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COLLECTED WISDOM™ on Fiduciary Responsibility and Liability Issues

This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.

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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 Related News and Intelligence, and DOL's Final Fiduciary Rule and Best Interests Contract Requirement.

Peeling Back the Fiduciary Layers and Unscrambling the Fiduciary Confusion

In seeking clarity about the "type" of 401k professional it has retained, plan sponsors often find the answers they are given to be incoherent with a slant in favor of the 401k industry instead of plan participants. The residual fuzziness plan sponsors are left feeling about this topic is a source of significant irritation to them. This comprehensive article attempts to peel back the fiduciary layers and unscramble the fiduciary fuzziness.

Source: 401khelpcenter.com

Navigating the Minefield of Fiduciary Liability

The failure to fully execute the fiduciary duties ERISA imposes upon 401k plan employers and administrators can lead to significant liability exposure. This article will help plan sponsors navigate the minefield of fiduciary liability including reviewing the litigation risk and suggesting some best practices.

Source: 401khelpcenter.com

Ten Fiduciary Duties

Because of a number of factor including the recent class action lawsuits and a new focus by the Department of Labor and Internal Revenue Service on a number of issues including fees, plan sponsors need to be more vigilant. They also should take proactive steps to ensure that all plan fiduciaries have a good understanding of their obligations in overseeing the company's retirement plans. Here is a general overview of fiduciary duties and responsibilities.

Source: 401khelpcenter.com

Cybersecurity: Another Responsibility for Retirement Plan Sponsors and Fiduciaries

The focus on cybersecurity implies that the DOL will start to hold plans and their fiduciaries accountable for cybersecurity. Besides the specter of a DOL enforcement action, this guidance should remind plan sponsors that if a cybersecurity breach ever impacts their plan, they need to be prepared. Class action lawsuits that argue that they chose the wrong service provider or that PII was misused or not protected are possible.

Source: Enterpriseiron.com, July 2021

Fiduciary Duty Is Coming to Privacy: Through Your Benefit Plans

While all businesses have been grappling with cybersecurity challenges for years, cybersecurity has recently come into focus for retirement plans, health and welfare plans, and other ERISA plans due to a new DOL cybersecurity initiative. The DOL has quickly followed up on this guidance by incorporating privacy and cybersecurity requests into its audits of employee benefit plans. This article outlines considerations for plan fiduciaries, including employers and investment or administrative committees, to document that they have followed a prudent process to protect the plan from losses from cybersecurity events and to protect the personal data of participants and beneficiaries.

Source: Kilpatricktownsend.com, July 2021

Mitigating Fiduciary Risk: Lessons Learned About the Prudent Person Rule After Fifteen Years of Fee Litigation

Excessive fee litigation has encouraged the reexamination of fiduciary best practices. Although the facts underlying these cases vary, the fundamental questions in each case pertain to the process by which the fiduciaries carried out their responsibilities. As courts have grappled with questions of fiduciary responsibility, a body of case law has been developed that provides valuable guidance on methods plan fiduciaries may use to mitigate their risk if faced with a lawsuit or government investigation. This article addresses the duty of prudence in monitoring plan investments, thereby mitigating fiduciary risk through the lens of that body of case law.

Source: Truckerhuss.com, July 2021

DOL Exemption Impacts Investment Advice Fiduciaries

The DOL recently issued guidance concerning a new exemption under the prohibited transaction provisions of ERISA in connection with the provision of investment advice. PTE 2020-02, Improving Investment Advice for Workers & Retirees, became effective on February 16, 2021. On April 13, 2021, the DOL issued additional guidance, in FAQ format, to further explain the Exemption. In this article, the authors explain the significance of this new guidance.

Source: Mwe.com, July 2021

All in: Understanding the Total Cost of Your Retirement Plan

As the retirement plan industry continues to evolve, with new products and solutions announced daily, plan sponsors have to remain diligent that they fulfill their fiduciary obligation to their participants. PLANSPONSOR recently spoke to James about the need for transparency in the retirement plan industry and what plan sponsors should evaluate when examining costs.

Source: Plansponsor.com, July 2021

Considerations for Engaging a 3(21) or 3(38) Fiduciary

Thinking about engaging a 3(21) or a 3(38) fiduciary? A new podcast by CAPTRUST discusses some of the key distinctions in terms of risks and responsibilities.

Source: Napa-net.org, July 2021

Cybersecurity for Plan Fiduciaries: Focus on Account Theft

Retirement account theft is one of the risks cropping up in the employee benefits community. If you are a plan sponsor or a plan fiduciary, it's important to make sure you've thought about how to address this risk that is now well above the horizon. As an ERISA fiduciary, you play a key role in helping your participants guard against the theft of their accounts at the hand of cybercriminals. Take the steps noted above and stay abreast of developments in this rapidly evolving area.

Source: Plansponsor.com, July 2021

Best Practices to Reduce Excessive Fee Risk

The role of retirement plan governance has become increasingly important as employers face increased scrutiny of how they operate their 401k plans in the current legal and regulatory environment. CFOs and human resource managers administering 401k plans and serving on 401k plan committees have increasingly been held responsible for fiduciary breaches. Plan fiduciaries should conduct due diligence to reprice services and replace underperforming funds given asset-based fees and significant growth in plan size, due to rising markets and recurring contributions.

Source: Cpajournal.com, July 2021

3(38) Plan Sponsor Pitfalls

In this article, CAPTRUST's Alysa Cronin takes a deep dive into potential 3(38) pitfalls for plan sponsors. Armed with insights from a few industry leaders, this easy read outlines key takeaways on four common plan sponsor pitfalls when selecting a 3(38) investment manager and how to avoid them.

Source: Captrust.com, June 2021

What 401k Plan Sponsors Need to Know About the Investment Policy Statement

When you're a 401k plan sponsor, you hear a lot about an investment policy statement and how you need one. Yet many plan sponsors don't know what it is or what it does. This article breaks down what an IPS is, what it does, and what it doesn't do.

Source: Jdsupra.com, June 2021

Using Mandatory Arbitration to Avoid ERISA Class Actions

With the significant increase in fiduciary breach class actions, plan fiduciaries have added provisions, including mandatory arbitrations, to their contracts, to gain control of and rein in litigation. The burning question, however, is where do the courts stand on forcing ERISA plan participants to engage in arbitration.

Source: Cohenbuckmann.com, June 2021

New Research From PSCA Illuminates Common Plan Committee Practices

If there was ever a meeting that couldn't be replaced with an email, it's that of a retirement plan committee, and while those structures are as varied as the companies that sponsor them, a new survey by the Plan Sponsor Council of America uncovers some key consistencies in structure and approach. Indeed, retirement plan committees have always been an essential element in assuring prudent retirement plan operation and administration. While there is perhaps no perfect number of committees -- or committee members -- their construction, monitoring, and maintenance through rotations and training are as critical to their effective operation as it is to the design of the plan functions they oversee.

Source: Psca.org, June 2021

Court Finds Sponsor Not Liable for Plan Account Theft

The US District Court for the Northern District of Illinois handed down a decision in Bartnett v. Abbott Laboratories, dismissing the plaintiff's claims against defendant sponsor fiduciaries in a case involving the theft of $245,000 in the plaintiff's Abbott retirement plan account. Particularly interesting for plan sponsors is the court's discussion of the sponsor fiduciary's standard of care concerning a plan provider's cybersecurity.

Source: Octoberthree.com, May 2021

Retirement Plan Fees Worsen Enterprise Risk

A new era of employee activism is underway in which plaintiff lawyers find fertile ground for litigation opportunities, catching many employers unprepared. The focal point of the growing number of such lawsuits is the compensation that employers arrange for payment to the vendors of services to the ERISA plans. Underestimating the economic and reputational risks related to deficiencies in the prudent management of ERISA plans threatens an entire enterprise.

Source: Rolandcriss.com, May 2021

The Benefits of Enacting a Plan Sponsor Philosophy

Overwhelmed by a lengthy to-do list, including the perpetual need to meet many ERISA regulatory obligations, plan fiduciaries often lose sight of the foundation for sponsoring a retirement plan: its purpose. Enacting a Plan Sponsor Philosophy is an effective way for committee members to remind themselves of this basic goal.

Source: Porteval.com, May 2021

Two Approaches to Benchmarking Plan Fees

Benchmarking retirement plan fees has become more complex in recent years, as it has moved beyond just scrutinizing recordkeeping and administrative fees. There are two ways sponsors can benchmark their fees. There is the traditional approach of doing an external benchmark by issuing an RFI or RFP. The other approach is to use information from a database of plan sponsors to compare fees paid.

Source: Plansponsor.com, May 2021

A Long Time Coming: The DOL Issues Cybersecurity Guidance

Given that the majority of plan sponsors and fiduciaries likely already have existing service providers that aid in the administration of their benefit plans, plan sponsors and fiduciaries may consider amending the applicable service agreement to include some or all of the provisions recommended here to the extent there is not sufficient contractual protection under the existing agreement.

Source: Frostbrowntodd.com, May 2021

Develop Your Fiduciary Toolkit

A fiduciary toolkit equips finance and human resources executives with knowledge, procedures, and performance measurements to drive operations, strategy, and compliance. This 5-page article examines the categories of best practices and how to evidence conformance to them.

Source: Rolandcriss.com, May 2021

Participant Data: Plan Asset or Fair Game for Recordkeepers to Use to Market Non-Plan Products?

In an emerging theory of liability, plan fiduciaries' treatment of participants' data is coming under scrutiny. Over the last five years, we have seen how the collection of many individuals' data can become a valuable asset in the right hands, whether it's used to influence an election, design a marketing plan that targets individuals based on their specific preferences and needs, or just to compile large troves of information to analyze trends.

Source: Truckerhuss.com, May 2021

Does the Recently Amended Investment Duties Regulation Change How Fiduciaries Are Expected to Make Investment Decisions

The final rule on investment decision-making that emerged from the filter of constituent comments does not prohibit fiduciaries of ERISA employee benefit plans from selecting investments that have ESG or other collateral objectives or benefits and does not create different standards for consideration of such investment options. Rather, the amended regulation requires that fiduciaries make investment choices based on consideration of pecuniary factors, which is consistent with the DOL's existing guidance. The final rule does, however, shift focus from considering investment options under the totality of the facts and circumstances to considering only defined pecuniary factors to the exclusion of non-pecuniary factors. This could be a distinction without a difference, however, given the expanded interpretation in the preamble and the flexibility incorporated into the final regulatory language.

Source: Wagnerlawgroup.com, April 2021

Cybersecurity Program Best Practices

The DOL has prepared these best practices for use by recordkeepers and other service providers responsible for retirement plan-related IT systems and data, and for plan fiduciaries making prudent decisions on the service providers they should hire.

Source: Dol.gov, April 2021

Participant Directed Investments Through Brokerage Windows: The Last Frontier or a Trap for the Unwary?

What should fiduciaries of participant-directed plans consider in deciding whether to allow participants to direct their investments using arrangements loosely referred to as "brokerage windows"? The realm of ERISA plan investments through these arrangements remains largely uncharted territory. Fiduciaries operate under the broad understanding that ERISA Section 404(a) fiduciary duties of prudence and loyalty apply, but with little guidance on how.

Source: Wagnerlawgroup.com, April 2021

The Line Between Education and Fiduciary Advice

Does the industry have a clear definition of what the DOL would consider investment education (not advice) in a 401k plan so that a financial advisor would not have to follow the requirements of Prohibited Transaction Exemption 2020-02?

Source: Napa-net.org, April 2021

The Key to Avoiding Retirement Plan Excessive Fee Litigation

The recent increase in litigation over retirement plans and, specifically, the fees those plans are being charged for administration and management, has many companies concerned about what they need to do to protect the plans they manage. Two recent federal district court rulings illustrate the necessity for plan sponsors to have a prudent decision-making process in place to successfully defend against excessive fee litigation.

Source: Hallbenefitslaw.com, April 2021

A Checklist for Retirement Plan Committees

Given that there are so many considerations to weigh when overseeing a retirement plan, it is important for plan sponsors to have a checklist for their committees -- whether the sponsor has a single retirement plan committee or dual investment and administrative committees -- to cover in quarterly meetings. Experts discuss what main facets of a retirement plan that a committee should cover in its quarterly meetings.

Source: Plansponsor.com, March 2021

Evaluating Target-Date Funds Is a Fiduciary Responsibility

Many fiduciaries responsible for selecting their 401k plan's target-date funds don't understand how these funds work. The risk of staying ignorant is increasing. Lawsuits challenging target-date fund selection are on the rise, and plan fiduciaries need to be able to defend their choices in response to these suits. New products, such as target-date funds that provide lifetime income options or make private equity investments are becoming available. For all of these reasons, if target-date funds are included in a plan's investment menu, fiduciaries need to develop a prudent process for evaluating the funds in partnership with their investment professionals.

Source: Cohenbuckmann.com, March 2021

The Benefits of Enacting a Plan Sponsor Philosophy

Overwhelmed by a lengthy to-do list, including the perpetual need to meet ERISA regulatory obligations, plan fiduciaries often lose sight of the foundation for sponsoring a retirement plan: its purpose. Enacting a Plan Sponsor Philosophy is an effective way for committee members to remind themselves of this basic goal. Unlike a Committee Charter, which sets the lines of authority, or an Investment Policy Statement, which outlines acceptable actions, a philosophy defines a retirement plan’s purpose, making it a useful reference tool for committees during the decision-making process.

Source: Porteval.com, March 2021

The Art and Science of Fee Benchmarking

Fee benchmarking can be a great tool for plan sponsors to ensure that their plan fees are fair and reasonable and also help to fulfill a fiduciary responsibility. Since each fee benchmarking platform has a unique process for aggregating and reporting data, plan sponsors should consider how various data sources, pools of data or report customizations may impact the accuracy and reliability of the report.

Source: Rpgconsultants.com, February 2021

Retirement Plan Fiduciary Duties Under DOL Missing Participant Guidance

The DOL's new missing participant guidance confirms that the DOL expects to see written policies and procedures regarding these terminated vested participants and puts in writing many, if not all, of the various suggestions DOL investigators have made for locating these participants during investigations. In certain respects, the documents also offer welcome transparency, in particular regarding the investigative processes and case-closing practices that investigators should be following when conducting these investigations.

Source: Thompsonhine.com, February 2021

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

Fiduciaries are required by ERISA to monitor the services providers to their plan. This includes monitoring any conflicts of interest. This retirement plan vendor conflict resource will help you identify, monitor, and avoid any conflicts with your plan's service providers, plus a worksheet to assist in asking the right questions about potential conflicts.

Source: Multnomahgroup.com, February 2021

Meeting Minutes: The Importance of Documenting Your Process

Meeting minutes capture the discussion and decisions of the investment committee. Several sets of meeting minutes help weave together the story of the actions the committee has taken related to their retirement plan. All employer-sponsored retirement plans are different. As the industry evolves, plans adopt different strategies at various times. A committee may take several years to execute plan changes. Meeting minutes provide the roadmap on what the committee was doing and how the committee reached its desired result.

Source: Multnomahgroup.com, February 2021

The New E-Delivery Rule: The Price of Simplification

The DOL has simplified the delivery of retirement plan information to participants through its new electronic disclosure rule. Although the E-Delivery Rule promises to expand the use of electronic delivery, retirement plans still retain a fiduciary duty to protect participants' personal information from cybertheft. Thus, retirement plans taking advantage of the new rule may face increased exposure to ERISA fiduciary breach claims alleging inadequate cybersecurity measures. This article discusses the DOL's E-Delivery Rule and the fiduciary considerations applicable to plans that rely on the new rule.

Source: Asppa.org, February 2021

Does the Investment Duties Regulation Change How Fiduciaries Are Expected to Make Investment Decisions

The more things change the more they stay the same. Or do they? This question should be on every employee benefit plan fiduciary's mind after January 12, 2021, when an amended DOL regulation went into effect changing the standards under which fiduciaries are expected to make investment decisions for ERISA employee benefit plans.

Source: Wagnerlawgroup.com, January 2021

Best Practices for ERISA Plan Fiduciary Governance

Plaintiffs' class action lawyers in fiduciary breach lawsuits, the DOL in ERISA plan audits, courts, and insurers have focused increased attention on how well ERISA plan fiduciaries follow procedural due process. Actions (or inactions) of committees and individual fiduciaries are scrutinized and judged in increasing detail, causing fiduciaries to wonder if they are up to date on all best practices for plan governance. This article is about best practices for ERISA plan fiduciary governance.

Source: Winston.com, January 2021

Lessons Learned From ERISA Class Action Litigation Arising Out of the "Great Recession"

Often fiduciary duties are magnified and called into question when the country is plunged into an economic crisis and retirement plans suffer significant losses. Most notably, we saw an increase in the number of ERISA class action lawsuits in the wake of the Great Recession of 2008. This article analyzes the ERISA litigation trends that emerged after the Great Recession, the lessons learned, and what we may expect in the wake of the economic impacts resulting from the novel coronavirus pandemic, COVID-19.

Source: Dechert.com, January 2021

3(38) Advisor in 2021

2021 is a good time for retirement plan sponsors to consider hiring an advisor who will accept delegation to serve as their 401k plan's fiduciary investment manager. Often known as a 3(38) advisor, these professionals bring a high level of investment expertise and fiduciary prudence to the selection and monitoring of 401k plan investments. They also remove that responsibility -- and the potential liability that accompanies it -- from the plan sponsor.

Source: Alliant401k.com, January 2021

Retirement Fiduciary Calendar for 2021

TRI-AD seeks to make it fast, simple, and easy for plan fiduciaries to keep their retirement plans in compliance with the Internal Revenue Service, Department of Labor, and ERISA regulations. They have created this useful calendar to help you stay in front of such administrative deadlines and submission complexities.

Source: Tri-ad.com, January 2021

Back to the Basics: How Will Your Plan Fare in an Audit or Lawsuit?

This is the time of year when we see lots of articles on hot plan trends for 2021 and what benefits innovations plan sponsors are adopting. But the beginning of the new year is also a good time for fiduciaries to review basic plan policies and operations to see how they can be improved. The better these are, the greater the chances your plan will survive an audit or prevail in a fiduciary breach lawsuit. Here are some places to start.

Source: Cohenbuckmann.com, December 2020

White Paper on ERISA 3(16) Services

This 8-page white paper offers insights into the principles that underlie conduct for 3(16) Plan Administrators. It also draws a line between third parties who are qualified to provide ERISA's comprehensive fiduciary 3(16) role and those that only pretend to do so.

Source: Rolandcriss.com, November 2020

2021 Annual Plan Compliance Review

Offering a 401k plan can be challenging and meeting your important fiduciary responsibilities can seem overwhelming. Administering a plan and managing its assets require certain actions and involve specific fiduciary responsibilities. This 8-page checklist will help guide you through the process.

Source: Employeefiduciary.com, November 2020

Why Fiduciaries Should Consider Outsourcing Plan Investment Responsibility

Plan sponsor fiduciaries who take a do-it-yourself approach to plan investments face huge potential exposure for underperforming investments and excessive plan fees. If you are a plan sponsor fiduciary who is losing sleep over all of this, it may be time to consider outsourcing your investment responsibilities to an investment manager or outsourced chief investment officer.

Source: Cohenbuckmann.com, November 2020

DOL Shifts Focus From ESG to Pecuniary Factors in Final Rule

The Final Rule requires that fiduciaries evaluate investment opportunities based upon pecuniary factors. However, if fiduciaries are unable to distinguish investments based on pecuniary factors, the Final Rule permits fiduciaries to consider non-pecuniary factors as a tie-breaker provided that they comply with the Final Rule's documentation requirement. Like the Proposed Rule, the Final Rule includes restrictive conditions for investments used as a plan's qualified default investment alternative. This article describes the Final Rule's key features, including notable differences from the Proposed Rule.

Source: Groom.com, November 2020

Should You Establish a Retirement Plan Governance Committee?

Retirement plan governance is the system through which key decisions are made about strategy and operations, including plan design, administration, and investment choices. Typically, at the core of plan governance is an official plan governance committee. Although the DOL and IRS do not require a plan to have a plan governance committee, it is considered a best practice to have one.

Source: Orba.com, November 2020

The Power of an Evolving Fiduciary Governance Approach

It's an often-overlooked aspect of qualified retirement plan operations, the need for a prudent and comprehensive governance process and identifying the person responsible for creating and "quarterbacking" these efforts. With proper fiduciary governance as a premier regulatory and litigation issue in the defined contribution plan space, the topic could not be timelier.

Source: 401kspecialistmag.com, November 2020

COVID-19 and Retirement Plan Fiduciary Obligations

COVID-19 has presented many challenges, including market volatility and business disruptions, which have placed added pressures on plan fiduciaries to comply with their ongoing obligations to prudently administer plans and plan investments. The steps outlined here will help employers and ERISA fiduciaries demonstrate prudence in plan operation and management and to mitigate their legal risk in response to the COVID-19 environment.

Source: Vanblacklaw.com, October 2020

Consider Who Is Paying When Benchmarking Retirement Plan Fees

Are plan sponsors' responsibilities for making sure retirement plan fees are reasonable different when the plan sponsor pays versus when plan participants pay? There is less risk when a plan sponsor pays retirement plan fees, but that doesn't necessarily mean the benchmarking should be different than if participants pay.

Source: Plansponsor.com, October 2020

ERISA/Cybersecurity Considerations in the COVID Age

Plan fiduciaries are now faced with the detailed compliance requirements of ERISA and cybersecurity laws including data breach matters. So, what can fiduciaries do to minimize their cybersecurity liability?

Source: Foley.com, October 2020

Fiduciary Fuels 401k Rise in Outsourced Chief Investment Officers

While outsourced chief investment officers have historically been tapped by defined benefit plan sponsors and endowments, there is a growing trend of DC plan sponsors turning to OCIO managers. New research from PGIM research found the top reasons that plan sponsors are using an OCIO manager.

Source: 401kspecialistmag.com, October 2020

The Dark Side of 401k Fiduciary

There's a common characteristic that links exemplary fiduciaries; it's their non-negotiable approach to moral discernment. They demonstrate a greater neurological capacity for binding procedural justice (moral discernment) with procedural prudence (prudent decision-making). Unfortunately, the exemplary fiduciary is becoming a rarity. There are three reasons why.

Source: 401kspecialistmag.com, October 2020

The Buck Stops With Retirement Plan Sponsors

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

Source: Jdsupra.com, September 2020

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

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

Source: Mfs.com, September 2020

How to Minimize Judicial Review of ERISA Fiduciary Decisions

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

Source: Beneficiallyyours.com, September 2020

The Uncertain Legal Landscape for Plan Fiduciaries Over Cybersecurity Challenges

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

Source: Wagnerlawgroup.com, September 2020

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

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

Source: Wagnerlawgroup.com, September 2020

DOL Proposed Regulation Highlights the Risks of ESG Investing for ERISA Fiduciaries

The DOL issued a proposed regulation outlining the duties of an ERISA fiduciary when considering an investment that incorporates environmental, social, and corporate governance factors. Some believe that the DOL will likely move quickly to finalize the regulation before the end of the current administration's first term. The proposed regulation would make five basic changes to the current regulation.

Source: Verrill-law.com, August 2020

401k Fiduciary Litigation on the Rise: Take These Steps Now to Avoid Liability Later

A recent spate of lawsuits against large employers' 401k retirement plans has refocused attention on the need for plan administrators to ensure that they are honoring their fiduciary duties and prudently managing their Plans. Plan administrators should take several steps now to ensure that they have good defenses when lawsuits are filed.

Source: Foley.com, August 2020

Top 10 Hidden Liability Pitfalls That Retirement Plan Sponsors Should Avoid

Retirement plan fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a retirement plan and their beneficiaries. These responsibilities include: acting solely in the interest of plan participants and with the exclusive purpose of providing benefits to them; carrying out their duties prudently; following the plan documents; diversifying plan investments; and paying only reasonable plan expenses. This article details pitfalls that plan fiduciaries are usually unaware of, which could expose them to potential fiduciary liability.

Source: Jdsupra.com, August 2020

DOL Provides Guidance for Private Equity Investments in 401k Plans

Employers that are fiduciaries of participant-directed individual account plans subject to ERISA should be pleased with the position taken by the DOL in an information letter dated June 3, 2020, addressing the use of private equity investments in designated investment alternatives offered in Plans. The DOL states that subject to the standards and considerations outlined in the letter, a plan fiduciary would not violate its duties under sections 403 and 404 of ERISA solely because the fiduciary offers a professionally managed asset allocation fund with a private equity component as a designated investment alternative in a plan.

Source: Workforcebulletin.com, July 2020

Retirement Plan Fiduciary Considerations in Context of COVID-19

Retirement plan fiduciaries are undoubtedly concerned about the effect of all the changes brought about by the pandemic and its effect on society and the stock market. Conducting a comprehensive review of a plan's investments, fees, and performance is in order to avoid litigation. Here are some considerations for fiduciaries navigating their duties in the wake of COVID-19.

Source: Hallbenefitslaw.com, July 2020

DOL Proposes New Fiduciary Guidance for Selection of Socially Responsible Plan Investments

The proposed rule makes it clear that fiduciaries must select those investments based solely on financial considerations that impact the economic value of the investments. In other words, plan fiduciaries must not sacrifice performance or expose the plan participants and beneficiaries to additional risk by including investment options that primarily serve the non-financial interests of the plan fiduciaries.

Source: Icemiller.com, July 2020

Retirement and Pension Plan Administration, Application of ERISA Fiduciary Duties

ERISA Section 404 sets forth ERISA's general fiduciary duty provisions. Knowing when these stringent duties apply is critical. The fiduciary duties established under ERISA are routinely acknowledged as the "highest known to the law" and the consequences of noncompliance can be significant: ERISA Section 409 imposes personal liability on fiduciaries, to make good on retirement plan losses resulting from their actions or inactions, in fulfilling their duties under ERISA Section 404. This 23-page article goes into great detail on various fiduciary duty provisions and knowing when these stringent duties apply.

Source: Wagnerlawgroup.com, July 2020

DOL Releases Proposed Rule for Financial Factors in Selecting Plan Investments

The DOL released a proposed rule that will amend existing guidance governing a fiduciary's investment duties under ERISA. The proposed rule clarifies that plan fiduciaries must base their investment decisions solely on pecuniary factors: those that have a material effect on an investment's risk and return based on appropriate time horizons consistent with the plan's investment objectives and funding policy. In other words, plan fiduciaries must not sacrifice performance or expose plan participants and beneficiaries to increased financial risk to serve a non-pecuniary interest.

Source: Thompsonhine.com, July 2020

Can You Invest Your Retirement Plan to Save the Planet?

The DOL issued a proposed regulation amending the fiduciary regulations governing investment duties under ERISA. This proposed regulation guides an ERISA fiduciary considering an investment or investment strategy based on "non-pecuniary" factors such as environmental, social or corporate governance, or sustainability factors. The DOL indicated that its proposal is in response to increasing interest in ESG and sustainability investing and no clear standard for what constitutes an ESG investment.

Source: Beneficiallyyours.com, July 2020

A Framework for Key Recordkeeping Fee Decisions

Several key recordkeeping fee decisions are important for prudent plan fiduciaries to analyze carefully. More often than in the past, when plan sponsors benchmark their plan fees, they often use the opportunity to evaluate the way fees are allocated to participants and to make changes to the way fees are paid. Three key recordkeeping fee decisions that go directly to the heart of the question of how fees should be allocated across participants are discussed in this article. First is the decision as to the type of recordkeeping fee structure. Second is the decision around using a lowest-cost share class strategy for the investment menu versus a revenue-sharing model. Last is the decision of how to apply revenue sharing when there is an active decision to use that model or when it is unavoidable.

Source: Porteval.com, June 2020

Fiduciary Exception to Attorney-Client Privilege for ERISA Plans

This paper explains the doctrine commonly referred to as the fiduciary exception to the attorney-client privilege. It is important for plan sponsors, fiduciaries, and their legal advisors to understand the rules regarding when the fiduciary exception doctrine can result in communications between a plan fiduciary and an attorney not to be privileged and become susceptible to being produced in litigation. This paper also explains how the fiduciary exception doctrine has been used to try to obtain communications ordinarily protected by the attorney work product doctrine. The principles outlined in this paper can help employee benefits counsel and their clients better understand how best to protect the privacy of their communications and how to anticipate when these communications may be open to examination by plan participants.

Source: Amazonaws.com, June 2020

Fiduciary Obligations With Respect to a Brokerage Window

This article reviews two recent cases that considered claims by participants in 401k participant-directed investment plans that plan fiduciaries failed to prudently monitor investments in what fiduciaries claimed were brokerage windows or "similar plan arrangements." The article starts with a summary of what we know and what we don’t know about the legal status of brokerage windows and similar plan arrangements.

Source: Octoberthree.com, June 2020

DOL Offers Guidance to Fiduciaries Considering Private Equity Investments in DC Plans

While the guidance does not establish any new fiduciary rules or exemptions, it is nonetheless quite helpful in providing factors to be considered by fiduciaries in determining whether investment vehicles with private equity components belong in their plan investment menu. The Information Letter considers facts relevant to private equity investments, but the guidance can be applied more broadly to consideration of any alternative investment vehicle with similar characteristics.

Source: Wagnerlawgroup.com, June 2020

DOL Issues Guidance on 401k Plan Investments in Private Equity

The DOL seeks to alleviate ERISA fiduciary liability concerns, first by limiting the use of private equity monies to investment components within larger, heavily diversified funds and, second, by focusing on the prudence of the private equity investment selection process itself. By following these precepts, the DOL believes that fiduciaries "may offer an asset allocation fund with a private equity component...in a manner consistent with the requirements of Title I of ERISA."

Source: Compliancedashboard.net, June 2020

DOL Information Letter Outlines Fiduciary Considerations for Including Private Equity in DC Plan Investments

The Letter emphasizes that selection and monitoring of an investment option with private equity are subject to the same fiduciary considerations as other investments (including the duties to be prudent and loyal, and the duty to avoid prohibited transactions). At a high level, this includes evaluating whether the potential upside from the investment justifies the added risk, fees, complexity, and valuation and liquidity issues. The Letter lists specific considerations.

Source: Erisapracticecenter.com, June 2020

Six Considerations for Plan Fiduciaries During the Covid-19 Pandemic

ERISA fiduciaries may want to identify steps they should be taking and decisions they should be considering to adjust their process in the face of the coronavirus pandemic. This article identifies six such points that could be appropriate for consideration by retirement plan fiduciaries, such as fiduciary committees, as the pandemic and related economic fallout continue to evolve.

Source: Morganlewis.com, May 2020

The War on Retirement Plan Fees: Is Anyone Safe?

Almost every employer that sponsors a retirement plan should be concerned about potential liability for a type of exposure known as excessive fee claims. Historically filed against only the largest organizations, an increasing number of smaller retirement plans have faced excessive fee litigation over the past couple of years. With this surge in litigation, it's important that all fiduciaries, regardless of plan size, understand the history and recent trends relating to excessive fee claims, the plan features that may make it a target of litigation, and steps fiduciaries can take that may reduce exposure to excessive fee claims.

Source: Chubb.com, May 2020

New Lawsuit Could Clarify Fiduciary Responsibility for Cybersecurity

Abbott, as the plan sponsor, is a fiduciary and was responsible for supervising Alight's procedures for safeguarding plan assets, yet the complaint provides no information about what Abbot did or did not do to monitor Alight. Abbott may also have breached its duties of loyalty and prudence by its failure to hire a vendor with adequate internal procedures. In that event, Abbott and its fiduciaries would also be required to restore the loss.

Source: Cohenbuckmann.com, April 2020

New Lawsuit Alleges Fiduciary Breaches for Quarter Million Dollar Cybertheft

A recently-filed lawsuit describes in specific detail the efforts cybercriminals often take to pilfer assets from retirement accounts. As a complaint, the filing provides only the plaintiff's version of what happened, and we have not yet heard from the defendants. But the complaint is particularly interesting in its description of how the theft occurred and may point to some useful approaches to try to reduce future fraud.

Source: Groom.com, April 2020

New Fidelity Fee Decision Addresses Several Important Issues for Plan Fiduciaries

The District of Massachusetts issued a decision finding that Fidelity breached its fiduciary duties to its 401k Plan by failing to monitor investments and administrative expenses. Although the decision involved unique facts relating to the implementation of a settlement of a prior case brought against Fidelity, the court's 67-page opinion addresses several significant legal issues. These issues include a plan fiduciary's obligations to self-directed brokerage accounts and the consideration of collective investment trusts and separate accounts as alternatives to mutual funds.

Source: Groom.com, April 2020

Are Your Target-Date Funds a Prudent Investment? COVID-19 Puts Spotlight on Fiduciary Choices

COVID-19 may have accelerated a reckoning for fiduciaries who have not fulfilled their responsibilities for target-date fund selection. Those who simply selected their vendor's funds without investigation and financial firms that selected their proprietary funds for their plans, especially funds without good track records, are probably most at risk. However, fiduciaries with exposure can begin to reduce that exposure by reviewing their selections and implementing a prudent review process. Here are some questions frequently asked about target-date fund selection.

Source: Cohenbuckmann.com, April 2020

Critical Qualified Plan Fiduciary Issues for Employers to Consider in Light Of Covid-19

With the business disruptions and market turbulence being wrought by COVID-19, many employers sponsoring qualified retirement plans are facing key decisions about their plans. Some of the most important fiduciary issues an employer may wish to consider in light of COVID-19 and depending on the type of qualified plan it sponsors are reviewed here.

Source: Benefitslawadvisor.com, April 2020

Minimizing the Risk of ERISA Litigation in a Turbulent Economic Climate

Based on past litigation experience, there are some types of investments that are considerably more likely to be the target of claims under ERISA. This article reviews these claims and also offers some thoughts on preventative measures that plan sponsors and fiduciaries can consider.

Source: Proskauer.com, April 2020

Employer Actions for 401k Plans Sickened by Coronavirus

The realities of the Coronavirus pandemic have quickly and dramatically changed the way we work, shop, seek health care, and interact with each other. The employer sponsors of 401k plans and any employer-based fiduciary investment committees should consider taking steps now in response to these developments.

Source: Dickinson-wright.com, March 2020

Elements of Retirement Plan Committee Education

Training new retirement plan committee members, as well as providing ongoing training throughout the year for all members, is critical, industry experts say. "Because their responsibilities are so enormous, we need to do a better job of training these fiduciaries to make better decisions," says Joshua Itzoe, a partner and managing director with Greenspring Advisors. This article reviews some best practices.

Source: Plansponsor.com, January 2020

Why You Should Hire a 3(38) Fiduciary

For many plan sponsors, designating an ERISA 3(38) investment manager to manage, select, and monitor the retirement plan's investments can be beneficial. It allows the plan sponsor to have more time and attention to focus on other aspects of the organization along with managing tasks that are otherwise difficult to outsource. There are many benefits if you decide to hire a 3(38) fiduciary, but it's important to understand the advantages and disadvantages of their role and the questions you should ask when vetting an investment advisor/manager to take on the role for your retirement plan.

Source: Planpilot.com, January 2020


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