of the plan, to potential litigation and corrective actions in the case of a DOL or IRS exam. This article shares several concerns from a plan auditor perspective which are leaving plan sponsors and fiduciaries exposed in the current environment to litigation and regulatory scrutiny.

Source: Linkedin.com, September 2020

Good Ideas for 401k Plans That Don't Get Enough Attention

This article highlights some features which can benefit participants in 401k plans which we don't see used enough. Employers and plan sponsors should consider adding these four features to their plans to provide additional benefits to their employees.

Source: Linkedin.com, September 2020

IRS Expands List of Qualified Individuals Eligible for Coronavirus-Related Distributions

The IRS issued Notice 2020-50 to update and clarify certain provisions of Section 2202 of the CARES Act, which deals with the tax treatment of coronavirus-related distributions from eligible retirement plans for qualified individuals. The Notice expands the definition of a "qualified individual" eligible to take coronavirus-related distributions from their retirement plans.

Source: Hallbenefitslaw.com, September 2020

UPDATE: SECURE Provides New Option to Help Pay for Birth or Adoption

The IRS has again directed our attention back to the SECURE Act by issuing guidance related to qualified birth or adoption distributions. Withdrawals from a qualified retirement plan before age 59 ½ are generally subject to a 10% tax for early distribution, but the SECURE Act created a new distribution option that permits plan participants to take distributions of up to $5,000 as a penalty-free early withdrawal to help cover expenses related to the adoption or birth of a child. The IRS has now issued further guidance on these qualified birth or adoption distributions in Notice 2020-68.

Source: Graydon.law, September 2020

Implementing Long-Term Part-Time Employee 401k Elective Deferrals

Notice 2020-68 includes guidance for implementing the mandatory participation of long-term part-time non-union employees in 401k plans for plan years beginning Jan. 1, 2021. The IRS also announces that it is seeking taxpayer questions and comments about the SECURE Act and Miner Act provisions referenced in the Notice. The deadline for submitting comments and questions is Nov. 2, 2020.

Source: Bhfs.com, September 2020

How to Minimize Judicial Review of ERISA Fiduciary Decisions

The courts have stated that their review of fiduciary decisions is both exacting and deferential. A recent decision from the Court of Appeals for the Seventh Circuit offers help to ERISA benefit professionals who prefer to maximize judicial deference in favor of the fiduciaries.

Source: Beneficiallyyours.com, September 2020

Average 401k Continued to Sizzle in August

Temperatures and major U.S. stock indexes, notably the S&P 500, continued to rise. The markets had their best August since 1986 and it was a pretty good month for the average 401k balance as well.

Source: Asppa.org, September 2020

IRS Revenue Procedure 2020-40 Provides Extensions of Retirement Plan Amendment Deadlines

Revenue Procedure 2020-40 (Rev. Proc. 2020-40) expands the situations in which the plan amendment deadline may be extended for discretionary amendments made to pre-approved qualified retirement plans and pre-approved Internal Revenue Code Section 403b plans.

Source: Westlaw.com, September 2020

Small Business Retirement Plans and the SECURE Act

The SECURE Act passed at the end of 2019 had several features that affected individuals and their retirement accounts. For financial advisers serving small business owner clients, the SECURE Act also offers several opportunities for small business retirement plans.

Source: Thestreet.com, September 2020

Retirement Plan Update: New DOL Disclosures and Updated IRS Notices

The DOL recently issued interim final regulations requiring new information to be included on ERISA-covered defined contribution plan participant account statements under the SECURE Act. The guidance only applies to defined contribution plans, such as 401k and 403b plans. The IRS also recently updated safe-harbor explanations that can be used to satisfy the tax notice requirements in Code Section 402(f). These requirements generally require plan administrators to provide a written explanation of tax consequences when making eligible rollover distributions from a qualified retirement plan.

Source: Shermanhoward.com, September 2020

MassMutual 401k Deal Wins Empower Valuable Clients

Empower Retirement's deal to buy MassMutual's defined-contribution business represents the latest iteration of the company's growth-by-acquisition strategy. But it also hints at a larger goal of winning over the workers who could be tomorrow's wealth management clients. The agreement also gains Empower a valuable potential relationship with Edward Jones.

Source: Investmentnews.com (registration may be required), September 2020

Cybersecurity Risk Considerations for 401k Plans

Cybercriminals have become increasingly sophisticated when targeting organizations holding significant assets and personal data. As a result, complaints have been filed and case law is developing that should motivate plan sponsors to satisfy their fiduciary duty to enact prudent procedures and safeguards to protect plan assets and plan data.

Source: Cpajournal.com, September 2020

Biden Plan to Improve the 401k Does the Opposite

The author writes, "I've written a couple of recent columns on fixes needed to restore the value of 401k and other deferred tax retirement plans for young median-wage workers. The presidential campaign of Joe Biden and Kamala Harris has a proposal aimed at that issue. It's a step almost exactly in the wrong direction."

Source: Advisorperspectives.com, September 2020

Election 2020: Retirement Policy Positions

We are nearing the final stretch of the 2020 campaign. What have the parties proposed for the future of the U.S. retirement system? Here is a chart that summarizes the policy documents prepared by the parties outlining their goals for both the private retirement system and Social Security.

Source: Groom.com, September 2020*

How Might Coronavirus-Related Distributions Impact Retirement Benefits?

The CARES Act allows greater access to defined contribution plan balances. In this 1-page report, EBRI considers the impact on the future retirement security of American workers.

Source: Ebri.org, September 2020

A "Vaccine" for COVID-19 ERISA litigation

ERISA litigation tends to spike when economic uncertainty or turmoil rises. Although many things contribute to this historically verifiable trend, it is easiest for employers to think about just two of them. First, an employer-sponsored retirement plan, like a 401k or pension plan, is likely to suffer from market volatility. Second, employer-sponsored health and welfare plans will see upticks in claims issues during a health crisis. Here are some key considerations and preventive measures that every plan sponsor and fiduciary can monitor and implement to avoid a COVID-19-related spike in ERISA litigation.

Source: Constangy.com, September 2020

DOL Warms Up to Private Equity in 401k Plans

On June 3, 2020, the DOL provided insights addressing private equity investment within defined contribution retirement plans. The letter addressed a scenario in which PEI would be a part of a larger, diversified asset allocation fund (such as a balanced fund or target-date fund). The DOL did not consider the use of PEI as a separate direct investment option, noting that "direct investments in private equity investments present distinct legal and operational issues for fiduciaries of ERISA-covered individual account plans."

Source: Carltonfields.com, September 2020

SECURE Act Compliance Q&A Published by IRS

The IRS this week published supplemental guidance related to significant policy changes made as part of the Setting Every Community Up for Retirement Enhancement Act. Presented in Q&A format, the guidance addresses issues under several sections of the SECURE Act.

Source: Plansponsor.com, September 2020

GAO: DOL Could Do More to Help Make QDROs More Accessible

A new report from the Government Accountability Office looks at the barriers people face when seeking to obtain a Qualified Domestic Relations Order (QDRO) and offers recommendations on how the process can be improved.

Source: Ntsa-net.org, September 2020

DOL Takes Fire From All Sides on Fiduciary Advice Proposal

The Department of Labor heard from an array of witnesses on its proposed fiduciary advice rulemaking package, ranging from calls to withdraw the proposal altogether to making significant changes before proceeding. In the nearly six-hour-long virtual hearing -- which experienced a few technical difficulties -- the DOL heard from six panels comprised of 21 witnesses where the arguments could generally be broken into four groups.

Source: Napa-net.org, September 2020

Guidance to Make Us Feel More SECURE

Notice 2020-68 from the IRS provides valuable clarification for sponsors of qualified plans, 403b plans, and 457b governmental plans, as well as IRA holders, related to certain provisions in the SECURE Act and the Bipartisan American Miners Act of 2019.

Source: Jacksonlewis.com, September 2020

Coronavirus-Related Relief for Retirement Plans

Section 2202 of the CARES Act, enacted on March 27, 2020, provides for special distribution options and rollover rules for retirement plans and IRAs and expands permissible loans from certain retirement plans. In these questions and answers, the IRS provides Coronavirus-related relief for retirement plans and IRAs.

Source: Irs.gov, September 2020

401k Plan Terminations Could Produce Wave of Leakage

During the COVID-19 crisis, massive job losses combined with economic hardship and relaxed restrictions on withdrawals have created the conditions for a perfect storm of 401k cashout leakage. Unfortunately, this storm may soon gain more strength, when a surge in end-of-year 401k plan terminations could trigger a new flood of cashouts, as participants are forced to leave their former employers' plans. Sponsors of terminating 401k plans can take steps to avoid excessive cashout leakage by ensuring that participants receive an enhanced standard of care, including education and consolidation assistance during the plan termination process.

Source: 401kspecialistmag.com, September 2020

Qualified Plan Loan Offsets

The IRS issued proposed regulations that define qualified plan loan offsets as well as confirm the extended rollover period for these amounts as outlined within the Tax Cuts and Jobs Act signed into law on December 22, 2018. The proposed regulation impacts participants, beneficiaries, plan sponsors and plan administrators of 403b, 401k, and governmental 457 retirement plans.

Source: Principal.com, September 2020

Important Considerations for the RFP Process

Selecting a defined contribution plan recordkeeper, financial adviser, or another service provider through a request for proposals process can ensure it is best suited to the plan. When conducting a service provider request for proposals, being specific can help ensure the plan and participant needs are met, as well as compliance with fiduciary duties.

Source: Plansponsor.com, September 2020

IRS Requesting Comments on Form 5500

The IRS is soliciting comments concerning the Form 5500 Annual Return/Report of Employee Benefit Plan. Proposed changes include adding a new checkbox to Form 5500, Form 5500-SF, and Form 5500-EZ for an initial plan retroactively adopted as permitted by the SECURE Act Section 201 and adding checkboxes for requesting an extension of time.

Source: Planadviser.com, September 2020

IRS Q&As Tackle Auto-Enrollment Credit, Part-time Vesting, Adoption

The IRS has provided some answers to questions concerning the small employer automatic enrollment credit, part-time vesting rules, and other provisions under the SECURE Act. IRS Notice 2020-68, issued September 2, provides guidance on some of the outstanding SECURE Act issues in a questions and answers format.

Source: Napa-net.org, September 2020

401k Plan Savings Challenge Has Been Solved

Helping people save for retirement isn't a mystery. Automatic enrollment and auto-escalation lead to better outcomes for employees, and those features are used by most institutional 401k and 403b plan sponsors, but not smaller plans. What's the resistance and why aren't retirement plan advisers and recordkeepers pushing harder?

Source: Investmentnews.com (registration may be required), September 2020

Latest 401k Lawsuit Filed in an Avalanche of COVID-19 Litigation

B. Braun Medical is among the latest companies sued so far this year in an unusual wave of 401k litigation. That company, which was sued Aug. 26 in U.S. District Court in the Eastern District of Pennsylvania, is among more than 60 others facing new claims this year, according to an analysis by Bloomberg Law.

Source: Investmentnews.com (registration may be required), September 2020

New SECURE Act Guidance: Lifetime Income Disclosures for 401k and 403b Plans

The DOL announced new guidance on lifetime income disclosures that must be included in pension benefit statements furnished to participants in defined contribution plans, such as 401k and 403b plans. This guidance, issued in the form of an interim final rule, sets forth the rules that plan administrators must follow in implementing the lifetime income disclosure requirement that was added to ERISA by Section 203 of the 2019 SECURE Act.

Source: Insidecompensation.com, September 2020

Plan Sponsors Hold the Keys to Boosting Retirement Readiness

Employers play a critical role in motivating their employees to begin saving for retirement. Cerulli's research finds that an employer's matching contribution is the most influential factor motivating participants to begin saving for retirement. Two-thirds (66%) of 401k participants indicate they would be very likely to increase contributions if their employer increased the matching formula (e.g., matches up to 5% instead of up to 3%).

Source: Cerulli.com, September 2020

DOL Releases Interim Final Rule on Lifetime Income Illustrations

The SECURE Act of 2019 modified the defined contribution plan benefits statement rules to require the inclusion of lifetime income. On August 18, the DOL released an interim final rule, including model disclosures and the assumptions plan administrators must use to calculate estimated lifetime income amounts. Using the model disclosures may limit fiduciary liability. The rule is expected to be effective by the end of the third quarter, 2021.

Source: Buck.com, September 2020

The Rising Tide of the Roth 401k

Many employer-sponsored retirement plan participants are conflicted in deciding which type of account is best for their 401k contributions: traditional or Roth? Often having no idea which is best for their situation, they need the help of an advisor. You can advise them with confidence if you know just two things.

Source: 401kspecialistmag.com, September 2020

The Uncertain Legal Landscape for Plan Fiduciaries Over Cybersecurity Challenges

It is hard to imagine that the drafters of ERISA envisioned a day would come when retirement plans would be administered electronically and distribution of paper notices and disclosures to plan participants might become a thing of the past. However, the retirement industry seems to be swiftly moving that direction. This creates a new liability source for the plan and its service providers.

Source: Wagnerlawgroup.com, September 2020

Abbott Data Breach Suit Provides Lessons for Plan Sponsors to Protect Against Potential Liability

On April 3, 2020, a participant in the Abbott Corporate Benefits Stock Retirement Plan, Heide Bartnett, filed a complaint against her employer and Alight Solutions, the Plan's contract administrator and recordkeeper, for allegedly processing a fraudulent $245,000 distribution from Ms. Bartnett's Plan account to an unknown person that impersonated her. In response and further demonstrating the lack of clarity on who is liable when a plan suffers a data breach, on June 30, Abbott Laboratories and Alight Solutions pointed fingers at each other in dueling motions.

Source: Wagnerlawgroup.com, September 2020

Few Divorcing Couples Know About QDROs

The GAO sent a report to the Senate Health, Education, Labor, and Pensions Committee, "Retirement Security: DOL Could Better Inform Parties About Dividing Savings," in which it explored how often divorcing parties seek access to their spouse's retirement savings. The overwhelming result was that very few do. Older couples and women, in particular, are often put at a retirement disadvantage when faced with a divorce, a GAO report finds.

Source: Planadviser.com, September 2020

Pandemic Prompts Shifts in Attitudes About Employee Benefits

Employees are mostly satisfied with their company's response to COVID-19, but there has been a change in sentiment concerning employee benefits, according to a series of surveys. The Hartford's Future of Benefits Study, which polled U.S. workers and human resources benefit decision-makers in early March 2020 just before the COVID-19 outbreak and again in mid-June, found that many employees continue to view their benefits positively, but their perceived value of the benefits provided and their trust in the company to make the best benefits decisions have declined.

Source: Ntsa-net.org, September 2020

The Real "Coverage" Gap

Teresa Ghilarducci doesn't give American employers or advisors much credit. She recently penned an article in Forbes titled "Employers Can't Provide Retirement Plans. Let's Stop Pretending They Can." The article's premise is false on its face, of course. Her point appears to be that all employers won't provide retirement plans, or at least to date haven't. She attempts to prove her case by pointing to the coverage gap. But the author suggests that the "real 'coverage' gap is that [employers] often don't get the credit they deserve for doing so."

Source: Napa-net.org, September 2020

Average 401k Continued to Sizzle in August

The markets had their best August since 1986, and it was a pretty good month for the average 401k balance as well. Temperatures and major U.S. stock indexes, notably the S&P 500, continued to rise. The latter not only enjoyed its fifth consecutive month of gains but recorded seven record highs during the month.

Source: Napa-net.org, September 2020

Advisors Talk About Fraud in 401k Plans

It is well known that fraud follows the money, so it may seem like it was only a matter of time before fraudsters expanded into what are many consumers' largest individual accounts: their 401k plans. The Secure Retirement Institute has been exploring the evolution of this threat with consumers, plan sponsors, and major recordkeepers. In a recent survey, the SRI asked more than 250 financial advisors in the defined contribution industry to describe the impact of financial fraud and the importance of fraud prevention programs within the institutional retirement space.

Source: Insurancenewsnet.com, September 2020

The CareerBuilder 401k Decision: Three Key Lessons for Plan Sponsors and ERISA Attorneys

Currently, we have different federal courts handing down various interpretations of ERISA. As a result, in some cases, the public's guaranteed rights and protections under ERISA are dependent on where the plan participants reside. These inconsistent interpretations and rulings are unnecessarily exposing plan sponsors to potential liability exposure. The purpose of this post is to alert plan sponsors, as well as attorneys, to these "traps" to ensure that plan participants are properly protected.

Source: Iainsight.wordpress.com, September 2020

DOL Could Better Inform Divorcing Parties About Dividing Savings

Many Americans don't have enough savings for a secure retirement and divorce can make it worse if one spouse can't claim some of the other spouse's retirement benefits. A legal tool called a Qualified Domestic Relations Order (known as a "QDRO") can be used to establish such a claim. Getting an order can be complex and costly. Many aren't approved, largely because the submitted orders lack the basic information needed for approval. Fees can be unaffordable for people with low incomes. Information from the DOL may be insufficient to facilitate the order process or determine reasonable fees. This GAO report recommends improving the information available.

Source: Gao.gov, September 2020

Retirement Plan Records: To Purge, or Not to Purge

Record retention rules are found in both the DOL Regulations and ERISA, plus there are statutes of limitation concerning plan sponsor liability for just about everything administrative in a retirement plan. While most plans have policies for loans, investments, and qualified domestic relations orders, very few plan sponsors seem to have a record retention policy to provide guidance on what to retain, what to purge, and when to do it all. Depending on the document category, there are different standards for how long documents need to be kept.

Source: Ferenczylaw.com, September 2020

ESG Investments and the Impact of Recent DOL Proposed Regulations on Retirement Plans - Podcast

Discusses the new set of proposed regulations from the DOL guiding retirement plan fiduciaries about investing plan assets in ESG Investment Vehicles. The group discusses what ESG investments are, what's different about considering them for retirement plans, what the DOL's proposed regulations will do, and what they wouldn't. Also talks about the reaction to the rules, how they impact retirement plans, and the next steps for plan fiduciaries.

Source: Ballardspahr.com, September 2020

Communication Best Practices

Communication with employees about benefits is always critical. And now there's an added wrinkle, the pandemic. It's changed the rulebook, at least in some ways, and a recent blog entry offers suggestions on communicating in this upended environment.

Source: Asppa.org, September 2020

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