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September 2022 DigestThis digest contains a wide variety of the freshest source material dealing with current trends, opinion, news, legislative action, investments, marketing, sales, consulting, and legal issues regarding 401k, 403(b) and other retirement plans. Each listing contains a headline (hyperlinked to the source document), description, source of the item, and the month and year posted to this digest. Use the SEARCH feature to located specific items from this digest and from our ARCHIVE.
Do's and Don'ts of Hardship DistributionsGiven the current economic climate, a greater number of participants may be requesting hardship distributions from their retirement plans. To avoid jeopardizing the qualified status of the plan, employers and plan administrators must follow both the plan document and legal requirements before making hardship distributions. Some retirement plans, such as 401k and 403b plans, may allow participants to withdraw from their retirement accounts because of a financial hardship, but these withdrawals must follow IRS guidelines. Source: Irs.gov, September 2022
New Wave of ERISA Class Actions Accuse Fiduciaries of 'Imprudently' Using Low-Fee, High-Rated Funds, Like Blackrock TDFsRetirement plan sponsors are fake fiduciaries if they offer cheap, highly rated funds from premium brands in 401k plans without factoring in fund performance, according to a fresh wave of ERISA class action cases. Most of the 11 outstanding class actions allege that plan sponsors chose BlackRock LifePath target-date funds as their default 401k option simply because they had the superficial markings of a fiduciary process rather than engaging in an authentic one. Source: Riabiz.com, September 2022
Plan Sponsors Can Self-Audit Before an IRS ExaminationVoluntary compliance tools are an important part of the IRS's retirement plan enforcement strategy. If a plan is out of compliance, the primary IRS goal is for the plan sponsor to make the necessary changes to bring the plan into compliance, although it also has the authority to assess penalties, taxes, interest, and even disqualify a plan. Recently, the IRS announced a new enforcement initiative that involves plan sponsors auditing their plans. Source: Newportgroup.com, September 2022
Seventh Circuit Helps Clarify New Pleading Standards for 401k Fee CasesA recent US Court of Appeals for the Seventh Circuit case supplies answers to many questions left open in 401k fee litigation cases after the US Supreme Court's ruling earlier this year in Hughes v. Northwestern University. Specifically, to survive a motion to dismiss in the Seventh Circuit, the recent ruling in Albert v. Oshkosh Corp. reiterated that plaintiffs must allege both high fees and substandard services or performance in comparison to other similar 401k plans. Source: Mwe.com, September 2022
The Headache of 401k Plan NoticesBeing a 401k plan sponsor isn't easy and one of the biggest headaches is dealing with notices and required documents. One area that most plan sponsors fail to fulfill their duties is the dissemination of required notices and documents, especially to former employees who still have a participant account balance in their plan. Source: Jdsupra.com, September 2022
Wells Fargo Facing Class Action Over 401k Stock PurchasesThe San Francisco-based bank thought it was in the clear when it agreed to pay $145 million earlier this month to resolve charges that it overpaid for company stock in its employees' retirement plan. Unfortunately for Wells Fargo, three of those plan participants are launching a class-action suit against it, opening the door for even more cases. Source: Investmentnews.com, September 2022
Is the Crypto Winter Finally Starting to Thaw?Several weeks after the DOL released their informal guidance on cryptocurrency, Fidelity announced that it will begin allowing 401k participants to invest up to 20% of their savings into bitcoin by year-end. Fidelity's decision to plunge into these choppy waters reflects the bullish excitement and potential of many investors who are eager to participate in this emerging opportunity. These and other recent developments in the financial services industry may be a sign that the crypto winter is experiencing the first signs of a major thaw. Source: Icemiller.com, September 2022
Year-End Amendments Extended: CARES and 2020 Relief ActFollowing up on the SECURE Act and other recent plan amendment extensions in Notice 2022-33, the IRS has issued Notice 2022-45 (Sept. 27, 2022) to extend the amendment deadlines for the remaining provisions of the CARES Act, as well as for relief provided under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, generally until December 31, 2025. Source: Groom.com, September 2022
Who Are the Top 403b Providers in 2022?As a small nonprofit, there are just some things that you struggle to find the time, resources, or staff to do. Looking for a 403b provider is one of those things. As a result, many nonprofits just default to one of the larger providers. Here is a comparison chart of the larger providers. Source: Forusall.com, September 2022
Clarification on Extension of Amendment Deadlines for CARES Act ProvisionsThe IRS released IRS Notice 2022-45, which corrected a potential oversight in IRS Notice 2022-33. Notice 2022-33 had extended the deadline to adopt certain retirement and savings plan amendments required by the SECURE Act and the CARES Act from December 31, 2022, to December 31, 2025, but the extension did not apply to certain CARES Act provisions, including penalty-free coronavirus-related distributions, increasing the permissible loan amount, and delaying repayment of loan amounts. Source: Erisapracticecenter.com, September 2022
So Far, Retirement Crisis is a "No-Show": Andrew Biggs"For decades, Americans have been told we are terrible retirement savers. We aren't offered a 401k; if offered, we don't participate; if we do, we don't save enough. But these warnings of an imminent retirement crisis have now been around for so long that we can check whether their dire predictions have come true. So far, the retirement crisis has been a no-show." Source: 401kspecialistmag.com, September 2022
New Bill Wants Alternative Investments in 401ksOn Thursday, Senators Pat Toomey, Tim Scott, and Rep. Peter Meijer introduced the Retirement Savings Modernization Act. The act purports to "bolster Americans' retirement savings by allowing workers in defined contribution plans, like 401ks, to better diversify their portfolios and invest in higher returning asset classes." Source: 401kspecialistmag.com, September 2022
Retirement Plan Documentation Mitigates Operational RiskRetirement plans face risk every day from many sources. One of the most overlooked is operational risk, often due to inconsistent employee performance and turnover. Employee turnover among a plan sponsor's benefits staff can lead to a loss of valuable knowledge and experience, as well as operational failures and possible litigation. Unfortunately, plan sponsors often learn this the hard way. The Great Resignation was a wake-up call to many employers. They realized that the knowledge employees took with them will take years to replace. Source: Segalco.com, September 2022
What Plan Sponsors Should Expect From a Retirement Plan AdviserMany plan sponsors are evaluating their relationships with plan advisers as they look for more guidance on managing their benefits, according to retirement industry veterans. As plan sponsors look to their advisers for help, many are beginning to see the difference, and it can become an issue when the adviser fails to deliver for their client. Source: Planadviser.com, September 2022
Plan Design Solutions to Satisfy ADP/ACP TestsYour 401k plan clients' mid-year test results will help you gauge which plans might be heading toward a failing grade on their year-end nondiscrimination testing. If a plan fails ADP, ACP, or top-heavy testing at year-end, the plan sponsor must take corrective actions such as returning deferrals to highly compensated employees or making additional employer contributions for non-HCEs. If you have plans that fail -- or barely squeak by -- each year, introduce them to the safe harbor plan design options that could guarantee them a pass on their next test. Source: Newportgroup.com, September 2022
IRS Extends Plan Amendment Deadlines Under CARES, Disaster Relief ActsThe IRS on Sept. 26 in Notice 2022-45 announced that it is extending the deadline for amending eligible retirement plans concerning coronavirus-related distributions and the use of retirement funds for disaster-related assistance.The IRS on Sept. 26 in Notice 2022-45 announced that it is extending the deadline for amending eligible retirement plans concerning coronavirus-related distributions and the use of retirement funds for disaster-related assistance. Source: Napa-net.org, September 2022
Costco ERISA Suit Ends in $5.1 Million DealA Wisconsin federal judge approved a $5.1 million settlement of a class action lawsuit against Costco concerning its 401k plan. Costco Wholesale Corp.'s retirement plan participants alleged that the company violated ERISA. An independent fiduciary, Fiduciary Counselors, approved the settlement, which represents an amount that is about 16% of the allegedly excessive fees that Costco charged plan participants. Source: Hallbenefitslaw.com, September 2022
Investment Advisers: The Independent Duties of Care and LoyaltyRecent SEC guidance has clarified that the investment adviser's duties of care and loyalty are separate, independent duties. A reasonable interpretation of the SEC and Staff guidance is that the satisfaction of one will not satisfy the other, both must be individually satisfied. As a result, the SEC appears to be saying that, even if a conflict is disclosed, that does not, in and of itself, satisfy the duty of care. For example, if an adviser discloses that the adviser will receive compensation related to an investment decision or recommendation, e.g., revenue sharing, but the revenue sharing share class of a mutual fund is more expensive for the investor, the duty of care may be violated even though the duty of loyalty was satisfied. Source: Fredreish.com, September 2022
Lender Beware: IRS Issue Snapshot on Third Party LoansThe IRS recently published an Issue Snapshot meant to guide examiners who encounter third-party loans among the investments of plans they are auditing. Third-party loans occur when a qualified plan trustee elects to loan plan funds to someone other than a plan participant, at a designated rate of return, in exchange for a promissory note, deed of trust, or other forms of security. This article summarizes some of the key points in the IRS Snapshot and provides some additional insights. Source: Eforerisa.com, September 2022
How Employers Can Transition to a New 401k Service ProviderMoving your 401k plan between providers can seem daunting. This article breaks down the services you might be switching and explains how you can prepare for the transition of each one. Source: Benefitnews.com, September 2022
Business Owners Owe $2M+ in DOL Fiduciary Breach CaseInvesting your company's retirement plan funds heavily in another company you have significant ties to is a no-no for a plan fiduciary. The fiduciaries of an international design firm in Moorestown, N.J. must pay more than $2 million to restore mismanaged assets to the company's retirement plan and in penalties after the DOL agreed to a settlement last Friday following an investigation and litigation. Source: 401kspecialistmag.com, September 2022
Debate: Is Defaulting 401k Participants Into Annuities in Their Best Interest?One provision in the Setting Every Community Up for Retirement Enhancement Act provides extra assurance and protection to retirement plan sponsors that follow certain rules to select annuities as in-plan offerings. Two professors with opposing political viewpoints share their opinions about whether retirement plans should default 401k participants into annuity options. Source: Thinkadvisor.com, September 2022*
Wake Forest University Retirement Plan Lawsuit Will ProceedA federal judge has allowed an ERISA lawsuit to proceed. Defendants previously alleged that the 403b university plan was mismanaged by plan fiduciaries because it was filled with excessive-fee investments, that the plan fiduciaries misused revenue sharing to pay for administrative expenses, and that they failed to conduct periodic bids to the market to ensure that the recordkeeping and administrative costs remained competitive. Source: Plansponsor.com, September 2022
Down Market Doesn't Stop DC Retirement Savers: ICI ReportDespite the volatile stock market, retirement saving continued to be a strong focus for defined contribution plan participants through the first half of 2022, according to new research from the Investment Company Institute. Source: 401kspecialistmag.com, September 2022
Amending Your Retirement Plans This Year for SECURE Act and CARES Act ChangesWhile many commentators and employee benefits publications have cheered the three-year extension, the article authors are of the view that plan sponsors will be best served by amending their plans this year to incorporate provisions of the SECURE Act, the Miners Act, and the CARES Act that they have been applying in operation. Source: Verrill-law.com, September 2022
Seventh Circuit Affirms Dismissal of Excessive Fee ClaimsThe Seventh Circuit has affirmed a trial court's dismissal of a participant's ERISA fiduciary claims against a 401k plan. The trial court dismissed the suit, observing that the participant had failed to allege that the fees were excessive in relation to the services provided or that a lower-cost alternative would have provided comparable services. Source: Thomsonreuters.com, September 2022
DC Plans Slow to Adopt ESG OptionsMany plan sponsors remain hesitant to implement environmental, social, and governance investing until the Department of Labor rules on the subject. Most of the ESG implementation so far has occurred in plans at organizations whose purpose naturally aligns with ESG factors. Source: Plansponsor.com, September 2022
Three Defendants Move to Dismiss Cybersecurity ERISA SuitThe Colgate-Palmolive employee relations committee, plan recordkeeper Alight Solutions, and custodian Bank of New York Mellon Corporation have all filed to dismiss an ERISA lawsuit brought by Paula Disberry, an employee of Colgate-Palmolive from 1993 to 2004. The defendants are accused of ignoring several red flags, resulting in over $750,000 being stolen from a retirement account. Source: Planadviser.com, September 2022
Retirement Plan Digital Experience Comes up Short for Many ParticipantsConcerned about their investments and deteriorating financial health, many retirement investors are turning to their plan's websites and apps for help, but they are not finding what they need. According to J.D. Power's 2022 U.S. Retirement Plan Digital Experience Study, overall satisfaction is down 12 points (on a 1,000-point scale) this year, as 53% of retirement plan investors are now classified as financially unhealthy and 63% say they have challenges managing their accounts digitally. Source: Ntsa-net.org, September 2022
Cruise Line Docked with Excessive Fee SuitThe plan size is somewhat smaller, and the plaintiff's law firm is relatively unknown in these matters, but the claims are familiar. The suit claimed that based on reasonable inferences from the facts set forth in this complaint, during the Class Period Defendants failed to have a proper system of review in place to ensure that participants in the plan were being charged appropriate and reasonable fees for each of the plan's investment options. Source: Napa-net.org, September 2022
Five Bad Fiduciary Assumptions, PodcastYou know that old saying that when you assume... well, that applies double (and then some) to ERISA plan fiduciaries. In this podcast, Nevin Adams and Fred Reish discuss five bad assumptions with reminders about how to avoid winding up in trouble. Source: Napa-net.org, September 2022
What Qualifies as an "Immediate and Heavy Financial Need" Under Hardship Withdrawal Rules?Do specialists have a list of the types of expenses for which distributions are deemed to be made on account of an immediate and heavy financial need from a 401k/ 403b plan under the hardship withdrawal rules? Experts from Groom Law Group and CAPTRUST answer the question. Source: Plansponsor.com, September 2022
Three 401k Excessive Fee Suits SettleThe pace of excessive fee settlements seems to be accelerating, but the size of those same settlements seems to be declining. Last week three of them -- in different courts, filed at different times, but with similar allegations -- announced that the parties had come to terms. Source: Napa-net.org, September 2022
Goldman Sachs Sacks 401k Excessive Fee SuitAnother excessive fee suit, this one involving proprietary funds, has been decided in favor of the plan fiduciaries. The suit alleged that the Goldman Sachs defendants "...retained these proprietary funds despite persistent underperformance and steep asset declines, adversely affecting participant balances while allowing Goldman Sachs to continue to draw fees and stem the consequences of losing one of the largest investors in the funds -- the Plan." Source: Napa-net.org, September 2022
DOL Proposal May Disrupt Plan Sponsors' Investment ArrangementThe DOL recently proposed significant changes to a key ERISA prohibited transaction exemption widely used by asset managers for nearly four decades. The exemption allows qualified professional asset managers to engage in many routine transactions that ERISA would otherwise prohibit. A separate provision clarifying that the exemption applies only to investment decisions that are the QPAM's sole responsibility might limit the investment opportunities available to plans. Source: Mercer.com, September 2022
Retirement Savers Continue Saving Despite Down Market in First Half of 2022Retirement saving continued to be a strong focus for defined contribution plan participants through the first half of 2022, ICI research demonstrates. ICI's study tracks contributions, withdrawals, and other activity in 401k and other DC retirement plans, based on DC plan recordkeeper data covering more than 40 million employer-based DC retirement plan participant accounts at the end of June 2022. Source: Ici.org, September 2022
ERISA Litigation: Seventh Circuit Confirms DOL's Broad Subpoena PowerIn Walsh v. Alight Solutions, LLC, the Seventh Circuit affirmed a district court order requiring Alight Solutions to produce documents in response to a DOL subpoena, confirming that the DOL has broad authority to issue subpoenas to investigate possible ERISA violations, even against non-fiduciaries. Source: Faegredrinker.com, September 2022
Retirement Plan Fiduciary Mistake: Focusing Solely on Past Investment PerformanceFiduciaries are not responsible for delivering the absolute best investment performance. They are responsible for following a prudent decision-making process that is reasonable and well-documented, and for making decisions with the best interest of participants in mind. Focusing primarily or solely on past investment returns could result in several fiduciary mistakes noted here. Source: Conradsiegel.com, September 2022
Target-Date Funds and the Ever-Evolving GlidepathIn 2021 and the first half of 2022, multiple TDF providers announced changes to their strategic target-date fund glidepaths. The timing of these changes was unique, as capital markets adjusted to a post-pandemic world and a vastly different global outlook. To better understand the nature and extent of these changes, Callan leveraged the data that they gather for their proprietary TDF analytics, which allows them to track broad TDF asset allocation trends. Source: Callan.com, September 2022
Is It a Breach of Fiduciary Duty to Include Target-Date Funds in 401k Plans?One of the themes of many excessive fee suits is that the inclusion of particular products in plans is, in and of itself, evidence of a fiduciary breach, when the real question in such a suit, even if a product was overpriced, should be whether it was imprudent for the fiduciary to have included that product. As the cliche goes, you get what you pay for, and a plan fiduciary's job is to assemble a prudent collection of investment options, not just assemble the cheapest one possible. Source: Bostonerisalaw.com, September 2022
Cerulli Sees Increased Recordkeeper, Advisor "Coopetition"Will "coopetition" between recordkeepers and plan advisors increase in the coming year? Boston-based research and consulting firm Cerulli Associates says yes, and the two parties will work together to serve the plan but simultaneously compete for participant rollovers. Source: 401kspecialistmag.com, September 2022
US Workers Fear Exhausting Savings in RetirementU.S. workers are more afraid of running out of money in retirement and more intimidated by financial matters -- such as long-term financial planning -- than workers in Europe are, yet Americans rate their financial well-being higher than do their counterparts across the pond, according to Alight research. Source: Plansponsor.com, September 2022*
Janus Henderson Sued for Allegedly Favoring Its Own Funds in Its Retirement PlanAsset manager Janus Henderson is being sued by one of its retirement plan participants, who alleges that the company breached its fiduciary duty by loading its 401k plan with poorly performing proprietary funds burdened by high fees. Source: Planadviser.com, September 2022
DOL Seeks Dismissal Of Cryptocurrency Guidance LawsuitA "meritless" lawsuit seeking to vacate the Department of Labor's cryptocurrency guidance for 401k plan fiduciaries should be dismissed, the agency said in a court filing. ForUsAll Inc., a 401k plan administrator that offers cryptocurrency to participants through a self-directed brokerage window, filed a lawsuit in June in U.S. District Court in Washington, alleging that the Labor Department's guidance is "arbitrary and capricious" and violated the Administrative Procedure Act. Source: Pionline.com, September 2022
Final 2023 IRS Limits ForecastThis is an update to the Milliman 2023 IRS Limits Forecast using the U.S. Bureau of Labor Statistics report published September 13, 2022. It is their fifth and final edition for the year. Source: Milliman.com, September 2022
Five Critical Components of a Cybersecurity Compliance ReviewCybersecurity should be top of mind for retirement plan fiduciaries, not only because the risks of a data breach or fraud are on the rise but also because the DOL has begun auditing retirement plans with a focus on cybersecurity. What's the best way for plan fiduciaries to mitigate risks while also demonstrating compliance with recent DOL guidance? Conduct a cybersecurity compliance review. This article outlines best practices for conducting such a review. Source: Ifebp.org, September 2022
Lassoing Fee Changes: What a TPA Needs to Know About Raising FeesTed the TPA is watching his costs go up and up with inflation. After examining his financials and thinking it through, he finds he has to put aside his usual optimism and raise his fees. It's the first time he's done this in years, and he is not sure what to do and how it needs to be done. He calls his attorney, Rebecca, who scoffs at him for waiting so long to raise fees. Then, she gets down to business and lets him know what he needs to do. Source: Ferenczylaw.com, September 2022
Maryland's State-Run IRA Is DifferentMaryland just announced its retirement savings initiative, MarylandSaves. There are a few similarities, but some favorable differences and improvements when compared to predecessors like OregonSaves, CalSavers, and Illinois Secure Choice. Source: 401kspecialistmag.com, September 2022
Report Features 401k Plan Sponsor and Participant Behavior in First Half 2022T. Rowe Price has published a report detailing plan sponsors' and participants' reactions to increased inflation and market volatility in the first two quarters of 2022. The report examines retirement behavioral trends and correlations between the challenging economy and job tenure with rates of savings for retirement. Source: Prnewswire.com, September 2022
DOL Pushes Back on Cryptocurrency SuitHaving been sued for issuing its Compliance Assistance Release on cryptocurrency by cryptocurrency recordkeeping platform provider ForUsAll, the Labor Department is pushing back. The DOL's motion to dismiss the suit -- filed in the U.S. District Court for the District of Columbia -- pushed back on the claims made by ForUsAll on several fronts. Source: Napa-net.org, September 2022
In ERISA Excessive Fee Cases, the Pendulum May Be Swinging Back in Favor of Plan SponsorsThe Oshkosh decision appears to create a favorable precedent for plan sponsors in the 7th Circuit since it narrowly applies the holding in Hughes. From the 6th and 7th Circuit, it appears that allegations have to compare the fees being charged with the quality and/or type of services being provided. Plan sponsors should review their investment lineup, compare investments under this standard, and maintain minutes of the deliberation process. Having a process-driven policy should mitigate fiduciary risk. Plan sponsors should also review their service agreements with their recordkeepers to fully understand how recordkeepers are compensated. Source: Foxrothschild.com, September 2022
What Broker-Dealers Need to Know About Correcting PTE 2020-02 MistakesThe DOL expanded its interpretation of fiduciary advice in the Preamble to PTE 2020-02 and as a result, many more broker-dealers and their registered representatives are fiduciaries for their recommendations to retirement investors, including rollover recommendations. Broker-dealers should implement good processes and documentation to satisfy the PTE conditions and closely supervise their investment professionals to ensure that the processes are followed. Source: Brokerdealerlawblog.com, September 2022
How Should Courts Analyze Arbitration Clauses in ERISA Plans?The validity of arbitration clauses should be considered by comparing the legitimate rationales for their inclusion in plans against the harm to the private attorney general model they engender, rather than by simply considering whether such clauses are legal when analyzed under traditional doctrines developed in the private contracting model. Source: Bostonerisalaw.com, September 2022
Massachusetts Secure Choice Moves Closer to ImplementationLegislation that would create Massachusetts Secure Choice, a state-run retirement program that would provide coverage for private-sector employees whose employers do not offer a retirement plan, is now before the Rules Committees of both chambers of the Bay State's legislature. The legislation was introduced in the state Senate and House of Representatives early in 2021. Source: Ntsa-net.org, September 2022
Proprietary Funds Draw Another 401k Excessive Fee SuitA new suit claims that the decision to retain proprietary funds in the 401k was "polluted by self-interest," driven by a "blind preference" and that "defendants' favoritism has led to the payment of excessive investment management fees." This time the plaintiff is bringing suit against the fiduciaries (and those that appointed them) of the Janus 401k and Employee Stock Ownership Plan. Source: Napa-net.org, September 2022
IRS Makes Changes to Determination Letter Application ProgramIRS Revenue Procedure 2022-4 made some notable changes to the determination letter application filing process. This article provides background on changes made under the Revenue Procedure to the determination letter filing process, including utilizing pay.gov, some "nuts and bolts" advice regarding navigating the website, filing an IRS Form 2848 electronically, and related considerations. Source: Groom.com, September 2022
Guiding Through Uncertainty: Ways to Connect With ParticipantsWhen uncertainty hits, it's natural that 401k participants will have questions, especially those who don't have a lot of investment experience. Plan sponsors can do a lot to allay their concerns by proactively reaching out and addressing the benefits of staying invested, the impacts of taking early distributions, and even the strength of the plan design can help keep jitters in perspective. Source: Blackrock.com, September 2022
DOL Recovers $131.8M for Wells Fargo 401k ParticipantsThe DOL announced a settlement with Wells Fargo and GreatBanc Trust Company that "recovers more than $131.8 million for the retirement plan's participants after a department investigation." Wells Fargo allegedly used the dividends paid on the preferred shares to defray its obligation to make contributions to the 401k plan. Source: 401kspecialistmag.com, September 2022
Are Your 401k Clients at Risk? Five Client Retention StrategiesNearly 50% of plan sponsors are actively looking for a new advisor. It's been said that it costs seven times more to earn a new client than it does to retain a current one. As you implement your business plan, consider these five client retention strategies. These ideas could have a big impact on how your clients perceive the quality of your service, could increase loyalty, and even produce inbound referrals. Source: 401k-marketing.com, September 2022
DOL (Somewhat) Unshackles Auditors From Stringent Independence RequirementsOn September 6, 2022, the DOL published an Interpretive Bulletin entitled "Independence of Employee Benefit Plan Accountants" superseding previous guidance governing when the Department considers a qualified public accountant to be "independent." The DOL's preamble statements in Interpretive Bulletin explain that the new guidance "remove[s] certain outdated and unnecessarily restrictive provisions." Source: Groom.com, September 2022*
Colorado Secure Savings Program Pilot About to LaunchThe pilot of the Colorado SecureSavings, the Centennial State's state-sponsored retirement savings program for those whose employers do not offer a retirement plan, will launch in October. The pilot will not be broadly open; the Colorado Secure Savings Board is set to work with a select group of Colorado businesses to take part in an exclusive pilot of the program. Source: Asppa.org, September 2022
Senate Finance Leaders Formally Introduce EARN ActWe now have legislative language for the Enhancing American Retirement Now (EARN) Act and a quick review finds a change from the concept draft regarding catch-up contributions. With legislative language now in hand, it appears the Finance Committee leaders have placed an income floor to the revenue-raising provision concerning catch-up contributions being treated as Roth contributions. Source: Asppa.org, September 2022
Third Circuit Backs J&J in Stock-Drop AppealThe Third U.S. Circuit Court of Appeals has issued a new ruling in an ERISA stock-drop lawsuit targeting Johnson & Johnson, affirming the dismissal of the lawsuit as ordered by a district court in May 2020. The new ruling emphasizes that a stock-drop plaintiff must do more than allege a general economic theory of why earlier disclosure of a financial issue would have been preferable. Source: Planadviser.com, September 2022
Judge Rejects Chamber's Commentary in ERISA SuitThe U.S. District Court for the Eastern District of Michigan has issued a new ruling in an ERISA lawsuit targeting the automotive components and supply business GKN North American Services Inc. The court rejects the defense's motion to dismiss the case but denies the U.S. Chamber of Commerce's bid to submit an amicus brief in the proceedings. Source: Planadviser.com, September 2022
Cryptocurrency and Retirement PlansAs advisors, TPAs, recordkeepers, and other service providers are dipping their toes into including cryptocurrency solutions for their clients, the regulators and legislators are wading in as well. It has been an active first half of 2022 in the world of crypto offerings with a general interest in regulating cryptocurrencies and digital assets coming from President Biden and a specific interest in cryptocurrencies in retirement plans from Congress and the DOL. Source: Napa-net.org, September 2022
Big Change Is Coming for 401ksWhile plan participants have been left largely to fend for themselves when it comes to investing for their retirements, market forces are now coalescing to revive the monthly retirement check in form of guaranteed lifetime income products. The 401k marketplace is in the midst of a tectonic shift that will transform retirement planning. Plan fiduciaries will need a new host of skills for evaluating and selecting this new potential onslaught of products. Source: Investmentnews.com, September 2022
Top Issues (and Their Solutions) Plan Sponsors Have With RecordkeepersNobody's perfect. It's unfair to expect recordkeepers to be. Everyone makes mistakes. The problem is what happens when a mistake occurs. When exit barriers are high, vendors tend to get cocky. And cocky vendors tend to be sloppy when it comes to assistance. Source: Fiduciarynews.com, September 2022
Making Sense of ERISA Pleading Law After the Seventh Circuit's Oshkosh DecisionThe quest for a predictable and fair pleading standard to stop ERISA class action litigation abuse continues. The Supreme Court in Hughes v. Northwestern gave us a limited opinion that did not solve the problem, and even that opinion initially caused more confusion in the district courts. So the battle continues in the appellate courts. Source: Euclidspecialty.com, September 2022
Seventh Circuit Provides Hope for Fiduciaries Defending Plan Fee LitigationThe Seventh Circuit recently provided a ray of sunshine in what has largely been a gloomy stretch for plan sponsors and fiduciaries defending ERISA breach of fiduciary duty claims based on allegedly excessive investment and administrative fees and investment underperformance. In this particular case, Oshkosh emerged victorious with the Seventh Circuit affirming the dismissal of claims that it mismanaged its 401k plan by paying excessive recordkeeping fees, failed to ensure investment options were prudent, and unreasonably maintained high-cost investment advisors. Source: Erisapracticecenter.com, September 2022
Seventh Circuit Ruling Sheds Light Into the post-Hughes 401k Litigation EraSince the Supreme Court's January ruling in Hughes v. Northwestern University, circuit courts throughout the country have issued varying rulings regarding 401k fee litigation cases. These include the Ninth Circuit in Trader Joe's Co. and Salesforce.com, Inc., and the Sixth Circuit in CommonSpirit Health, Inc. and TriHealth, Inc. Most recently, the Seventh Circuit has weighed in, affirming the dismissal of a 401k fee litigation in Albert v. Oshkosh Corporation. Source: Erisalitigationadvisor.com, September 2022
Practical Tips for Plan Sponsors and ESG InvestmentsRegulatory and legislative developments continue to accelerate around investments incorporating ESG factors into retirement plans. Plan sponsors and fiduciaries should take note of the fast-changing landscape when selecting and monitoring investment options. Groom Law Group's Jacob Eigner outlines what asset managers need to know about incorporating ESG factors in their investment processes. This includes compliance steps and how firms can build processes to avoid lawsuits from stockholders and the government. Source: Bloomberglaw.com, September 2022
Despite Recession Fears, Most 401k Investors Haven't Changed Their PortfoliosOnly 5% of 401k and 403b investors shifted their asset allocations during the second quarter of 2022, according to a Fidelity Investments report. It's not surprising since many 401k investors use target date funds, a "set it and forget it" option that gradually shifts to more conservative assets as they approach retirement. However, there may be opportunities for adjustments in other accounts, experts say. Source: Cnbc.com, September 2022
Two Losses for Pension Plan Participants Challenging Investment FeesIn two recent cases, 401k plan fiduciaries defeated claims by participants that they breached their duties under ERISA with respect to investment fees. Source: Yourerisawatch.com, September 2022
Fiduciary Lessons From Recent LitigationThe Supreme Court's Hughes v. Northwestern University holding has already revealed its expected impacts: (1) retirement plan fee lawsuits are more likely to survive a motion to dismiss; and, as a result (2) retirement litigation continues to accelerate. A recent collection of litigation activity provides another opportunity for plan fiduciaries to identify helpful protective steps and best practices. Source: Qualifiedplanadvisors.com, September 2022
DOL Extends Comment Period, Sets Hearing on QPAM Exemption AmendmentThe DOL announced that it will hold an online public hearing on the proposed amendment to its Class Prohibited Transaction Exemption 84-14, commonly known as the qualified professional asset manager exemption. The DOL is also extending the public comment period for the proposed amendment for an additional 15 days, through October 11. This period will be supplemented by a subsequent comment period beginning after the hearing in mid-November. Source: Planadviser.com, September 2022
Principal Prevails (Yet) Again in Fiduciary SuitA case that hinged on the determination of fiduciary status based on control of plan assets has been decided -- again -- in favor of the defendants. Source: Napa-net.org, September 2022
Behaviors You Should Avoid With 401k Plan ProvidersLike Rodney Dangerfield, retirement plan providers don't think they get respect. They probably think that way with some of the 401k plan sponsors who use and abuse them. This article is all about the behaviors you should avoid as a 401k plan sponsor in dealing with plan providers, whether they work for you or not. Source: Jdsupra.com, September 2022
DOL Updates Guidance on Audit Independence RulesThe DOL has issued new guidance for retirement plan fiduciaries, Interpretive Bulletin 2022-01, that addresses the rules about audit independence that apply to retirement plans governed by ERISA. Source: Planadviser.com, September 2022*
Low-Cost Index Funds in the Crosshairs of New 401k LawsuitsA series of new lawsuits demonstrate that plan fiduciaries' selection of any fund may be at risk for fiduciary breach claims, having a robust system of plan governance in place can make a company's 401k plan a less attractive target for plaintiffs' lawyers and provides necessary defenses should litigation arise. It is also very likely that compliance with ERISA Section 404(c) will be an important defense in these cases. Source: Hklaw.com, September 2022
Top 401k Priorities on the DOL's Regulatory AgendaOn June 21, 2022, the DOL published its Spring 2022 Regulatory Agenda which lists all the regulations the DOL expects to have under active consideration, including 401k reform items. You should check them out to understand the DOL's 401k-related priorities for the next 12 months. Here are the three 401k-related priorities that the author is most excited about. Source: Employeefiduciary.com, September 2022
BlackRock 401k Suits Pressure DOL to ActAt least 11 companies, including Booz Allen Hamilton Inc., Citigroup Inc., and Microsoft Corp., have been named in a spate of almost identical lawsuits going after a target-date index suite operated by BlackRock Inc. This surge in new lawsuits challenging workplace retirement plans over the set-it-and-forget-it funds they default investors into is renewing calls from industry critics who say the US Labor Department should be doing more to protect 401k savers. Source: Bloomberglaw.com, September 2022
DOL Releases New Bulletin on Independence for Plan AccountantsHow independent do accountants have to be when auditing plan documents? The DOL just got more specific. Interpretive Bulletin 2022-01 revises and restates the 1975 Interpretive Bulletin to remove certain outdated and unnecessarily restrictive provisions and reorganize other provisions for clarity. Source: 401kspecialistmag.com, September 2022
Plaintiffs Say 401k Plan Omitted Target-Date Funds Among ProblemsThe plaintiffs claim that the defendants "flagrantly" breached fiduciary duties owed to the plan and plan participants by mismanaging the plan's recordkeeping fees and investment options. In addition, the plaintiffs claim in the complaint that the TTEC 401k plan was administered during the class period without "crucial" protocol, namely, an investment policy statement, and did not include target-date funds in the plan's investment menu until "late" 2019 when five Vanguard options were added. Source: Planadviser.com, September 2022
District Court Rejects Cross-Selling Claims in Mixed ERISA RulingMuch of the ruling sides with plaintiffs and permits the case to move to discovery, but the defendants successfully defeat claims related to cross-selling and data-sharing among providers. Source: Planadviser.com, September 2022
M&A Could Be the Next Challenge for Plan Sponsors: Are You Ready?Auto parts maker GKN North America Services Inc. managed to fend off some, but not all, claims in an excessive fee suit involving its use of Prudential's GoalMaker product. Source: Orba.com, September 2022
Split Decision for 401k Excessive Fee SuitAuto parts maker GKN North America Services Inc. managed to fend off some, but not all, claims in an excessive fee suit involving its use of Prudential's GoalMaker product. Source: Napa-net.org, September 2022
Feds Poised to Implement Four Policy Changes Affecting ERISA Plans Before End of 2022The Biden administration plans to introduce various rules before the end of 2022 that will impact ERISA-regulated benefits plans. Meanwhile, Congress is working to smooth out differences between the Senate and House on a broad retirement policy omnibus bill. Here is a review. Source: Hallbenefitslaw.com, September 2022
Factors Contributing to Lower Retirement Confidence Among Women Who Are Not MarriedAmericans have near-record-high confidence in having enough money to live comfortably throughout retirement. However, unmarried women workers and retirees have lower retirement confidence than their married counterparts and are more likely to have lower incomes and assets. This 37-page report examines the attitudes, considerations, and behaviors surrounding the retirement of women workers and retirees of different marital statuses to provide greater insight into what can help improve women's retirement outcomes. Source: Ebri.org, September 2022
Achieving Fiduciary ExcellenceMore advisory firms are seeking to differentiate themselves and grow AUM by formalizing their commitment to fiduciary excellence. 139 investment advisory firms from around the world have done just that, achieving certification by the Centre for Fiduciary Excellence, the gold standard for signifying adherence to fiduciary best practices. This report provides an inside look at how those advisory firms operate their practices. Source: Broadridge.com, September 2022 Looking for earlier information? Go to our Archive. 401khelpcenter.com, LLC is not the author of the material referenced in this digest unless specifically noted. The material referenced was created, published, maintained, or otherwise posted by institutions or organizations independent of 401khelpcenter.com, LLC. 401khelpcenter.com, LLC does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com, LLC. | ||||
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