Plan fiduciaries facing a lawsuit for alleged breach of duty related to underperforming funds have successfully won a motion to dismiss the case. The plaintiffs claimed that the defendants violated their fiduciary responsibilities under ERISA by mismanaging the SDH Funds, which purportedly led to the funds' poor performance and resulted in significant financial losses for the plaintiffs in terms of investment earnings.
Economic uncertainty, such as the current conditions across the country, significantly impacts both business and employee participation in retirement savings plans. A study published in the Journal of Pension Economics and Finance indicated that a young participant's behavior during the Great Recession of 2008 could potentially decrease their retirement account value by up to 8% by age 62. Plan sponsors who recognize these challenges can proactively mitigate their effects on employee participation. Strategies such as improved plan design, enhanced features, and diligent monitoring can help reduce negative impacts on participants. The article explores the various ways that economic downturns influence participant behavior.
Participants of the National Rural Electric Cooperative Association's retirement plan have filed a complaint in the U.S. District Court for the Eastern District of Virginia, alleging financial mismanagement and self-dealing in the administration of NRECA's 401k Pension Plan. The complaint highlights NRECA's failure to heed fiduciary warnings, including a 2012 DOL settlement that mandated restoring $27.3 million to employee benefit plans for similar violations. Instead of implementing necessary changes, NRECA allegedly continued to overcharge participants and used plan assets to subsidize its operations.
UnitedHealth Group agreed to a $69 million settlement regarding allegations of breaching its duties and mismanaging participants' retirement funds in its 401k plan. A Minnesota judge finalized the settlement last week, following a lawsuit filed in 2021 that involved three years of litigation. The claims centered on UnitedHealth's handling of investments in the Wells Fargo Target Fund Suite, which reportedly harmed over 350,000 current and former plan participants. The settlement aims to resolve these claims.
Fiduciaries considering the inclusion of digital asset investments in 401k plans must adhere to ERISA's requirements of prudence and loyalty. This involves carefully evaluating the appropriateness of crypto-based investments, taking into account factors such as participant risk tolerance, market volatility, valuation reliability, transaction fees, and custody arrangements. Given the inherent challenges of cryptocurrencies, fiduciaries cannot simply pass the responsibility to participants by offering crypto alongside other options. Even in plans directed by participants, fiduciaries must ensure that all investment options are prudent and do not include imprudent alternatives.
The DOL has rescinded its 2022 guidance advising fiduciaries to be cautious when adding cryptocurrency options to 401k investment menus. While cryptocurrency options are currently rare in these plans, this change may increase the likelihood of their inclusion in the future. Additionally, the removal of the guidance clarifies how 401k investors can currently access cryptocurrency through brokerage windows. Ultimately, the impact of this decision lies in how it may influence future investment options for plan participants.
In this podcast episode, Nevin Adams and Fred Reish discuss common misconceptions about retirement plan responsibilities, drawing inspiration from Fred Barstein's column titled "10 Biggest Lies Told to 401k Plan Sponsors." The hosts aim to clarify these misunderstandings and address the challenges these misperceptions create for plan sponsors.
A federal judge has dismissed a lawsuit alleging that JPMorgan Chase & Co. and JPMorgan Chase Bank, N.A. misused forfeited plan assets to lower their employer contribution obligations instead of benefitting plan participants. The suit claimed violations of ERISA and the defendants' fiduciary duties, but the judge rejected this "novel theory" behind the forfeiture reallocation claims.
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Collected Wisdom™
Our researchers look for what they think are some of the better resources available to assist you in administering your plan or helping your clients. We group these resources in our COLLECTED WISDOM™ topics to make it easy for you to locate the information you need. Each item in a category contains a summary and date of when it was placed in the group.
We also maintain some older material in these collections for perspective and context.
