October 2023 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.

Converting a SIMPLE IRA to 401k Midyear

Although SIMPLE IRAs may initially be the best fit for certain small businesses, they may not continue to be the best fit over time. With SECURE 2.0, starting in 2024, a SIMPLE IRA can be replaced with a safe harbor 401k plan mid-year. The replacement plan can be either a traditional safe harbor plan or a Qualified Automatic Contribution Arrangement safe harbor 401k plan.

Source: Consultrms.com, October 2023

CITs Continue to Erode Mutual Fund Dominance in DC Market

This issue of The Cerulli Edge -- U.S. Monthly Product Trends analyzes product trends as of September 2023, including mutual funds and exchange-traded funds, and explores the rise of collective investment trusts.

Source: Cerulli.com, October 2023

Survey Finds 74% of Canadian Workers Say It's Important for Employers to Offer Retirement Savings Options

Roughly three-quarters (74 percent) of Canadian employees say it's important for their employer to offer a retirement savings option, according to the latest mental-health index by Telus Health. The survey, which polled 3,000 respondents, found that 70 percent reported not knowing or being unsure of how much savings they'll need to maintain their desired standard of living in retirement. Forty-four percent said they're concerned about being able to purchase or rent a home and 30 percent said they want benefits packages with financial planning solutions.

Source: Benefitscanada.com, October 2023

Pooled Employer Plans (PEPs): The Basics

A PEP is a type of multiple-employer plan that allows unrelated employers to participate in a single, shared defined contribution plan, which is treated as a single plan for purposes of satisfying ERISA requirements. This is a nice overview of PEPs.

Source: Belfint.com, October 2023

Small Business Retirement Plans: The Importance of Employer Perceptions of Benefits and Costs

This 2023 Small Business Retirement Survey provides an in-depth look at why small firms do or do not offer a retirement savings plan. Some key findings are: Firms that believe retirement plans help with hiring and retention are much more likely to offer a plan now or soon. The main barriers to offering a plan are concerns about the stability/size of the firm and the perceived costs of a plan. Concerns about costs are driven by misperceptions; many firms are unaware of lower-cost options for employers and tax credits. The survey results also suggest that state auto-IRA programs do not deter firms from offering a plan and may even encourage it.

Source: Bc.edu, October 2023

Biden Administration Previews Fiduciary Rule Rollout

The Biden Administration has issued a fact sheet previewing the content of the new fiduciary rule. The fact sheet focuses on the issue of conflicted advice, specifically calling out what it calls "junk fees" and the impact they have on retirement security. Acknowledging that while "responsible retirement advisers deserve to be paid for their important work," it continues that "when a firm pays a retirement adviser more to recommend a specific investment product, that creates a conflict of interest that often leads to Americans selecting an investment product recommended to them that generates lower returns."

Source: Asppa.org, October 2023

DOL Releases Proposed Fiduciary Rule

The Department of Labor has released a new proposed rule updating the definition of an investment advice fiduciary under ERISA. According to a Biden Administration fact sheet, the proposal expands the definition of fiduciary in several ways which are reviewed here.

Source: Ascensus.com, October 2023

DOL Fiduciary Rule Released: Industry Reaction Pours In

The text of the DOL's new fiduciary rule is out, and the reactions from around the retirement industry are streaming in. Aligned with the Biden-Harris administration's efforts to protect retirement investors the proposal would require trusted investment advisors to adhere to high standards of care and loyalty when they make investment recommendations and avoid recommendations that favor their financial and other interests at the expense of retirement savers.

Source: 401kspecialistmag.com, October 2023

How Retirement Security Litigation Has Impacted the DC Landscape

"The role of litigation depends on where you stand," said Bradford Campbell, a partner in the law firm of Faegre Drinker Biddle & Reath. "I don't think lawsuits have made improvements." Instead, ERISA lawsuits have perpetuated a series of "fiduciary myths," said Campbell. He said those myths include assertions that passive investments reduce litigation risk vs. active investments, that lower fees reduce litigation risk, and that short-term performance is a reason for removing an investment from a plan lineup.

Source: Wagnerlawgroup.com, October 2023*

New Wave of 401k Forfeiture Lawsuits May Hinge on Plan Terms

Qualcomm, Intuit, and Clorox are facing new lawsuits asking whether a common way of handling forfeited 401k money could violate federal law, a legal theory that could turn on the language used by a given plan.

Source: Wagnerlawgroup.com, October 2023

SECURE 2.0 Requires Operational Compliance, Not Amendments

As the end of the year approaches, sponsors of calendar-year retirement plans focus their attention on amendments and operational changes. Because SECURE 2.0 retroactive corrections require operational compliance, plans are likely to have to implement operational changes in 2024, along with those already applicable in 2023. Even though no amendments are required, some plans may want to make amendments.

Source: Segalco.com, October 2023

Cybersecurity Triggers a New Paradigm in Vendor Monitoring

Data breach statistics have constantly pointed to third-party service providers being the most significant conduit for compromised personally identifiable information or personal health information. A new era in vendor monitoring has emerged to gain efficiency in the responsibility to oversee service providers.

Source: Rolandcriss.com, October 2023

Retirement Advisory M&A Persists Amid Overall Deal Decline

Overall dealmaking among registered investment advisers "ran out of gas" in the third quarter of 2023, but retirement plan-related transactions appear to be running on hybrid engines, according to the latest report from consultancy DeVoe & Co. Mergers and acquisitions started strong in Q3 but tapered off as higher interest rates, an uncertain economic environment and stock market volatility appeared to take their toll.

Source: Planadviser.com, October 2023

New PTE Procedures Could Be Coming Soon

Final regulations updating the existing procedures governing the filing and processing of applications for administrative exemptions from the prohibited transaction provisions of ERISA, the Internal Revenue Code and the Federal Employees' Retirement System could be released soon.

Source: Napa-net.org, October 2023

Trouble Lurking for 401k Plan Participant Retirees

After a retirement committee engages a team of experts to orchestrate the plan's duties, it seems all appropriate boxes are checked. An inexperienced plan fiduciary may feel there is not much left to do. However, retirement planning goes well beyond the accumulation period. Once prudent processes are defined and followed, and appropriate funding mechanisms are in place, there remains an all-encompassing next step.

Source: Napa-net.org, October 2023

Changes in 401k Plan Asset Allocation Among Consistent Participants, 2016-2020

This 12-page paper provides an update of a longitudinal analysis of 401k plan participants drawn from the EBRI/ICI 401k database. Because the annual cross-sections cover participants with a wide range of participation experience in 401k plans, meaningful analysis of how 401k participants' asset allocations evolve over their lifecycle must examine the asset allocation of 401k plan accounts of participants who maintained accounts over all of the years being studied.

Source: Ebri.org, October 2023

Personalized Solutions Help Plan Sponsors Address Retirement Readiness

According to new research, a challenge for key decision-makers at some of the nation's largest corporate DC plans is selecting the right personalized financial services for their participant base. These plans typically have sizeable, diverse participant populations with varying levels of wealth, financial challenges, objectives, and preferences. Accommodating the needs of heterogeneous plan participants requires programs and features that can fill in gaps left by target-date funds or other less personalized offerings.

Source: Cerulli.com, October 2023

SECURE 2.0 Changes Catch-Up Contribution Rules

SECURE 2.0 requires that all catch-up contributions for a participant whose FICA wages for the prior year exceed $145,000 be made on a Roth basis. Although this rule technically becomes effective beginning January 1, 2024, the IRS has issued guidance that effectively delays this date to January 1, 2026.

Source: Ascensus.com, October 2023

How SECURE 2.0 Changed the Hardship Rules

Employers may now establish policies and procedures allowing participants to self-certify that the hardship distribution is being made on account of a deemed immediate and heavy financial need. Employers are no longer required to collect documentation when approving hardship distributions, which should help streamline the hardship distribution process.

Source: Ascensus.com, October 2023

Reps. Introduce RISE Act for Micro-Businesses to Offer Retirement Plans

A newly introduced bill would allow micro-sized businesses to enact full retirement plan startup tax credits and benefits originally offered in SECURE 2.0 legislation. The bill would incentivize businesses with under 10 employees to adopt retirement savings plans.

Source: 401kspecialistmag.com, October 2023

Plan Sponsors Look for Personalized Solutions to Help Participants Reach Retirement Readiness

More than one-third (36%) of 401k plan sponsors cite improving retirement readiness as the top priority for their 401k plan, according to a new white paper issued today by Cerulli Associates. The white paper offers fresh insights featuring perspectives from large 401k plan sponsors on the value of managed accounts and other personalized financial wellness offerings.

Source: 401kspecialistmag.com, October 2023

TDF Assets Through Q3 Dip Slightly, Still Outpacing '22

Assets in target-date funds through the third quarter of 2023 ended down from Q2 but are still on pace to exceed those of a relatively down year in 2022, according to the latest data from ISS Market Intelligence's Simfund.

Source: Planadviser.com, October 2023

CITs for 403bs a Top Priority

A panel at the Oct. 22 opening session of the 2023 ASPPA Annual Conference noted that there is legislation that would allow 403b plans to offer CITs and separate account insurance contracts as investment options. Brian Graff, American Retirement Association CEO, highlighted the significance of the matter, noting that 15 million participants in 403bs would benefit. This is "a top priority for us," he added.

Source: Ntsa-net.org, October 2023

Two More Suits Say Forfeiture Reallocation Was a Fiduciary Breach

Two more suits in two different California federal district courts have just challenged the use of plan forfeitures to offset company contributions as not being in the best interests of plan participants.

Source: Napa-net.org, October 2023

401k Plans Need the Involuntary Cash-Out Rule

The author writes, "As a 401k plan sponsor, you certainly want former employees to say goodbye and take their 401k account balance with them. One way you can eliminate the balances of former employees is the use of the involuntary cash-out provision, which is something that your plan has and should exercise."

Source: Jdsupra.com, October 2023

Investment Committee Best Practices: If a Prudent Decision Was Made and No One Documented it, Did it Happen?

Engaging in prudent behavior is only the first step a plan fiduciary should take, however. Equally important is for the plan fiduciary to be able to demonstrate at a future date when that decision-making process might be called into question that the fiduciary engaged in a prudent process. This article provides some recommendations and insights on committee best practices.

Source: Graydon.law, October 2023

The SEC's 2024 Examination Priorities: Impact on IRAs and Retirement Plans

The SEC Division of Examinations is focused on advice to older investors and retirement investors. Advisors and their firms should review their practices for those investors. This article focuses on the priorities that could impact advice and recommendations by investment advisers and dual registrants to retirement investors.

Source: Fredreish.com, October 2023

Retirement Plan Assistance for Domestic Abuse Survivors

Employers are often at a loss on how to best support domestic abuse survivors at work; however, 21% of full-time employees have experienced domestic abuse, which has serious implications for employee safety, productivity, and morale. Secure 2.0 offers employers another option to support survivors.

Source: Compliancedashboard.net, October 2023

Talking DOL Retirement Saving Priorities with EBSA Head Lisa Gomez: Podcast

It's been about a year since the Honorable Lisa M. Gomez was sworn in as the Assistant Secretary of Labor, and quite a busy year. She joins the 401k Specialist Pod(k)ast to talk about topics including the high-profile rewrite of the conflict of interest rule, SECURE 2.0 and its ability to address the workplace retirement plan coverage gap, and what EBSA can do to help plan advisors, plan sponsors, and participants make the most of 401k plans to save for retirement.

Source: 401kspecialistmag.com, October 2023

No One Is Coming to Save You From Missing Participants

Missing participants is a highly predictable aspect of our defined contribution system. In the near term, there's likely nothing that will spare plan sponsors from addressing the missing participant problem head-on. In the face of uncertainty, they must take decisive action to avoid being overwhelmed, including implementing effective, common-sense search practices, and pairing those search practices with other actions that will minimize the incidence of missing participants over time.

Source: 401kspecialistmag.com, October 2023

DOL Fiduciary Proposal Expected by End of October

The Office of Management and Budget held its final meetings on the DOL's new fiduciary rule proposal, and a full proposal is likely to be released by the end of October, retirement industry sources speaking on background confirmed this week. The OMB is currently considering a draft proposal submitted by the DOL which the budget office must first approve before it is sent out for comment.

Source: Planadviser.com, October 2023*

Controversial "Retirement Savings for Americans Act" Reintroduced in Congress

A bipartisan, bicameral bill that would make saving for retirement attainable for all American workers is once again on the Congress floor, and now backed by mega-corporations and industry leaders. If passed, the RSAA would allow the federal government to match contributions for low- and middle-income workers, with the match beginning to phase out at median income.

Source: 401kspecialistmag.com, October 2023

Information on IRS's Compliance Program Priorities and VCP

Two recent IRS releases are of interest to retirement plan sponsors. The first updates information about its Voluntary Correction Program. The second provides information about alignment of the compliance program and priorities of the IRS's Tax Exempt & Government Entities Division, which includes employee plans, with the agency's broader Strategic Operating Plan that encompasses increased audits.

Source: Segalco.com, October 2023

How to Stay Safe From Evolving Cybersecurity Threats

To minimize the impact of potential cyberattacks, organizations should work with investment managers on complying with the Securities and Exchange Commission's new cybersecurity rules, should adopt prevention measures against threats, and should be prepared to respond if an attack happens, experts say.

Source: Planadviser.com, October 2023

Inflation Is Reshaping Retirement Outlooks, MFS Reports

Persistent inflation is taking a toll beyond the shopping cart, according to a new report by MFS Investment Management. After two years of larger-than-average inflation, cost concerns are driving workers to be more conservative in decisions such as how long they plan to work, as well as their investment choices, according to a survey the firm conducted among 1,000 plan participants.

Source: Planadviser.com, October 2023

IRS Updates Regulations for Use and Timing of Forfeitures

Over the years, the IRS had an item on its annual guidance plan to update the existing regulations on forfeitures. Well, that guidance is finally here in the form of proposed regulations and it comes with very welcomed transition relief for plan sponsors that have not been as diligent with timely forfeiting and using forfeitures. The proposed regulations impact both defined contribution and defined benefit plans and are described in the article, in question-and-answer format.

Source: Groom.com, October 2023

DOL: Brokerage Windows Not Subject of Increased Investigative Efforts

The DOL has denied that it planned to increase investigative efforts targeted at brokerage windows following the release last year of a compliance assistance bulletin implying that investigations would extend to plans that offer cryptocurrency through a brokerage window.

Source: Napa-net.org, October 2023

DOL Embarks Upon SECURE 2.0 Plan Disclosure Reforms

The DOL has taken the first step in exploring ways to improve the effectiveness of retirement plan disclosures under ERISA, consistent with Section 319 of the SECURE 2.0 Act of 2022. More specifically, the DOL on Oct. 18 notified the White House Office of Management and Budget that it intends to begin consulting with stakeholders to explore alternatives for improving the understandability and effectiveness of such plan disclosures.

Source: Napa-net.org, October 2023

SECURE 2.0 and Required Minimum Distributions

SECURE 2.0 was passed and signed into law on December 22, 2022. Many of its provisions impact employer-based retirement plans. This 5-page article focuses on the changes that the law made to Required Minimum Distributions.

Source: Kushnerco.com, October 2023

Almost Half of Americans Not Confident in Their Retirement Plans

A survey from Western & Southern Financial Group is the latest to highlight a lack of professional planning -- and therefore confidence -- in retirement plans with inflation having added a new layer of concern. The upward trend in life expectancy has been evident for many years and yet still millions of Americans do little to plan for the large chunk of their lives that will live in retirement.

Source: Investmentnews.com, October 2023

IRS Updates Regulations for Use and Timing of Forfeitures

Over the years, the IRS had an item on its annual guidance plan to update the existing regulations on forfeitures. Well, that guidance is finally here in the form of proposed regulations and it comes with very welcomed transition relief for plan sponsors that have not been as diligent with timely forfeiting and using forfeitures. The proposed regulations impact both defined contribution and defined benefit plans and are described in the article, in question-and-answer format.

Source: Groom.com, October 2023

404(a)(5) Participant Fee Disclosures: Rules and Requirements

The DOL requires 401k providers to send fee disclosures to employees and plan administrators. This helps both parties make informed decisions about the plan. This discusses the 404(a)(5) fee disclosure and key disclosure rules and requirements.

Source: Forusall.com, October 2023

Missed the Safe Harbor Deadline? You've Still Got Options

If on a fiscal year, the rule is that the plan must be in effect for at least three months for the safe harbor provision to be valid. You'd like a safe harbor provision but it is too late this year to include it with your new 401k plan. There are still options for you and this article may help you decide how you'd like to proceed.

Source: Benefit-Resources.com, October 2023

The Game is Changing for Target-Date Funds

In Target-Date fund providers struggle to compete, Pensions & Investments reports: "More fund closings, fewer launches as five giant firms maintain grip on market. The target-date fund market is becoming saturated, causing providers to liquidate... in an industry dominated by five companies with nearly 80% of the market share."

Source: 401kspecialistmag.com, October 2023

Successful Acquisitions Include Thorough Retirement Plan Due Diligence

For an acquiring organization, due diligence of a target company's retirement plan may not be at the top of the list of acquisition activities. However, a focused review of the retirement plan can help achieve a successful purchase. A thorough due diligence team can identify potential risks and liabilities, compliance issues, and other retirement plan concerns.

Source: Usi.com, October 2023

SECURE 2.0 Brings Changes to Retirement Plans and Planning

The Setting Every Community Up for Retirement Enhancement 2.0 Act was signed into law in late 2022. Although some provisions are being phased in over time, the law includes many significant changes that take effect in 2023 and 2024. Here are some that may influence your, or your employees', retirement planning.

Source: Orba.com, October 2023

Understanding Excessive Fee Litigation Risk in Retirement Plans

Plaintiff firms continue to be creative in bringing forth fiduciary claims against organizations and those who oversee their retirement programs. It's not enough to just have the right insurance coverage. Organizations need to institute the right internal governance processes to manage their fiduciary liabilities and risks.

Source: Newfront.com, October 2023

Inflation Leading to Retirement Saving Behavioral Change Across Generations

Inflation fears are leading to behavioral change, especially with retirement saving and investing. Following a second straight year of above-average inflation, and after last year's volatile markets, workers' perceptions of what retirement will look like have begun to shift, further complicating the retirement outlook, according to MFS Investment Management's 2023 Global Retirement Survey.

Source: Napa-net.org, October 2023

Help or Hype: AI's Impact on the Retirement Plan Space

Global adoption of artificial intelligence in all industries is happening at a breakneck pace, the retirement plan space included. It's not a question of if, but how, it will affect plan advisors, sponsors, and participants. The author spoke with top advisors and experts about what to expect.

Source: Napa-net.org, October 2023

Changes for the Form 5500

Earlier this year, the Department of Labor, Internal Revenue Service, and the Pension Benefit Guaranty Corporation released two Federal Register Notices announcing changes to Form 5500 effective for plan years beginning on or after January 1, 2023. Here is a review of the five key changes.

Source: Fidelity.com, October 2023

Navigating the Number Jumble: A 403b, 401k, and 457b Comparison

Over the years, through regulation changes and plan design mandates, the three predominant types of defined contribution retirement plans have grown more similar. Still, understanding the nuances of employer-sponsored retirement plans can be daunting. This article explores the most significant distinctions of 403b, 401k, and 457b plans and their impact on the availability, benefits, and limitations of these plan types.

Source: Benefitslawadvisor.com, October 2023

The Time for Long-Term Part-Time Employee Eligibility Compliance Has Nearly Arrived

When the original SECURE Act was passed in 2019, compliance with its new long-term part-time employee rule seemed far in the future, way out to January 1, 2024. Well, that time is nearly upon us, so sponsors of 401k plans should be ready to let these long-term part-time employees start participating in their plans with the start of the New Year.

Source: Benefitslawadvisor.com, October 2023

When it Comes to Joining a PEP, Don't Be the Hot Potato

PEPs were established in section 101 of the SECURE Act of 2019. In the past, the "one bad apple" rule jeopardized a plan's tax-qualified status when one employer had an operational failure. With the SECURE Act, a PEP is not treated as failing the IRS qualification requirements solely because a single employer fails to satisfy those requirements. Noncompliant PEP members are a bad apple turned a hot potato. This article provides a good review of PEPs.

Source: Belfint.com, October 2023

Five Ways Employers Can Improve Retirement Readiness for Underserved Participants

From incorporating an in-plan emergency savings vehicle to facilitating auto-portability, employers can take actionable steps to help disadvantaged workers save for retirement, Alight advises.

Source: Plansponsor.com, October 2023*

Understanding 401k Expense Ratios and Why They Matter

When it comes to saving for retirement, it's common to encounter fees, and the expense ratio is one of the most common. These fees cover costs associated with managing your investments. The expense ratio is calculated by dividing a fund's operating expenses by the average value of its net assets. This article breaks down what you need to know to better understand expense ratios.

Source: Guideline.com, October 2023

2023 Retirement Plan Year-End Amendments and Operational Compliance

As the end of 2023 approaches, it's again time for plan sponsors to review their plan documents and plan operations to ensure compliance with increasingly complex qualification requirements and moving deadlines. While there are no mandatory plan amendments due this year, plan sponsors must remain diligent about discretionary amendment deadlines, operational compliance with changes in law, and ensuring later-adopted plan amendments accurately reflect plan operations.

Source: Groom.com, October 2023

Trust but Verify...But Not for Hardship Distributions

Years of experience have shown us that anytime Congress attempts to simplify the retirement plan rules, they often end up doing just the opposite. SECURE 2.0 is no exception, with many of the provisions purporting to make life easier while being far more convoluted than necessary. One area where they hit the mark, however, is concerning hardship distributions, and the SECURE 2.0 simplifications follow several others made in recent years.

Source: Dwc401k.com, October 2023

Two Plan Sponsors Accused of Improper Use of 401k Forfeitures

In two recent lawsuits, plan fiduciaries have been accused of violating ERISA by using plan forfeitures to offset future employer contributions, as well as to pay administrative expenses. Representatives from the law firm, which is not involved with either case, stated that the claims are surprising, given that this use of forfeitures is well established and widespread.

Source: Planadviser.com, October 2023

Industry Advocates Implore DOL for Regulatory Clarity on SECURE 2.0

Retirement industry groups filed comment letters Wednesday with the Department of Labor asking for clarity on certain provisions of the SECURE 2.0 Act of 2022 and streamlined disclosure requirements. The comments came in response to a DOL request for information in August.

Source: Planadviser.com, October 2023

Tips for School Systems Considering a Student Loan Matching Contribution Program

What are some considerations for a school system that is thinking about putting in place a student loan matching contribution program? Here is an answer to that question.

Source: Ntsa-net.org, October 2023

Settlement Announced in Big 401k Proprietary Fund Suit

The parties in a suit that claimed the fiduciaries of the $7.3 billion MetLife 401k Plan "stocked the Plan's investment menu with their own proprietary index funds" while "participants got the short end of the stick" have come to terms.

Source: Napa-net.org, October 2023

Important Details About 401k Plan Providers That Employers Never Ask About

For 401k plan sponsors, there are tons of things that they may ask of plan providers they hire, but there are important questions they never ask. This article is all about those important details that 401k plan sponsors never bother to ask about but should.

Source: Jdsupra.com, October 2023

Gen Z Has Ambitious Retirement Goals in Face of Increasing Obstacles, Schwab Says

According to Charles Schwab's annual nationwide survey of 401k plan participants, Gen Z employees, or those who are 21 to 26 years old, want to retire at age 61, but 99% say they are facing obstacles to saving for a comfortable retirement, a 9% jump over last year and higher relative to the 88% of millennials, 91% of Gen Xers and 86% of boomers who cited such concerns. The top obstacles to meeting their retirement goals for Gen Z are inflation (54%), meeting monthly expenses (35%), and paying for unexpected expenses (31%).

Source: Investmentnews.com, October 2023

Beneficiary Designations: Plan Sponsor Best Practices

Unlike other types of property that an individual owns, retirement plan accounts generally do not pass to an individual by a will, statute, or rights of survivorship designation. The plan document controls the disposition either through a valid beneficiary designation or through a plan provision. There are several things you can do to make sure the administration of beneficiary designations runs as smoothly as possible.

Source: Graydon.law, October 2023

Many Couples Do Not Coordinate 401k Matches

Imagine a married couple. Both work and their earnings are identical. But one spouse's employer is matching every dollar of her 401k contributions up to a cap. The other spouse's 401k match is only 50 percent. They could increase how much they are saving for retirement by contributing first to the 401k with the full match. But, according to a new study, one in four couples do not prioritize the more generous employer's 401k matching funds.

Source: Bc.edu, October 2023

Recordkeeper Benchmarking: It's About More Than Fees

This article starts with some litigation context and then moves into practical recordkeeper benchmarking perspectives that will serve your fiduciaries and participants well. As you'll see, there are many reasons to undertake a benchmarking exercise, and the recent litigation developments help to reiterate those reasons.

Source: Qualifiedplanadvisors.com, October 2023

The Three Biggest Investment Mistakes Plan Sponsors Make

Managing a retirement plan demands attention to detail, foresight, and unwavering commitment. Financial advisors and plan sponsors bear the weight of managing funds that represent not only a lifetime of savings for many participants but also their aspirations for a comfortable retirement. While the financial landscape continually shifts and new best practices are developed, it's possible for certain lapses in oversight to occur and impact the integrity of a retirement plan, especially as it relates to investments.

Source: Planpilot.com, October 2023

Half of Hispanic Adults Not Prepared for Retirement, LIMRA Reports

Half of Hispanic adults (50%) reported being very worried about having enough money for retirement, six percentage points higher than the response from the general population, according to LIMRA's 2023 Insurance Barometer Study, but the owner of a Hispanic-run financial wellness platform says focused engagement with the Latino audience can help.

Source: Planadviser.com, October 2023

Retirement Transitions: Expectations Versus Reality

Today's workers' expectation of when and how they will retire is a radical departure from how retirees actually retire. That's according to the Transamerica Center for Retirement Studies' survey report, Life in Retirement: Pre-Retiree Expectations and Retiree Realities.

Source: Napa-net.org, October 2023

A Second Suit Stakes Out Forfeiture Use as Fiduciary Breach

For the second time in a month, a law firm has brought suit challenging the use of forfeitures in a 401k plan. The suit acknowledges that "although the Plan expressly authorizes the use of forfeited funds to pay Plan expenses, throughout the class period Defendants chose to utilize the forfeited funds in the Plan for the Company's own benefit, to the detriment of the Plan and its participants, by reallocating nearly all of these Plan assets to reduce future Company matching contributions to the Plan."

Source: Napa-net.org, October 2023

IRS Freshens Discussion of Deductibility of Employer Contributions to a 401k

The IRS has updated the content it provides through an Issue Snapshot on the deductibility of employer contributions to a 401k plan made after the end of the tax year. The Issue Snapshot discusses the timing rules of the IRC and considers how those rules apply to employers that establish a new 401k plan after the end of the tax year.

Source: Napa-net.org, October 2023

Department of Labor's "ESG" Rule Survives Challenge in Federal District Court

Since its effective date in February 2023, the DOL's rule officially titled Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, colloquially called the "ESG rule," has been challenged in both the courts and US Congress. In September 2023, a federal district court in one of the two court challenges ruled in favor of the DOL and its authority to adopt the ESG rule. Here is a review.

Source: Morganlewis.com, October 2023

Michigan Court Dismisses ERISA Class Action

Class action lawsuits continue to target ERISA fiduciaries for their decisions about investment options and fees. The standard for dismissing cases at the pleading stage is still evolving, but recent decisions suggest that courts are evaluating allegations closely and requiring data on suitable comparators before permitting an ERISA class action to proceed to discovery.

Source: Littler.com, October 2023

ERISA 2.0: Six Big Ideas for an ERISA Reboot

ERISA, the nation's comprehensive retirement law, is showing its age. The disconnect between good intentions and results is due, in large part, to a lack of a legislative post-mortem review for effectiveness and unintended consequences. It is past time for an ERISA reboot. Here are six big ideas for ERISA 2.0.

Source: Klgates.com, October 2023

Podcast: Talking Retirement Industry Trends With Jania Stout

When you want to gain insight into what's going on in the retirement industry, you want to talk to someone who's in the loop and immersed in the business. We can't think of someone who fits that description better than Jania Stout.

Source: 401kspecialistmag.com, October 2023

GE to Pay Record-Setting $61 Million to Resolve 401k Proprietary Funds ERISA Lawsuit

General Electric will pay $61 million in cash to resolve a 6-year-old ERISA lawsuit. The settlement is being called the largest ever in an ERISA case alleging a retirement plan improperly offered proprietary funds. The settlement must still be approved by United States District Court for the District of Massachusetts. A preliminary hearing has been scheduled for October 17, 2023.

Source: 401kspecialistmag.com, October 2023

Mobile Apps Emerge as a Critical Tool for Retirement Plan Providers

Amid ongoing market volatility, it's little wonder that plan participants are keeping a close eye on their retirement account balances, and they increasingly are doing so via mobile apps. As a result, mobile apps have taken center stage as critical tools for retirement investors, according to J.D. Power's 2023 U.S. Retirement Plan Digital Experience Study released Sept. 13.

Source: Ntsa-net.org, October 2023*

10 Things to Look for in Retirement Plan Administration

401k's and other retirement plans are extremely technical. But by working with a highly skilled Third Party Administrator, employers can be supported in these tasks, assured their plan is running smoothly and in compliance with ERISA and IRS regulations. Choosing the right TPA for your retirement plan is a critical decision that can significantly impact your plan's success. Here are key factors to take into consideration when choosing a TPA.

Source: Kushnerco.com, October 2023

New DOL Advisory Opinion Guidance Outlines Approach for Diverse Plan Investment Manager Hiring Program

In a September 29, 2023, Advisory Opinion issued to Citigroup Inc., the DOL addressed several key ERISA implications arising in connection with a Citi Racial Equity Program. The Program involves a commitment by Citi, as the plan sponsor, to pay all or some portion of the investment management fees for diverse managers retained by Citi-sponsored defined benefit and defined contribution retirement plans and welfare benefit plans that hold investment assets.

Source: Groom.com, October 2023

"Groundbreaking" DOL Advisory Opinion for Citibank Provides ERISA Guidance

Citibank has received a "groundbreaking Advisory Opinion" from the Department of Labor confirming that Citibank's conduct in connection with its Diverse Asset Manager Program and the ERISA plans it sponsors is settlor in nature and not subject to ERISA's fiduciary duties.

Source: 401kspecialistmag.com, October 2023

Managed Accounts' Default Use Limited by Litigation Fears, Fees

New research shows that managed accounts are facing a stumbling block beyond fees and general acceptance in retirement plans: litigation fears. Defaulting retirement participants into a managed account either immediately or after they reach a threshold of either age or assets, can offer a more personalized investment experience and potentially better outcomes. But retirement benefit consultants considering the option are often turned off not just by higher fees, but by litigation concerns, according to Sway Research's most recent defined contribution investment-only report.

Source: Planadviser.com, October 2023

Understanding Plan Fees, With Help From NAGDCA

The National Association of Government Defined Contribution Administrators published a fee guide for public sector defined contribution plans. Understanding and negotiating reasonable fees is a fiduciary duty to participants in a retirement plan, according to the guide. The guide lays out all the services and related fees a DC plan might encounter and explains the pros and cons of the various services and fee structures available to sponsors.

Source: Planadviser.com, October 2023

Flexibility on the Use of Forfeitures: Not So Fast

Many (if not most) defined contribution plan documents provide that the plan administrator may use forfeitures to reduce contributions, pay plan expenses, or allocate to participants as additional benefits. The Treasury Department and IRS recently suggested that plans be drafted this way to avoid the impermissible accumulation of forfeitures. A recent complaint filed in a federal circuit court, however, raises fiduciary concerns when plan fiduciaries make decisions permitted by the provision.

Source: Napa-net.org, October 2023

Legislation Opens Door for Cannabis Companies to Sponsor Retirement Plans

Legally operated cannabis companies could soon be allowed to sponsor retirement plans under legislation recently approved by the Senate Banking, Housing, and Urban Affairs Committee. By a vote of 14-9 on Sept. 27, the committee approved the Secure and Fair Enforcement Regulation Banking Act (the SAFER Banking Act, S. 2860) to provide protections for federally regulated financial institutions that serve state-sanctioned marijuana businesses.

Source: Napa-net.org, October 2023

Required Minimum Distributions

As we approach the end of the calendar year, it is important to be reminded about one frequently overlooked retirement plan requirement. Upon attainment of age 73, certain participants of a tax-qualified retirement plan may be required by federal tax law to withdraw a minimum amount from such plan each year. This article should help you understand this topic.

Source: Legacyrsllc.com, October 2023

Target-Date Funds: Low Fee Doesn't Equal Low Risk

Passive target-date funds remain a popular choice for many defined-contribution plans, often driven by the generally lower fees associated with these funds. While intuitively it may feel as if "lower cost" naturally translates into a more prudent option for plan participants, the reality is this may not always be the case. Here are three reasons why passive TDFs aren't automatically the safer choice for DC plan fiduciaries.

Source: Investmentnews.com, October 2023

Plaintiffs Target Use of 401k Plan Forfeitures

In the past month, plaintiffs have filed two separate lawsuits -- Dimou v. Thermo Fisher Scientific, Inc. and Rodriguez v. Intuit, Inc. -- accusing plan fiduciaries of violating ERISA, by using plan forfeitures to offset future employer contributions. This use of forfeitures is widespread, so sponsors and providers will want to monitor the cases closely. For plan sponsors and service providers, these new claims are disconcerting and offer another example where a long-common practice is now being challenged in the context of a class action complaint.

Source: Groom.com, October 2023

IRS Delays SECURE 2.0 Roth Catch-ups

The IRS provided relief to the onerous SECURE 2.0 provision requiring that age-50 catch-up contributions be made on a Roth basis for individuals making more than $145,000 from that employer in the prior year. The implementation of this provision has been delayed from 2024 to 2026.

Source: Callan.com, October 2023

ERISA Section 3(21)(A) and Discretion

In this 13-page article, the author explains that fiduciary status under ERISA does not hinge on the exercise of discretion in some cases because, under ERISA Section 3(21)(A), an entity that exercises any authority or control over the disposition of plan assets becomes a fiduciary.

Source: Wagnerlawgroup.com, October 2023

The Future Is Now for ERISA Fiduciary Duties Around Plan Data

ERISA needs to catch up with the information age by identifying plan data as a plan asset, resolving the current ambiguity on that point that has led courts to decide otherwise, and developing the related fiduciary duties, argues Michael Schloss of The Wagner Law Group.

Source: Wagnerlawgroup.com, October 2023

New Retirement Outlook Report: A National Perspective on Retirement Readiness

The retirement readiness outlook is mixed for Americans, according to the inaugural Vanguard Retirement Outlook report. This comprehensive analysis evaluates retirement readiness for a nationally representative sample of American workers. The report is 31 pages.

Source: Vanguard.com, October 2023

Long-Term Part-Time Workers: More Questions than Answers for Defined Contribution Plans?

On December 29, 2022, the SECURE 2.0 Act was signed into law. SECURE 2.0 builds upon the retirement improvements made by SECURE 1.0. This article provides an overview of the LTPT rule and identifies outstanding questions that require additional guidance from the DOL and the IRS.

Source: Truckerhuss.com, October 2023

What's at Risk in a Cyberattack on a DC Plan?

Every organization working with a defined contribution plan shares the responsibility for protecting from cyberattack the data, reputation, trust, and $10.2 trillion of accumulated assets in retirement plans. Safeguarding DC plans from digital security issues does not end with ensuring criminals do not steal workers' nest eggs, explains Gregg Levinson, senior director for retirement at WTW.

Source: Plansponsor.com, October 2023

Retirement Contribution Limits, COLA Stay on Track With Continuing Resolution

President Joe Biden signed a continuing resolution into law Saturday night that will keep the federal government operating through November 17. The continuing resolution ends on November 17, but both the Social Security Administration and IRS will have the inflation data they need by then, so even if the government shuts down in November, the inflation adjustments for 2024 should stay on track because they should have all the info for 2024 before then.

Source: Plansponsor.com, October 2023

Protect Against a Retirement Plan Cybersecurity Breach or Else: DOL

Earle Allen, Principal with CAPTRUST, asked former EBSA Assistant Secretary Preston Rutledge for an idea of what to expect from a DOL cybersecurity audit and how far plan sponsors and advisors should go in preventative measures. Here is the response.

Source: Napa-net.org, October 2023

Judge Dismisses Another 401k Suit Involving BlackRock TDF Funds

Another in the series of suits alleging that plan fiduciaries "chased low fees" and ignored investment performance has been dismissed, though there was a unique twist here.

Source: Napa-net.org, October 2023

The Ins and Outs of Fiduciary Liability Insurance

An explanation and history of fiduciary liability insurance occurred at the ERISA 403b Conference in Washington, D.C. While fiduciary liability insurance initially covered individuals, no one thought it was for a plan or company. It changed in the 1990s and today, fiduciary liability insurance is malpractice insurance for fiduciaries and it generally covers four areas.

Source: Napa-net.org, October 2023

Recent IRS Snapshot Suggests Audit Interest in Timing of Employer Deductions of Retroactive Contributions to 401k Plans

The IRS recently released an Issue Snapshot, Deductibility of employer contributions to a 401k plan made after the end of the tax year, to review the timing rules for employer contribution deductions under Code section 404(a)(6) and the limits on "annual additions" under Code section 415. The SECURE Act may have heightened the interest of IRS agents in auditing employer deductions of retroactive contributions to 401k plans.

Source: Groom.com, October 2023

IRS Priority Guidance Plan Includes Retirement Items

The IRS has issued its 2023-2024 Priority Guidance Plan, in which it describes guidance projects in the current fiscal year. Many items in the plan have appeared in prior years' Priority Guidance Plans. A number of the guidance items deal with retirement savings arrangements that are outlined here.

Source: Ascensus.com, October 2023

Six SECURE 2.0 Changes Coming to Retirement Plans in 2024

As 2024 approaches, retirement plan advisors need to be aware of the various changes to retirement plans set to occur in the new year under the SECURE 2.0 Act of 2022. An Employee Benefits Alert from law firm Bradley highlights key changes to 401ks in the coming year.

Source: 401kspecialistmag.com, October 2023

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