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October 2021 Digest

This digest contains a wide variety of source material dealing with current trends, opinion, news, legislative action, investments, marketing, sales, consulting, and legal issues regarding 401k 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.


Updating Your Plan's Safe Harbor Notice

As the end of the year approaches, now is the time for safe harbor 401k plan sponsors to prepare their annual safe harbor notices. For a plan sponsor that has previously sent out the safe harbor notice, last year's notice should be updated for any changes. This may include updating the date of the notice, annual contribution limits, any deferral changes, any employer contribution changes (including vesting schedules), and any distribution changes.

Source: Spotlightonbenefits.com, October 2021*

KPMG, Fiduciaries Face ERISA Lawsuit From Former 401k Participants

Former participants in a KPMG 401k plan have sued the company and plan fiduciaries, alleging a series of ERISA violations. "Plan fiduciaries failed to administer the plan in a prudent manner," said the complaint filed Tuesday in U.S. District Court in Newark, N.J. The complaint criticized "the selection (and maintenance) of several funds … and payment of excessive record-keeping and administration fees that wasted the assets of the plan and the assets of participants because of unnecessary costs."

Source: Pionline.com, October 2021

Surviving a DOL Cybersecurity Audit: A Cybersecurity Action Plan for 401k Fiduciaries

Whatever a particular fiduciary's degree of involvement with cybersecurity may be, the DOL's enforcement initiative should prompt the fiduciary to get ready for the scrutiny of their cybersecurity preparedness and oversight of the preparedness of their defined contribution retirement plan service providers, for example, 401k plan recordkeeper or institutional trustee. Whether a fiduciary has been highly engaged with cybersecurity or not, this is article outlines a fiduciary action plan.

Source: Keightleyashner.com, October 2021

Cybersecurity Preparedness Checklist for Plan Fiduciaries

Fiduciaries should complete this checklist for each service provider, for example, a payroll provider, 401k plan recordkeeper and administrative service provider, and an institutional trustee. Neither the DOL guidance nor this checklist ranks or assigns relative importance to the questions and practices it describes. To the extent questions in this checklist are answered in the negative, consideration should be given to potential changes in policy, procedures, contract terms, and/or monitoring, as appropriate. Answering "yes" to questions provides a degree of assurance but is no guarantee that fiduciary conduct would be considered prudent.

Source: Keightleyashner.com, October 2021

Court Limits Defendants in Fiduciary Breach Lawsuit

In Luense v. Konica Minolta Business Solutions U.S.A., Inc., a federal trial court dismissed certain allegations of a putative class action lawsuit brought by 401k plan participants, because they failed to prove that the defendants were fiduciaries when acting as alleged in the complaint.

Source: Hallbenefitslaw.com, October 2021

The Search for Missing Participants Continues: DOL Guidelines and Best Practices

The DOL noted that plan fiduciaries should consider what practices will yield the best results for their retirement plan, taking into account the participant population, size of the particular participant's account balance, and the cost of search efforts. Here are the best practices the agency recommends for searching for missing participants.

Source: Findley.com, October 2021

Strong Cybersecurity Policies Must Be a Firm Priority

Cybersecurity breaches are a growing concern among advisers, and, without sufficient protection, the benefits of America's workers may be at risk. With this challenge in mind, a recent panel discussion hosted by Fi360, a Broadridge company, detailed how to prepare a plan to keep up with current and future risks.

Source: Planadviser.com, October 2021

Law Firm Takes Aim at Another Big 4 Accounting Firm Retirement Plans

Taking a page (literally) from its recent excessive fee suit against the fiduciaries of the Deloitte 401k Plan, a litigation firm has made nearly identical claims against another of the "Big 4."

Source: Napa-net.org, October 2021

DOL Proposes to Warm the Climate for ESG Investing

The DOL proposes to clarify when ERISA plan fiduciaries can consider environmental, social, and governance factors in investment selection and proxy voting. The proposal would maintain the requirement for fiduciaries to focus on factors material to a risk-return analysis but, unlike the current rule, would make clear that this evaluation may include ESG factors. A more flexible tiebreaker standard would apply to consideration of collateral benefits but with new disclosures for DC plans. The proposal would lift the restrictions on investments that incorporate nonpecuniary factors from being considered qualified default investment alternatives. DOL also proposes to remove the current rule's proxy-voting policy safe harbors and cumbersome written documentation requirements.

Source: Mercer.com, October 2021

IRS Issues Summary Regarding Hardship Distributions From 401k Plans

The IRS has updated its "Issue Snapshot" summarizing the requirements for Hardship Distributions From 401k plans. These latest updates incorporate changes made by the Bipartisan Budget Act of 2018. The updated issue snapshot exclusively focuses on the current rules and foregoes virtually all mention of the restrictions that applied to hardship distributions before 2020, which is before the effective date of the amended regulations.

Source: Hallbenefitslaw.com, October 2021

DOL Delays Advice Exemption Enforcement Against Good Faith Fiduciaries

DOL's PTE 2020-02 transition relief includes two components. First, for the period from December 21, 2021, through January 31, 2022, DOL will not pursue prohibited transaction claims against investment advice fiduciaries who are working diligently and in good faith to comply with the impartial conduct standards for transactions that would have otherwise been exempted under PTE 2020-02 or treat such fiduciaries as violating the applicable prohibited transaction rules. Second, DOL extended express relief through June 30, 2022, to certain rollover recommendation conditions under PTE 2020-02.

Source: Groom.com, October 2021

New Rule Would Allow ESG Considerations for Retirement Plans

The new rule aligns with the White House's Executive Order 14030 ("Climate-Related Financial Risk") which asks federal agencies to protect financial stability and pensions from the financial risks related to climate change. The proposed rule states that the duty of prudence when evaluating investment may require the review of climate change's impact on financial markets and rates of return. The new proposal permits fiduciaries to consider these factors, and other ESG related factors, when evaluating investments without fear of breaching their fiduciary obligations.

Source: Graydon.law, October 2021

Private-Sector Retirement Plans; Abstract of 2019 Form 5500 Annual Reports

Private-sector retirement plans are required by ERISA to submit annual reports on the operations, funding, and investments of their employee benefit plans, which is satisfied by filing Form 5500. This 72-page paper presents summary statistics from Form 5500 series reports for plan years ending in 2019. The information presented includes weighted counts of plans and participants for both defined benefit and defined contribution retirement plans, various break-outs of these plan characteristics, as well as information on their assets, contributions, and investments.

Source: Dol.gov, October 2021

EBSA Reports Retirement Plan Growth

The DOL's Employee Benefit Security Administration has released a report that shows that retirement plans are growing by all measures: number of plans, participants, assets, contributions, and disbursements.

Source: Asppa.org, October 2021

Retirement, Mega Roth Provisions Dropped From Reconciliation Bill

While most of the news coverage on what was originally cast as a $3.5 trillion reconciliation bill has concentrated on a host of progressive initiatives, a number of key retirement related provisions were also under consideration, until last night. Those included a requirement that most employers (with more than 6 workers, operating for a couple of years) begin automatically enrolling their employees in IRAs or 401k-type plans, as well as those outlined here.

Source: Asppa.org, October 2021

A Million Dollar 403b Mistake

Here's the thing. I could have had $2 million when my account reached $1 million. Nine years of delayed saving cost me the opportunity to save $1 million because I had one less compound interest doubling period. Another decade later, as compound interest continues to work its magic on my portfolio, the gap between what I saved and could have saved continues to grow.

Source: 403bwise.org, October 2021

Shining a Light on What Participants Want

Fintech has broad acceptance among younger people. As digital natives, younger generations are more open to digital-first ways of managing their finances. Results from the 2021 PLANSPONSOR Participant Survey indicate that 87% of respondents age 23 to 29 reported using some sort of fintech, and that percentage also holds for the 30 to 39 age demographic. The number drops to 75% for the 40 to 49 age group and 58% for 50- to 59-year-olds. The survey also suggests that the use of fintech correlates with participants' engagement with their plans.

Source: Planadviser.com, October 2021

Deemed Distributions Can Be Triggered by More Than Just Loan Nonpayment

Plan sponsors might be most familiar with the failure that occurs when a participant loan goes into default if payments are not made. But the IRS says failures also could occur when participant loans exceed the maximum dollar amount, have payment schedules that do not meet the time or payment requirements or are not legally enforceable agreements.

Source: Plansponsor.com, October 2021

Older 401k Participants Moving to TDFs More So Than Younger Participants

401k plan participants -- especially those in older age cohorts -- have been increasing their exposure to target-date funds, according to a report from the Employee Benefit Research Institute and Investment Company Institute. Participants in their 50s and 60s are using TDFs more than they have in the past, according to a new EBRI and ICI report.

Source: Planadviser.com, October 2021

Walgreen Co. Agrees to Settle Suit Challenging Underperforming TDFs

Plaintiffs in a lawsuit alleging fiduciaries of the Walgreen Profit-Sharing Retirement Plan breached their fiduciary duties by selecting and retaining poorly performing target-date funds for the plan have filed a motion for preliminary approval of a settlement agreement. The challenged target-date funds have already been taken out of the plan, and the defendants have agreed to pay $13.75 million into a settlement fund.

Source: Planadviser.com, October 2021

ESG and Proxy Voting Rules Receive New Life Under Proposed DOL Regulations

On October 13, 2021, the DOL released a proposed rule, "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights." The proposal would amend the DOL's investment duties regulation for the consideration of environmental, social, and governance factors in the selection of investments for retirement plans that are subject to ERISA. The proposal also would amend the rules for the exercise of shareholder rights and proxy voting under ERISA.

Source: Icemiller.com, October 2021

DOL Grants New Extension of Investment Advice Rulemaking

Financial services firms -- that were in a mad dash to comply with a new and important exemption for investment advice fiduciaries to ERISA plans and IRAs -- can rest easy, at least for now. The DOL announced yesterday a new temporary enforcement policy to Prohibited Transaction Exemption 2020-02.

Source: Fiduciarygovernanceblog.com, October 2021

What Plan Sponsors Need to Know About SOC Reports

Most 401k and other benefit plans outsource the vast majority of plan activities to a service organization (e.g., recordkeepers/custodians and payroll service providers). Most service organizations will have a Service Organization Controls report that documents internal controls over financial reporting as well as the results of the tests of those controls for operating effectiveness. Information contained in the SOC report helps plan sponsors act in the best interests of their plan participants, which is part of the plan sponsor's fiduciary duty.

Source: Eisneramper.com, October 2021

Field Assistance Bulletin No. 2021-02

This document announces a temporary enforcement policy related to the Department of Labor's prohibited transaction exemption (PTE) 2020-02.

Source: Dol.gov, October 2021

DOL Further Delays Enforcement of PTE 2020-02

The DOL has issued Field Assistance Bulletin No. 2021-02 to further delay enforcement of Prohibited Transaction Exemption 2020-02, which sets forth several requirements that financial institutions and investment professionals must satisfy when providing fiduciary investment advice, including advice to roll over a retirement plan account into an individual retirement account. The transition relief currently in effect was set to expire on December 20, 2021. Citing practical difficulties caused by the year-end timing, the DOL has extended its non-enforcement policy for compliance with PTE 2020-02 to January 31, 2022, for all requirements other than the specific documentation and disclosure requirements for rollover recommendations.

Source: Bradley.com, October 2021

Latest Swing in ESG Investments and ERISA's Fiduciary Duties

For those of you following the saga of ERISA's fiduciary duties and ESG investing, we are nearing a possible finish line. The latest turn in the saga came when the DOL issued a new set of proposed regulations this month. The approach taken by the DOL comes as no surprise. Looking at the broader ESG shifts in the regulatory environment, the DOL regulations create a symmetry with SEC activities under Gary Gensler's helm as the SEC's taken a very vocal approach on the role of ESG factors in an investor's ability to assess the value of an investment.

Source: Beneficiallyyours.com, October 2021

GKN Latest to Face Scrutiny Over GoalMaker Service

Plaintiffs have filed a new ERISA lawsuit in the U.S. District Court for the Eastern District of Michigan, naming as defendants GKN North American Services Inc. and its board of directors. GKN is an automotive components and supply business. Though its GoalMaker portfolio management solution features prominently in the plaintiffs' allegations, Prudential is not a party in the case.

Source: Planadviser.com, October 2021*

The "Defensive" 401k Plan

While ERISA litigation has proliferated in recent years, the Supreme Court has pointed plan sponsors toward a way to help control plan disputes. The Roberts Court's ERISA jurisprudence has re-awakened the idea that one of ERISA's key tenets is that a plan's written terms matter. In other words, if plan sponsors want to reduce their exposure to litigation, one way to do so is by adding certain plan terms that mitigate risk. This column identifies some ways in which plan sponsors can amend plan language to manage and/or mitigate exposure to claims for benefits and other ERISA claims.

Source: Jenner.com, October 2021

401k Plan Top 10 Year End Laundry List

No one likes doing laundry, but having a calendar year-end top 10 list may be exactly what plan sponsors and administration committees need to prevent operational or document compliance issues being raised by a 401k plan participant or beneficiary, the IRS, or the DOL. This list highlights issues for sponsors and administration committees between now and year-end for calendar year plans.

Source: Foley.com, October 2021

Empire State (Officially) Embraces Auto-IRA Mandate

Gov. Kathy Hochul has signed into law legislation that would convert New York State's voluntary participation state-run IRA program to mandatory for employers that do not offer a retirement plan and employ 10 or more employees. The legislation had been passed by the State Senate back in June, and by the New York General Assembly in May.

Source: Asppa.org, October 2021

Thoughts on the DOL's Proposed ESG Regulation

The latest installment in the regulatory back-and-forth over the investment of ERISA-governed retirement plan assets based on ESG factors arrived in the form of a newly proposed regulation on "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights." This post focuses on the part of the regulation relating to the selection of plan investments. After briefly summarizing what's new, this post comments on winners and losers in this latest round of guidance, discusses how the proposal would change the risks affecting ERISA plan fiduciaries, and speculates on what it might take to settle the perennial uncertainties generated by changing DOL guidance in this area.

Source: Verrill-law.com, October 2021

Fiduciary Insurers Follow Plaintiffs' Paths

Fiduciary liability insurers have taken note of the recent surge in excessive fee suits and are now making pointed inquiries based on the plaintiffs' bar's playbook. This "new" generation of questionnaires cover the same type of questions, but now get into areas such as how fiduciaries are selected, as well as whether a periodic review is conducted (including benchmarking) to determine the reasonableness and competitiveness of fees of service providers -- in particular for recordkeepers -- as well as how often, how/is it documented, and "what is the recordkeeping fee for each plan when calculated on a per capita basis?"

Source: Napa-net.org, October 2021

RIA Aggregators' Influence in DC Plan Market on the Rise

As registered investment advisor aggregator firms continue to acquire smaller players in the DC space, their size and scale have brought greater influence in the DC market, according to a new report from Cerulli. This is particularly true in the $25 million to $500 million market segment, the firm notes in its latest report, "U.S. Defined Contribution Distribution 2021: Uncovering Investment-Only Distribution Opportunities."

Source: Napa-net.org, October 2021

Unanimous Support Seen for Workplace Retirement Plans

With anxiety running high about not having enough saved for retirement, a new survey finds that virtually all respondents want help saving for retirement while they are working. AARP's survey of 1,000 registered voters aged 25 or older reveals that 99.7% of respondents agree about the importance of being able to save for retirement through their paychecks. AARP notes that the views are similar regardless of political affiliation, income, or gender.

Source: Napa-net.org, October 2021

Retirement Plan Sponsors Have Short List of 2021 Year-End Amendments

Retirement plan sponsors face a very short list of required amendments to make before year-end, but a few will need to formally adopt plan changes already operationally in effect. This article summarizes the amendments that may be required by year-end for qualified defined benefit, defined contribution plans, and Section 403b plans.

Source: Mercer.com, October 2021

SAS 136 Is Here: A Review of All the Changes

SAS 136 is around the corner. There have been tidbits of information so you can be prepared for the change, but this piece ties it all together because the effective date is for periods ending on or after December 15, 2021 (i.e., beginning with December 31, 2021, year-ends).

Source: Lindquistcpa.com, October 2021

SAS 136: How to Plan Ahead and Prepare for Additional Requirements

401k plan sponsors will need to prepare for additional requirements related to their 2021 plan audits. Statement on Auditing Standards No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, is effective for periods on or after December 15, 2021.

Source: Lindquistcpa.com, October 2021

Dangers Advisers May Face Due to Recordkeeper Consolidation

The larger providers produced by consolidation will cater to larger RPA groups like aggregators and major broker-dealers at the expense of smaller, independent RPAs.

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

ROBS: What to Know When Financing a Business Using Your 401k, IRA, or Other Retirement Funds

For those who are reluctant to assume additional debt or may not qualify for a traditional business loan, there is an alternative option. A Rollover as Business Start-Ups (ROBS) is an alternative form of business financing that can be used without having to borrow the cash to start, acquire, or grow a business. A ROBS arrangement is not a withdrawal from a retirement plan account or a loan against it. Instead, is a rollover fund that enables the use of retirement funds to purchase stock in the new company, with the proceeds from the sale of stock then used to fund the new or purchased business without incurring tax penalties or early withdrawal fees.

Source: Icemiller.com, October 2021

U.S. Business Groups Support Cornell in ERISA Case

Two trade groups recently offered support to Cornell University after the academic institution settled a class-action lawsuit brought by participants in Cornell's 403b retirement program. The U.S. Chamber of Commerce and the American Benefits Council filed an amici curiae (friend of the court) brief in Cunningham et al. v. Cornell University et al., case number 21-88 in the U.S. Court of Appeals for the Second Circuit. The brief supports Cornell and the decision rendered in 2019. The determinative issue of the case was which party bears the burden of proof once an injury has been alleged.

Source: Hallbenefitslaw.com, October 2021

New DOL Proposal May Be ERISA's Zero-to-One ESG Moment

As with the Financial Factors rule and Obama-era guidance, the proposal emphatically reaffirms that ESG factors can be material to an investment's risk-return analysis, and in those situations, a fiduciary should consider them along with any other non-ESG material risks. In doing so, the DOL fleshed out various types of ESG risks, and, in considerable detail, the multi-dimensional aspects of an ESG factor. The proposal is directly relevant to all ERISA plan sponsors (both DB and DC), investment managers, and pooled investment funds that hold "plan assets." Proxy advisory firms and product manufacturers are indirectly affected.

Source: Fiduciarygovernanceblog.com, October 2021

DOL New Proposed ESG Regulations (and Other Updates)

The author writes, "Without question, we heard from Third Party Administrators, Certified Public Accountants, and Institutional Pension Workers, that this year was one of the most challenging October 15th deadlines. The fallout from the 2020 census hokey-pokey, and ongoing personnel shortage with Plan Sponsors, added massive challenges to an already difficult process. While you were locked in your chair and not sleeping, lots of interesting proposed regulations and legislation were floated and it's time to start putting your thinking caps on to figure out how this all might impact our clients."

Source: Ferenczylaw.com, October 2021

Aon Defeats ERISA Class Action at Trial

Aon Hewitt Investment Consulting defeated a class action in the Western District of North Carolina brought by nearly 250,000 current and former Lowe's Companies employees who were participants in Lowe's 401k retirement plan. Plaintiffs alleged that Aon and Lowe's breached their fiduciary duties of loyalty and prudence under ERISA to the Plan by directing substantial Plan assets to Aon's proprietary investment products.

Source: Erisalitigationadvisor.com, October 2021

Managing Fiduciary Responsibility

With ERISA lawsuits alleging negligence and mismanagement on the rise, fiduciary liability insurance is a critical component of managing a retirement plan. However, experts say settlements in the tens or hundreds of millions of dollars are forcing insurers to institute dramatic premium increases. Some carriers are hesitant to offer such coverage at all. This article investigates the risks associated with fiduciary responsibility, the need for fiduciary liability insurance, and ways employers can secure coverage and reduce the likelihood of litigation.

Source: Captrust.com, October 2021

DOL Issues Proposed Changes to Investment Duties Rule Under ERISA

The much-anticipated revised Investment Duties regulation drops ERISA fiduciaries into 21st-century investment decision making, freeing fiduciaries to consider all relevant facts and circumstances that could affect an investment's value, including, as appropriate, climate change and environmental, social, and corporate governance factors. These proposed rule changes are the latest chapter in a series of non-regulatory and regulatory guidance on the sticky subject of fiduciary consideration of an investment's potential collateral benefits, loosely encompassing investments that promote or support social or other benefits or goals.

Source: Wagnerlawgroup.com, October 2021

Cumulus Media Granted Summary Judgment in 401k Excessive Fee Suit

A judge has granted summary judgment to Cumulus Media in a lawsuit over retirement plan fees because he found that the plaintiff waived his right to sue. On May 31, 2019, the plaintiff signed a separation agreement with Cumulus Media that released the company from all claims held by the plaintiff as of that date. The plaintiff admitted that before signing the agreement, he did not read the document in its entirety nor consult with an attorney about the effect of its terms.

Source: Planadviser.com, October 2021

Watch Out for 401k Fees

Syndicated columnist Michelle Singletary warned consumers to be aware of the fees charged by 401k plans. Singletary told her readers "It's important that you understand that the fees you're being charged matter," and that people who think there's no cost to invest in these plans are wrong.

Source: Pensionrights.org, October 2021

Cybersecurity Requests Appear in DOL Audits

Benefit plan sponsors and service providers need to take a proactive approach to cybersecurity and be prepared for a possible DOL investigation. Although the immediate attention has been on retirement plans, health and welfare plan sponsors and fiduciaries should also be prepared to field questions about cybersecurity from DOL auditors.

Source: Groom.com, October 2021

The DOL Pendulum Swings on ESG, but How Far Remains to Be Seen

On October 14, 2021, the DOL issued proposed regulations that represent the first step in meeting President Biden's directive to revise or rescind the recent Trump-era rules addressing a fiduciary's duties under Section 404 of ERISA. The key takeaways are reviewed here.

Source: Debevoise.com, October 2021

DOL Updates the Fiduciary Rule (Again)

The DOL issued updated guidance on the so-called "Fiduciary Rule," which will be enforceable beginning Dec. 20, 2021. The DOL set out the steps investment advice professionals should take to satisfy the prohibited transaction exemption, which allows them to offer investment advice. The guidance also clarified that recommendations around out-of-plan rollovers could be considered fiduciary advice.

Source: Callan.com, October 2021

How Can Plan Sponsors Evaluate Prospective Auditors?

As the results of a DOL study on audit quality shift, the industry focus on the qualifications of employee benefit plan auditors. CPA firms with specialized retirement plan audit practices choose to demonstrate their commitment to quality employee benefit plan audits by displaying their auditors' badges on marketing materials, social media, and email signature lines. What do the badges mean and how does a plan sponsor differentiate between prospective audit teams that are equally credentialed?

Source: Belfint.com, October 2021

Getting Up to Date on Form 5500

The SECURE Act of 2019 has a long reach and that extends to Form 5500. An Oct. 18 session at the 2021 ASPPA Annual conference took a look at changes that have taken place in the form vis-a-vis the enactment of the measure.

Source: Asppa.org, October 2021

403b Plan Participants: Getting "Noticed"

A reminder for public schools and 501(c)(3) organizations with 403b plans as year-end approaches, employers have an annual notice obligation to employees to meet IRS requirements. This article reviews the IRS employers' annual notice obligation to employees.

Source: Voya.com, October 2021*

Autoenrollment and the Importance of the Default

Automatic enrollment is a powerful strategy proven to increase retirement plan participation, but the newest -- and last -- edition of Nudge, a seminal book on behavioral finance coauthored by Nobel laureate Robert H. Thaler, stresses that the benefits of the popular strategy depend largely on how it is implemented.

Source: Vanguard.com, October 2021

Only 31% of Hispanic Workers Participate in a Workplace Retirement Plan

While they're one of the fastest-growing population demographics in the country, Hispanic workers face major challenges in allocating enough money to retirement savings compared with other groups. In the report "A Closer Look Into The Finances of Hispanic American Households," behavioral researchers at Morningstar dug into the underlying causes of the lower savings rates for this group.

Source: Planadviser.com, October 2021

Plaintiffs Claim Deloitte Breached ERISA Prudence Duties

Plaintiffs have filed a new ERISA lawsuit in the U.S. District Court for the Southern District of New York, naming as defendants Deloitte LLP, the company's board of directors, and various other related entities. The suit alleges the defendants permitted the payment of excessive administrative and recordkeeping fees in the operation of a 401k plan and a profit-sharing plan provided to Deloitte employees.

Source: Planadviser.com, October 2021

401k Fee Litigation: What Must a Plaintiff Allege to Survive a Motion to Dismiss?

This term the Supreme Court is considering -- for the first time -- critical issues in DC plan fee litigation, in Hughes v. Northwestern. This piece discusses the recent decision by the United States District Court for the Southern District of Ohio, dismissing plaintiffs' claims in Forman v. TriHealth, Inc. 401k Retirement Savings Plan Retirement Committee. Forman illustrates an issue that is also likely to be presented in Hughes: how fact-specific must plaintiffs' complaint be to survive a motion to dismiss?

Source: Octoberthree.com, October 2021

DOL Proposes Rule Encouraging ESG and Proxy Voting, Reducing Documentation Requirements

The proposed rule would largely retain the basic framework of the investment duties regulation while reinstating guidance similar to the sub-regulatory framework that existed immediately before the 2020 rules. For example, the proposed rule retains two longstanding principles. First, the duties of prudence and loyalty require ERISA plan fiduciaries to focus on material risk-return factors and not subordinate the interests of participants and beneficiaries to objectives unrelated to the provision of benefits under the plan. Second, the fiduciary act of managing plan assets includes making decisions about voting proxies and exercising shareholder rights. While the framework is the same, the proposed rule would include changes that seem likely to result in greater leeway for fiduciaries to include ESG investments in plans.

Source: Groom.com, October 2021

How Fiduciaries Can Help Protect Themselves from Excessive Fee Litigation

Employers that sponsor a retirement plan should be concerned with the risk of excessive fee claims, as the number of these has skyrocketed recently. Chubb's Alison Martin shares steps plan fiduciaries can take to reduce the chances of a lawsuit or increase their chances of successfully defending against one.

Source: 401kspecialistmag.com, October 2021

Surprising Findings on 401k Participant Student Loan Debt

Nearly one-in-three Baby Boomer and Gen-X 401k plan participants who have student loan debt also have outstanding 401k loans, a much higher percentage than Millennials or Gen Z participants. The research also shows Gen-Z joining the ranks of workers increasingly burdened by debt, entering adulthood with $27,900 in student debt on average. But notably, Boomers hold more than twice as much debt as these younger borrowers.

Source: 401kspecialistmag.com, October 2021

DOL Proposes Rule to Remove Barriers to ESG Funds in Retirement Plans

The DOL has proposed removing barriers put in place by the prior administration that would have limited plan fiduciaries' ability to consider climate change and other environmental, social, and governance issues as risk factors affecting workers' financial security when fiduciaries select retirement plan investments and exercise shareholder proxy voting rights.

Source: Shrm.org, October 2021

New 401k Adoption Agreements on the Horizon: Pitfalls for the Unwary

It is important for employers to carefully review the updated documents prepared for their plans. Simply "rubber stamping" the updated document package from the vendor is likely to result in compliance failures and could lead to costly corrections and penalties. Here are some of the issues to watch for.

Source: Sgrlaw.com, October 2021

After 401k Account Growth Catapults Ahead of Curve, Vestwell CEO Scrambles

Vestwell CEO Aaron Schumm just abdicated his chairmanship to Lori Hardwick as part of a senior executive team shuffle, after experiencing overwhelming growth in the workplace 401k accounts it services.

Source: Riabiz.com, October 2021

Aon Triumphs in ERISA Suit Over Lowe's Investments

A judge determined the firm didn't breach its ERISA fiduciary duties when it encouraged Lowe's to move more than a billion dollars in plan assets to one of Aon's investment funds.

Source: Planadviser.com, October 2021

Four Tech Trends Shaping the 401k Industry

While the 401k industry may be somewhat slow to adapt to new technology, the results of a new survey suggest that ongoing developments are quickly transforming the retirement space. According to the resulting of a recent, outdated recordkeeping technology has led to high costs, administrative difficulties, and rigid plan designs. But that appears to be changing as large banks and private equity firms, for example, have invested nearly $1 billion into the industry over the past year alone.

Source: Napa-net.org, October 2021

Changes in 401k Plan Asset Allocation Among Consistent Participants, 2010-2018

This paper provides an update of a longitudinal analysis of plan participants drawn from the EBRI/ICI 401k database. It examines how asset allocations change over the years within the accounts of consistent participants, that is, those who maintained accounts in each year from 2010 through 2018.

Source: Ebri.org, October 2021

Scary Surprise for Some New 401k Sponsors: Plan Audit Costs

You are a business owner and have just found out that as part of your Form 5500 filing obligations you need to engage the services of an independent qualified public accountant to audit plan operations and finances. The cost of these services run about $10,000. This is a scary surprise for you. Did things have to end up this way?

Source: Eforerisa.com, October 2021

DOL Proposes Rule to Remove Barriers to Considering ESG Factors in Retirement Plan Management

The DOL announced a proposed rule that would remove barriers to plan fiduciaries' ability to consider climate change and other environmental, social and governance factors when they select investments and exercise shareholder rights. The proposed rule, "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights," follows Executive Order 14030, signed by President Biden on May 20, 2021. The order directs the federal government to implement policies to help safeguard the financial security of America's families, businesses and workers from climate-related financial risk that may threaten the life savings and pensions of U.S. workers and families.

Source: Dol.gov, October 2021

TIAA Faces New Managed Account Rollover Complaint

A new lawsuit suggests the individual advisory program TIAA clients were rolled into was significantly more expensive and generated hundreds of millions of dollars in fees for TIAA, without providing commensurate performance benefits.

Source: Planadviser.com, October 2021

ESG Would Get Massive Boost From DOL Proposed 401k Rule

A proposed rule issued Wednesday by the DOL bodes extremely well for ESG investment managers, especially because the regulator clarified that target-date funds and other default products that use the investment criteria are permissible in 401ks. But the DOL went a step further, noting that it is retaining the so-called "tie-breaker" test for investments, meaning that all else being equal, financially immaterial factors can give one product an edge over another. The proposal also clarifies that ESG can be material when it comes to proxy votes that plan sponsors make on behalf of participants.

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

Labor Department Issues ESG Rule Proposal for 401ks

The DOL has issued its much-anticipated rule for the use of ESG investments in retirement plans, effectively walking back two Trump-era rules that were finalized last year. In the single rule proposal, "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights," the DOL would modify requirements outlined in the two rules from last year, "Financial Factors in Selecting Plan Investments" and "Fiduciary Duties Regarding Proxy Voting and Shareholder Rights."

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

A Primer on DOL Probes for ERISA Plan Service Providers

The DOL has proactively shifted its enforcement resources in recent years from the sponsors of plans covered by ERISA to the financial institutions that provide services to ERISA plans. This has allowed the agency to conduct investigations involving hundreds or thousands of plans at once rather than investigating individual plan sponsors. Given this shift, it is important to know both what to expect when the DOL decides to investigate and how to respond.

Source: Groom.com, October 2021

Do This If You Don't Like Your 401k Plan's Fees

If you've been paying attention, you know there's been a constant cry lamenting the "high" fees of 401k plans. Setting aside whether or not this is as pervasive as some make it sound, the truth is, at least a few 401k plans do pay more than they should. You might even be tempted to call them "outrageous." If your 401k plan falls into that sorry camp, what can you do?

Source: Forbes.com, October 2021

The Key Differences Between 401k and Roth IRA Retirement Plans

If you're thinking about starting to save for retirement, chances are good that you are looking at both Roth IRA and 401k plans. Both offer tax benefits and can help you grow your wealth over time, but there are several key differences between the two.

Source: Cnbc.com, October 2021

Despite Pandemic, Nonprofit Workers Boost Participation in 403bs

Despite COVID-19 hitting nonprofit organizations particularly hard last year, nonprofit workers participated in 403b retirement plans at the highest level since tracking began in 2008, according to an annual 403b Plan Survey from the Plan Sponsor Council of America. Overall retirement plan participation continued to climb, rising to 77.2% in 2020, up from 76.6% in 2019 and 72% in 2018.

Source: Psca.org, October 2021

DCIO Service Providers Report Significant Momentum

The average defined contribution investment-only provider's assets under management rose 30% over the 12 months leading up to June 30, aided by market gains of around 10% in just the first half of 2021, according to a new Sway Research survey. The analysis is based on surveys and interviews with 21 DCIO sales leaders and DC plan intermediaries. It shows that not all the AUM growth is the result of increasing stock prices, as two-thirds of the managers captured positive net sales during the first half of this year.

Source: Planadviser.com, October 2021

New IRS Snapshot Tackles Deemed Distributions

A new IRS issue snapshot explains when different kinds of participant loan failures will cause a taxable deemed distribution. The snapshot also highlights the provisions of the CARES Act that gave more loan flexibility to participants affected by COVID-19. While the snapshot summarizes existing guidance rather than providing new information, it may alert plan sponsors and taxpayers to the kinds of issues IRS agents review during audits.

Source: Mercer.com, October 2021

Revenue Sharing Declines Among DC Plan Sponsors

The percentage of DC plans using revenue sharing -- or a combination of revenue sharing and other forms of plan payments -- has been declining over the years. The strategy has been a casualty of trends in lower fees, more transparency, government regulation, litigation risk, and fiduciary liability insurance requirements.

Source: Pionline.com, October 2021*

Six Excessive Fee Suits Paused for SCOTUS Ruling

A federal judge has put a half dozen excessive fee suits on hold pending a decision by the U.S. Supreme Court in a case that "will likely clarify the pleading requirements for ERISA breach of fiduciary claims in cases such as this...." That was the determination of Judge William C. Griesbach regarding six cases pending in the U.S. District Court for the Eastern District of Wisconsin.

Source: Ntsa-net.org, October 2021

Can 401k Plans Better Serve Their Retired Workers?

Improving 401k plans for retirees is a worthwhile goal. Currently, the system is messy. To start, plan sponsors view their responsibilities divergently. According to a survey from Pimco, 36% of sponsors actively encourage their company's retirees to remain in the 401k plan, 38% prefer that they do so but do not solicit such behavior, 19% are indifferent, and 7% hope that their retirees will leave. The trend, however, is toward greater involvement. Over time, attempting to retain retiree accounts will likely become the corporate standard.

Source: Morningstar.com, October 2021

Budget Bill Seeks Retirement Plan Mandate, Roth Conversion Ban

Nearly all employers would have to offer retirement plans with automatic enrollment, and the saver's credit would turn into a government matching plan contribution under the current House version of a roughly $3.5 trillion budget package. Other retirement-related proposals would ban Roth conversions in employer plans and cap retirement benefits for high earners. Although the retirement provisions may change as the Senate weighs in, they stand a good chance of surviving in any final package.

Source: Mercer.com, October 2021

AT&T Fends Off 401k Fee Suit

AT&T saw a big win in a five-year-old lawsuit over its 401k plan, with a federal judge on Sept. 28 granting summary judgment in the company's favor. In 2017, the telecommunications giant was sued in U.S. District Court in Central California for alleged fiduciary breaches in the plan, including claims over administrative fees paid to the plan provider, Fidelity, as well as to indirect compensation that Financial Engines paid to that firm.

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

Small Business Tax Incentives for Retirement Plans

The growing emphasis on expanding retirement plan coverage, particularly among small businesses, leaves many employers asking when -- not whether -- retirement plan access will become a requirement. But establishing a retirement plan can be expensive and time consuming, especially for small businesses. Fortunately, there are some incentives in place to make establishing a plan easier for small employers.

Source: Captrust.com, October 2021

SECURE Act Revisited -- Plan Participants

The SECURE Act provides more access to retirement plans for more people, allows participants more options in retirement, and provides small businesses with incentives to offer and additional options to establish new 401k plans. With all the provisions now effective, here's what plan participants need to know.

Source: Benefit-Resources.com, October 2021

Congress Considers Mandatory Auto-Enrollment IRAs

All eyes are on Congress as it wrestles with a $1 trillion infrastructure bill and a $3.5 trillion budget reconciliation bill. The House Ways and Means Committee markup of the reconciliation bill would require certain employers with five or more employees to automatically enroll employees in a payroll deduction IRA. This requirement would take effect on January 1, 2023.

Source: Wagnerlawgroup.com, October 2021

EBSA Nominee Addresses Fiduciary Rulemaking, Women's Protection

Lisa Gomez, who was nominated to serve as Assistant Secretary of Labor for the Employee Benefits Security Administration, tackled a wide range of issues during her Oct. 7 Senate confirmation hearing.

Source: Napa-net.org, October 2021

Small U.S. Retirement Plans Lagging in Cybersecurity Oversight

Fiduciaries at large, sophisticated plans tend to understand their responsibility and have resources and staff to regularly assess contractors' fraud and data controls. But smaller firms can be left in the dark. As recordkeepers continue to make cyber improvements, they may play an outsized role in helping their smaller clients keep up. One of the things they need to be doing is helping raise awareness to plan fiduciaries that they have this responsibility.

Source: Groom.com, October 2021

District Court Dismisses ERISA 401k Performance and Fee Putative Class Action

The District Court for the Southern District of Ohio recently dismissed an ERISA putative class action lawsuit asserting fiduciary duty claims based on allegations of unreasonably high administrative fees and relatively higher-cost, underperforming funds offered in TriHealth, Inc.'s 401k plan. Plaintiffs were TriHealth 401k Plan participants and beneficiaries. On behalf of a putative class, they alleged that TriHealth and the Plan's Retirement Committee breached their duties of prudence and loyalty to Plaintiffs.

Source: Erisalitigationadvisor.com, October 2021

IRS Updates Issue Snapshot on Participant Loans

On Sept. 28, the IRS updated the "Issue Snapshot" which discusses the laws and regulations governing plan loans. This article reviews the update.

Source: Asppa.org, October 2021

Study Reveals That Americans Are Shifting Retirement Due to Pandemic

New research from Northwestern Mutual shows that Covid-19 has changed many Americans' retirement plans, with over one-third (35%) saying it has either moved up or pushed back their target retirement age. Almost a quarter (24%) plan to retire later than previously expected while 11% plan to retire earlier.

Source: Prnewswire.com, October 2021

Specialist Advisers Say Cybersecurity Practices a Top Factor in Recordkeeper Selection

Nearly one-third (31%) of retirement plan recordkeepers expect to increase their cybersecurity staff, according to a Cerulli report. Industry stakeholders suggest the threat of retirement account fraud has increased in recent years, particularly during the remote work environment, Cerulli Associates says. And, even though the majority of recordkeepers act in a non-fiduciary capacity, Cerulli points out that courts have suggested that cybersecurity is a shared responsibility.

Source: Planadviser.com, October 2021

Audit Communications to Plan Sponsors More Robust Under SAS 136

The AICPA's Statement on Accounting Standards No. 136 will meaningfully change the audit process for defined contribution plan sponsors. The AICPA issued SAS 136 intending to give readers of the audit report a better understanding of the scope of the audit, as well as clarifying the responsibilities of the plan sponsor and auditor. SAS 136 requires a greater level of written communication to those charged with governance.

Source: Orba.com, October 2021

2021 Retirement Plan Regulatory Update

While businesses and the people they employ continued to navigate the ever-changing landscape of COVID-19, 2021 has brought new and refurbished legislature top of mind for plan sponsors. Despite the SECURE Act's debut nearly two years ago, many plan sponsors are just now contemplating whether to adopt some of the provisions. Meanwhile, plan sponsors are gearing up for the House of Representative's proposed SECURE 2.0 bill. This 15-page paper covers this development, the IRS' EPCRS changes, updates from the DOL, a review of notable updates in retirement plan fee litigation cases, plus much more.

Source: Multnomahgroup.com, October 2021

Resources to Help Identify, Manage, and Avoid Retirement Plan Vendor Conflicts

Fiduciaries are required by ERISA to monitor service providers to the plan. That includes monitoring for any conflicts of interest. This 7-page paper identifies five areas where recordkeeping vendors have tried to monetize their relationship with retirement plans: Proprietary investment management, managed accounts, IRA rollovers, annuitization, and cross-selling retail financial products. These don't constitute a conflict of interest, but whenever a recordkeeper stands to be compensated by choices made by the plan fiduciaries or plan participants, extra care should be taken.

Source: Multnomahgroup.com, October 2021

2021 Plan Amendment Deadlines and Other Looming Fourth Quarter Considerations

As the year draws to a close, it is helpful for employers to pause to evaluate employee benefit plan amendment deadlines and other crucial fourth-quarter considerations. Ten are reviewed here.

Source: Jacksonlewis.com, October 2021

Murder Victim's Son Can Get Money From 401k Linked to Killers

The son of a man murdered by a Colombian guerrilla group can obtain money from a 401k account connected to the perpetrators, a Massachusetts federal judge ruled, deciding a novel legal question involving federal benefits and anti-terrorism laws. Fidelity Investments can turn over 401k assets to the victim's son under the Terrorism Risk Insurance Act of 2002 without violating the federal law protecting retirement plan assets from being used for other purposes.

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

Seventh Circuit Weighs in on Arbitration and Class Waiver Provisions in DC Plans

The Seventh Circuit decided Smith v. Board of Directors of Triad Manufacturing Inc. holding that benefit plans may require claimants to arbitrate claims under the Employee Retirement Income Security Act of 1974, 29 U.S.C. Section 1001, et seq., but may not preclude claimants from obtaining relief that ERISA provides.

Source: Faegredrinker.com, October 2021

Exposing Excessive Fee Litigation Against America's DC Plans

This 24-page whitepaper is designed to highlight the problem of excessive fee lawsuits and present a sensible framework to restore sanity and fairness to the defined contribution landscape.

Source: Euclidspecialty.com, October 2021

Managed Accounts and TDFs Better Together Than Apart, Research

For years plan sponsors and consultants have compared the outcomes of managed accounts and target-date funds within workplace retirement plans. The thinking was that plan sponsors and consultants should choose one or the other to offer retirement plan participants. New research and analysis from Empower Institute show that managed accounts and target-date funds instead complement each other and together can improve investors' retirement savings outcomes.

Source: Empower-Retirement.com, October 2021

415 Limit Applies in Aggregate When 403b Participant Sponsors Another Plan

In an updated Issue Snapshot, the IRS reminds plan sponsors about rules for the Internal Revenue Code Section 415 annual additions limitation when a 403b plan participant also sponsors a qualified plan to which he contributes.

Source: Planadviser.com, October 2021*

Bipartisan Aura Around Retirement Savings Diminishes in Reconciliation

Partisan tension has surrounded most issues in Washington, D.C. over the last several years with a few notable exceptions. One of them was retirement-savings policy. For the moment, "was" is the operative word because of a massive bill that is creating brittle politics on Capitol Hill. Republicans are upset about auto-IRA and other proposals in the $3.5 trillion budget reconciliation package. Will their ire carry over to SECURE 2.0?

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

AT&T Win Is Road Map for Defense of 401k Fees

AT&T's defeat of a massive class action challenging its retirement plan's recordkeeping fees could help other plan sponsors defend against similar disputes. The flood of class actions brought in recent years over allegedly excessive 401k plan fees isn't letting up. But with more companies choosing to fight rather than settle, defense attorneys say AT&T's case could serve as a road map for what evidence needs to be produced to prevail at trial.

Source: Bloomberglaw.com, October 2021

Department of Labor Teases Cryptocurrency Interest

Hinting that the DOL is currently working on guidance related to cryptocurrency, the Acting Assistant Secretary for the DOL's Employee Benefits Security Administration recently commented that the DOL finds the prospect of cryptocurrency investments in 401k plan lineups "troubling." This may be a sign of DOL focus on the increasing frequency of ERISA plan investments in cryptocurrency vehicles, including funds with cryptocurrency exposures.

Source: Morganlewis.com, October 2021

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