COLLECTED WISDOM™ on Fiduciary Related News and IntelligenceThese are general fiduciary news items. Other topical areas you may find of interest that are not fully covered here include ERISA 404(c) Compliance and Fiduciary Duty, 401k Investment Committees, Fiduciary Responsibility and Liability Issues, and DOL's Final Fiduciary Rule and Best Interests Contract Requirement. RSS feed of this page is available:
Captrust Fiduciary Update: August 2024In this installment of the quarterly Fiduciary Update, Captrust's Financial Advisor Drew McCorkle reviews the flow of cases related to recordkeeping, fees, cybersecurity, beneficiary designations, and more. Source: Captrust.com, August 2024
Benchmarking Outcomes, Not FeesThere are substantial efforts underway in many parts of the industry to develop similar sorts of benchmarking tools for assessing, comparing, and monitoring the growing variety of lifetime income programs for DC plans. A very real challenge these developers face arises from the fundamental difference in the nature of the investments involved. Even the language used to produce these new tools is demanding a new mindset. Source: Businessofbenefits.com, August 2024
Experts Outline Strategies for Investment Menu DesignDeveloping and maintaining a plan's investment menu is a key fiduciary responsibility. Industry experts offer their insights into factors and steps to consider in performing that function. In a Plan Sponsor Council of America webcast "The Art and Science of Investment Menu Design," experts offered their insights on strategies for designing an investment menu that will best serve participants and address their needs and concerns. Source: Asppa.org, July 2024
Evonik Corporation Beats 401k Plan Challenge With Evidence of Rigorous Fiduciary ProcessA New Jersey federal district court recently granted summary judgment in the defendant's favor in an ERISA excessive fee case accusing Evonik’s 401k plan fiduciaries of keeping imprudent investments in the plan and of allowing participants to pay excessive recordkeeping fees. At the core of the decision was the court’s finding that Evonik's fiduciaries followed a rigorous, prudent process for reviewing plan investments and fees. Source: Erisalitigationadvisor.com, July 2024
Preparing for Your First Retirement Plan AuditFew things can feel as daunting as preparing for an audit, especially if it's your first time being audited. With all the information circulating about new laws and regulations dictating who is required to undergo an audit, compliance issues can become even more complicated. Here are some considerations to help you as you prepare for a retirement plan audit. Source: Berrydunn.com, July 2024
What Plan Sponsors Should Know About DOL's Final Fiduciary RuleWhile the direct effect of the DOL's final fiduciary rule on plan sponsors appears modest, plan vendors may decide to modify their service models -- including associated fees -- and sales practices. This is a comprehensive review of the rule including implications for plan sponsors. Source: Mercer.com, June 2024
401k Plan Sponsor Fiduciary Best Practices For Lost Or Missing Plan ParticipantsWhen plan sponsors have lost contact with 401k plan participants, they must address several key questions. The DOL has recently asked for input on its proposal to deal with lost or missing plan participants. But the idea of a participant being missing or lost is less black and white than it seems. Source: Fiduciarynews.com, June 2024
Nine Insurance Trade Groups File Suit Against DOL's New Fiduciary ProposalThe DOL went into the Memorial Day weekend with a fresh lawsuit seeking to undo its Retirement Security Rule filed by nine insurance trade associations. The associations filed the suit in the U.S. District Court for the Northern District of Texas, which is within the jurisdiction of the Fifth Circuit Court of Appeals. The associations cited the Fifth Circuit in the complaint because several years ago the court overturned a prior rule DOL intended to change the definition of what it means to give fiduciary advice for retirement investments. Source: Planadviser.com, May 2024
Unpacking the DOL's Final Retirement Security Rule: A Guide for Plan SponsorsThe DOL's recent final Retirement Security Rule has significant implications for plan sponsors and fiduciaries. At the heart of this rule is the amended Prohibited Transaction Exemption 2020-02, which provides relief from prohibited transaction treatment for conflicted fiduciary advice, subject to stringent conditions. As a plan sponsor, it's crucial to understand how this PTE impacts your fiduciary duties and responsibilities. This comprehensive analysis delves into the details of PTE 2020-02. Source: Octoberthree.com, May 2024
Thinking in Bets: Using Behavioral Psychology to Improve Fiduciary Prudence: OpinionThe author writes, "I am still waiting for someone to truthfully explain to me how a product is in the best interests of a plan participant and their beneficiaries when that product requires the annuity owner to surrender ownership of the annuity contract and the accumulated value to the annuity issuer in order to receive the contractual alleged, with no guarantee of the investor receiving a commensurate return, incur excessive, and often counterintuitive, fees, potentially reducing an investor's end-return by one-third or more, and forego any estate plans of providing any remainder interests for one's heirs." Source: Fiduciaryinvestsense.com, April 2024
Several New Reasons Employers Should Self-Audit Retirement PlansEmployee benefit plans must be reviewed regularly to determine whether there are compliance errors that need to be corrected before there are major correction costs and penalties. There are many reasons why doing self-audits of both tax and fiduciary compliance makes sense and provides retirement plan fiduciaries with protection. Here are four of them. Source: Cohenbuckmann.com, March 2024
Defendants in ESG Litigation File Motion for Summary JudgmentOn February 26, 2024, defendants in Spence v. American Airlines filed a brief in support of a motion for summary judgment. Defendants' motion comes just days after the court had handed down a decision denying defendants' motion to dismiss. In this article, the authors review the defendants' arguments in this case, mainly because they usefully raise the issues of proof and causation that vex challenges to the prudence (and loyalty) of certain proxy voting positions. They begin with a more abstract discussion of challenges to fiduciary proxy voting decisions, as a way of framing the specific arguments, and then try to get an understanding of what is going on in Spence. Source: Octoberthree.com, March 2024
Plan Sponsor Attitudes Toward Retirement Plan Management and Fiduciary OutsourcingThis 18-page study measured how retirement plan sponsors view 3(16) fiduciary outsourcing as a tool to help them better manage their retirement plans. It also captured plan sponsor perspectives on how such outsourcing can help drive improved plan outcomes. The study was conducted in January 2024. Source: Pentegra.com, March 2024
Slide Deck From Presentation on the DOL's Fiduciary Rule: The Impact on Recommendations of AnnuitiesFaegre Drinker discusses the DOL's proposed fiduciary regulation and its amendments to Prohibited Transaction Exemptions 84-24 and 2020-02 and their anticipated impact on annuity sales. These proposed rules, to be finalized this year, will impose significant requirements on recommendations of annuities to retirement investors -- ERISA and tax-qualified private-sector retirement plans, participants and IRA owners -- including recommendations for rollovers and transfers. Source: Faegredrinker.com, March 2024
Tips to Keep Your Retirement Plan in ComplianceA recent survey indicates that 45% of retirement plan sponsors do not realize they serve as fiduciaries to their organization's retirement plan. All fiduciaries need to follow best practices for ensuring their plans are operating according to the rules, regulations, and governing plan documents. This process can be accomplished by creating a compliance checklist for 2024. Source: Usicg.com, February 2024
Consultants Advise Plan Fiduciaries to Vet DC Annuity OffersWith defined contribution annuity offerings proliferating in recent years among both providers and recordkeeper platforms, retirement plan advisers and sponsors must take a close look at the options to protect themselves and their participants, according to recent commentary from an annuity consultancy. ARC consultants cite "cause to question" language that requires assessing annuity offerings for qualified plan participants. Source: Planadviser.com, February 2024
How to Teach Fiduciary Responsibility to Plan CommitteesSponsors of retirement plans, especially those covered by ERISA, must ensure their retirement plan committee members are trained to understand and execute their fiduciary duties. To do so, plans find fiduciary education and training from regulators, existing providers, and a wide variety of sources. Source: Plansponsor.com, February 2024
Forfeiture Litigation Raises New Issues for Plan FiduciariesGroom Law Group's George M. Sepsakos covers allegations and potential implications of recent lawsuits against plan fiduciaries related to the use of plan forfeitures. Source: 401kspecialistmag.com, January 2024
401k Fiduciary Warning: This Is How the Supreme Court's Chevron Decision Might Impact the Retirement Plan IndustryThe nation's highest court heard arguments involving the National Marine Fisheries Service. It seems they don't appreciate the government requiring fishing companies to pay certain regulatory costs. This concept is allowed under a 1984 Supreme Court decision involving Chevron. Overturning Chevron will not only impact the fishing business but all regulated activities, including the retirement plan industry. There are some immediate ramifications for plan sponsors and they will need to pay close attention to events as they unfold. Source: Fiduciarynews.com, January 2024
Bitcoin and Brokerage Windows: A Risk for Fiduciaries?Now that the ETFs have been approved by the SEC, what does this mean for plan sponsors? Michael Kreps, a principal in Groom Law Group, says that guidance issued by the DOL in March 2022 cautioning sponsors against using cryptocurrency in plans governed by ERISA is "still good agency guidance." The guidance says that "the Department has serious concerns about the prudence of a fiduciary’s decision to expose a 401k plan's participants to direct investments in cryptocurrencies." It refers to them as "speculative and volatile" and notes valuation and regulatory concerns. Source: Planadviser.com, January 2024
Podcast - Year-End Fiduciary Focus: Best Practices for EmployersAs 2023 comes to an end, the responsibilities of employers and fiduciaries take center stage in ensuring the financial well-being of employees and the overall success of retirement plans. It's a critical juncture where strategic decisions can make a profound impact. Ensuring you understand your fiduciary obligations and year-end considerations is essential. Discover how you can elevate fiduciary standards, benefiting employees, and your organization with this future-focused discussion shaping your approach to retirement planning and fiduciary responsibilities. Source: Hubinternational.com, December 2023
Federal Court Upholds DOL's Final ESG Rule for Plan FiduciariesA Texas federal judge recently upheld a DOL final rule concerning environmental, social, and governance considerations in investment decisions by plan fiduciaries. Nonetheless, plan sponsors should understand that considering ESG factors remains permissible rather than compulsory and always should be secondary to the plan's financial interests. Source: Hallbenefitslaw.com, December 2023
Bed Bath & Beyond, Bankruptcy, and Fiduciary LitigationIn September 2023, former employees of Bed Bath & Beyond sued members of the company's 401k committee, the committee responsible for the prudent management of the company's 401k plan. The former employees allege they lost more than $5 million following the company's bankruptcy filing in April 2023, a loss the committee could have avoided. Here is a cautionary tale of Bed Bath & Beyond's bankruptcy. Source: Woodruffsawyer.com, November 2023
A Victory for Plan Fiduciaries: The Second Circuit Clarifies the Pleading Standard for Prohibited Transaction ClaimsFor years, courts have struggled with the appropriate standard to apply to ERISA-prohibited transaction claims at the pleading stage. In Cunningham v. Cornell University, a case that involved a 403b defined contribution plan, the Second Circuit addressed the pleading standard necessary to sufficiently allege a party-in-interest prohibited transaction claim. The Second Circuit issued a well-reasoned opinion that may have significant implications for ERISA-prohibited transaction claims at the pleading stage. Source: Groom.com, November 2023
Fred Reish on the New Fiduciary Rule: The Fiduciary Definition of FiduciaryThis post discusses the "fiduciary acknowledgment" definition of fiduciary invest. advice in the DOL's proposed fiduciary regulation. More specifically, the proposed regulation says that a person will be an ERISA and Code fiduciary if "The person making the recommendation represents or acknowledges that they are acting as a fiduciary when making investment recommendations." Source: Fredreish.com, November 2023
A Guide to the DOL's Retirement Security Rule ProposalThe DOL's new "retirement security rule" package is the latest chapter in an almost 15-year effort by the DOL to amend the five-part test in its 1975 regulation for determining whether a person is a "fiduciary" by providing invest. advice for a fee. Very generally speaking, the Proposed Rule would significantly expand the circumstances under which a person could be treated as providing invest. advice that is subject to ERISA's fiduciary standards. Source: Erisapracticecenter.com, November 2023
Understanding Excessive Fee Litigation Risk in Retirement PlansPlaintiff 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
The Future Is Now for ERISA Fiduciary Duties Around Plan DataERISA 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
Why Smart Fiduciaries Avoid AnnuitiesIn the current campaign by annuity advocates to increase the use of annuities within 401k and 403b plans, the advocates argue that plan participants desire guaranteed income for life. But do plan sponsors and plan participants understand how such annuities work and the associated costs involved? As the late fee-only insurance adviser Peter Katt used to caution, "But at what cost?" Source: Fiduciaryinvestsense.com, September 2023
Why a Meaningful Benchmark Is Needed in the Intel Investment Imprudence Case to Prevent a Hindsight Attack Against FiduciariesParticipants label Intel's use of hedge funds and alternative investments to hedge volatility as "institutional gambling," but compare the results to funds with higher-equity allocations that ironically are higher-risk investments. Just because the higher-risk funds did better in a long bull-market is not evidence of fiduciary imprudence, but rather the classic deficiency of ERISA malpractice lawsuits that use outcomes as a proxy for fiduciary imprudence. Source: Euclidspecialty.com, August 2023
Prudent Plan Governance Essential in Defense Against Fiduciary BreachAlthough retirement plan excessive fee cases remain an ongoing concern for plan sponsors, the recent jury trial victory for Yale in Vellali v. Yale University provides hope for plans with strong, prudent plan governance. Given the pace of new excessive fee lawsuits and the verdict in Yale, plan sponsors should review their plan governance procedures as soon as possible for compliance with the roadmap outlined here. Source: Dwt.com, August 2023
Ideas From "Beyond Fiduciary" Hint at the Future of 401kThe antiseptic compliance regime spelled out by the DOL and ERISA has to date defined fiduciary services. Perhaps, if we're going to consider what is "beyond" that sterile definition, we might want to go back to the future. In a sense, rediscovering where "fiduciary" initially came from might suggest where it is headed. Source: Fiduciarynews.com, August 2023
Qualified Retirement Plan Considerations in Corporate TransactionsNotwithstanding the current economic uncertainty, corporate transaction activity has remained steady, meaning buyers continue to address issues relating to a target company's qualified retirement plans, such as a 401k plan. Treatment of a target company's 401k plan affects both employers and employees, so, ideally, parties in a transaction will consider preferred strategies well in advance of closing. This article discusses two approaches: terminating the plan or maintaining it after the transaction. Source: Ogletree.com, July 2023
What is a 401k Fiduciary: Key Responsibilities & DutieThis guide explains everything you need to know about being a 401k fiduciary. This includes understanding your legal responsibilities and finding ways to reduce your liability and make compliance easier for your plan. Source: Forusall.com, July 2023
Are All ESG Investments Imprudent? A Plaintiff Suing American Airlines Says YesPolitically-motivated lawsuits were filed earlier this year to invalidate the Biden administration's ESG regulations. The plaintiffs in these lawsuits don't even claim specific losses from having made ESG investments. After that, it seemed that it was only a matter of time before the first lawsuit against a corporate plan sponsor was filed. Now we have one. A new lawsuit targets American Airlines and aggressively challenges its 401k ESG investment offerings. Source: Cohenbuckmann.com, June 2023
Plan Sponsors Should 'Definitely' Have Cyber Liability Insurance: Lisa GomezAt PSCA National just last week, ARA CEO Brian Graff and EBSA Assistant Secretary Lisa M. Gomez discussed a wide range of topics, including the many misunderstandings about cyber liability insurance (which could be a huge fiduciary failure) and the ESG rule. Source: Napa-net.org, May 2023
A New Fiduciary Standard?Resistance to retirement plan innovations (like automatic enrollment) has long been excused as being too paternalistic, but there might be a better standard -- a maternal standard of care. Source: Napa-net.org, May 2023
Why More Advisers Are Assuming 3(38) Role, ResponsibilityERISA Section 3(38) fiduciary designation can often mean more work for an adviser since it assigns decision-making responsibility. It also means a conversation with a plan sponsor that likely leads to a higher fee. Even so, the industry is trending toward more advisers seeking, and taking on, the role of the 3(38) to manage what are increasingly complex, and important, investment strategies. Source: Planadviser.com, May 2023
Advisers Recommend Fiduciary Outsourcing Services, Mostly for Small PlansPlan advisers often recommend that clients use fiduciary outsourcing services, alleviating the administrative burden on both advisers and clients, according to new industry research. More than 20% of advisers said clients spend between a quarter and half of their time on plan administrative tasks that could be outsourced. Source: Planadviser.com, March 2023
Court Overturns DOL Guidance on Rollover AdviceA federal court has vacated part of the 2021 DOL rollover guidance for investment advice fiduciaries. In one of those FAQs, DOL said a recommendation to roll over a participant's retirement plan account to an individual retirement account may be fiduciary investment advice when the advisor expects to give ongoing advice after the rollover. According to the court, this guidance contradicts the agency's current regulation. Source: Mercer.com, March 2023
DOL's ESG Rule Attacked on Multiple FrontsIn recent weeks, opponents of the DOL's ESG rule have brought new challenges in the courts and Congress. Most of the provisions of the DOL's final rule addressing fiduciary duties for ERISA retirement plans concerning investment selection and consideration of ESG factors as well as exercises of shareholder rights, which the agency issued last fall, became effective as of January 30, 2023. Source: Ropesgray.com, February 2023
Dialing Up the Intensity of Missing Participant SearchesUnderstanding how (and when) to increase the intensity of a missing participant search is vital to fulfilling a plan sponsor's fiduciary duty to ensure that plan participants receive the retirement benefits that they're owed. Source: 401kspecialistmag.com, February 2023
Fiduciary Concerns Continue to Stymie Annuities in 401ksEmployers have embraced 401k plan benefits changes for 2023, but are still shying away from annuities, according to Alight. Survey data showed that among employers, 47% cite fiduciary concerns as a major reason for not adding annuities. The figure has remained stagnant since the 2018 report, Alight found. Source: Planadviser.com, January 2023
Five New Year's Resolutions for 401k Plan FiduciariesThis is the time of year when resolutions for the cessation of bad behaviors and the beginning of better ones are in vogue. Here are three for plan fiduciaries for 2023. Source: Napa-net.org, January 2023
A Checklist for Your Retirement Plan Fiduciary Insurance RenewalIn response to the continued proliferation of lawsuits against retirement plan fiduciaries, fiduciary liability insurers are raising rates, limiting coverage, and expanding their due diligence of fiduciary processes. This article provides a checklist that includes tips and best practices for policyholders to ensure they are in a strong position to obtain retirement plan fiduciary coverage when it comes time to review and avoid coverage denials when it comes time to pay benefits. Source: Bradley.com, December 2022
ERISA Fiduciaries May Consider ESG Factors in Selecting Investments and Exercising Shareholder RightsThis final rule effectively overturned two rules published in the last months of the Trump administration, which essentially prohibited the consideration of ESG factors when ERISA fiduciaries selected investments or exercised shareholder rights. In effect, the Biden administration has now enabled fiduciaries managing ERISA funds to consider "factors [that] may include the economic effects of climate change and other ESG considerations on the particular investment or investment course of action." Source: Mintz.com, December 2022
Crypto Craze Cracks, Raising Potential 401k Fiduciary Liability?Oops! That didn't go as planned. A major player in the cryptocurrency world took a spectacular nosedive amidst celebrity, politics, and intrigue. This happened as the hard-to-understand virtual currency has already suffered from a series of negative headlines. The collapse of FTX only makes it worse. Source: Fiduciarynews.com, November 2022 | |||
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