Daily Article Digest - Updated Regularly

This digest contains a wide variety of the freshest source material dealing with current trends, opinion, news, legislative action, investments, marketing, sales, consulting, and legal issues regarding 401k, 403b and other retirement 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.

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Sixth Circuit Revives Kellogg Excessive Fee Case Over Arbitration Clause Dispute

The article discusses a decision by the Sixth Circuit Court of Appeals to revive an excessive fee lawsuit against Kellogg's retirement plan. The court ruled that the arbitration clause in the plan documents was unenforceable because it could prevent plan participants from pursuing their claims effectively. The case centers on allegations that Kellogg's retirement plan charged excessive fees, and the ruling emphasizes the importance of access to legal recourse for employees in retirement plans. The decision is significant as it addresses the balance between arbitration agreements and participants' rights in employee benefit plans.

Source: Plansponsor.com, October 2024

What 401k Plan Providers Never Tell Plan Sponsors

The article reflects on personal disappointments related to expectations not being met, particularly in contexts like schools, organizations, and jobs. It focuses on retirement plan providers, suggesting that they often do not fully disclose important information to plan sponsor clients. The piece highlights potential gaps in transparency that can affect clients' understanding and management of retirement plans.

Source: Jdsupra.com, October 2024

GAO on 401k Plans: Reported Impacts of Fee Disclosure Regulations, and DOL Efforts to Support Implementation of Regulations

The GAO report emphasizes the significance of employer-sponsored 401k plans for retirement savings, highlighting the role of mandatory fee disclosures by the Department of Labor. Since 2012, 401k plan fees have generally decreased, with various factors -- including fee disclosures -- contributing to this trend. The DOL implemented fee disclosure regulations in 2010 and 2012 to enhance awareness among plan sponsors and participants regarding fees and investment performance. Overall, while fee disclosures have positively influenced the management of 401k plans, enhancing financial literacy among participants may further improve their engagement and understanding.

Source: Gao.gov, October 2024

Federal Data Crackdown Poses Risks to 401k Student Loan Match

The article discusses potential risks associated with a federal crackdown on data privacy that could impact 401k plans and student loan matching programs. As the government enhances scrutiny on how employers manage and share employee data, companies may face challenges in offering benefits connected to loan repayment. This increased regulation might lead to complications for programs designed to match student loan payments with 401k contributions, potentially affecting the financial well-being of employees reliant on these benefits.

Source: Bloomberglaw.com, October 2024

Interest Still Strong in Retirement Plan Adviser Acquisitions

The article discusses the ongoing interest in acquisitions within the retirement plan advisory sector. Despite economic challenges, such as market volatility and rising interest rates, firms remain eager to acquire other advisory businesses. Key reasons include the desire to expand client bases, acquire talent, and enhance service offerings. The trend reflects a strategic move to increase competitiveness and revenue in a growing market, as firms look to capitalize on the increasing importance of retirement planning for clients.

Source: Planadviser.com, October 2024*

ERISA Advisory Council Homes in on Four QDIA Recommendations

The ERISA Advisory Council has made recommendations to enhance qualified default investment alternatives for retirement plans. Key suggestions include improving communication with participants about QDIAs, considering environmental, social, and governance factors, and ensuring that QDIAs align with participants' needs and preferences.

Source: Planadviser.com, October 2024

Pfizer Gets 401k Plan Fee Lawsuit Tossed

The U.S. District Court for the Western District of Michigan dismissed a lawsuit against Pfizer Inc. regarding alleged "unreasonable" recordkeeping and administrative fees. Judge Paul Maloney ruled that plaintiff Matthew Miller, a former employee, did not adequately support his claims and used a flawed methodology. As part of a joint agreement, Miller waived his right to appeal the dismissal, and Pfizer agreed not to pursue legal fees or costs from him.

Source: Planadviser.com, October 2024

8 in 10 Plans Overpaying on 401k Fees, Finds Form 5500 Analysis

Research by Abernathy Daley 401k Consultants reveals that nearly 80% of corporate retirement plans with over 100 employees are overpaying on administrative fees for 401k and 403b plans. This issue stems from a lack of regular compliance-related benchmarking, leading to potential compliance risks. The study analyzed Form 5500 filings from 6,566 companies, finding that 5,241 of them reported administrative costs exceeding the efficient baseline available in the market.

Source: 401kspecialistmag.com, October 2024

IRS Provides Guidance on Application of SECURE 2.0 Act's Coverage of Long-Term, Part-Time Employees

The article discusses recent IRS guidance on the SECURE 2.0 Act's provisions regarding the coverage of long-term part-time employees (LTPT). It clarifies the rules that allow these employees to participate in retirement plans, specifically addressing the definition of LTPT employees and the requirements for plan sponsors. The guidance aims to help employers understand their obligations and ensure compliance, ultimately facilitating better retirement savings options for part-time workers.

Source: Wagnerlawgroup.com, October 2024

Forfeiture Accounts Hold More Than Nonvested Employer Contributions

The article discusses the implications of forfeiture accounts in retirement plans, emphasizing that these accounts hold not only nonvested employer contributions but also other funds. It explains how forfeiture accounts can be used to benefit the plan and its participants, such as funding plan expenses or reinstating lost benefits. The piece also highlights regulations surrounding these accounts and the importance of proper management to ensure compliance and maximize their utility. Overall, it calls for careful attention to forfeiture accounts to enhance the value of retirement plans for participants.

Source: Wagnerlawgroup.com, October 2024

24 Facts That Illuminate Women's Precarious Retirement Prospects

The article highlights 24 facts that underscore the challenges women face regarding retirement security. It discusses issues such as gender pay gaps, longer life expectancies, and caregiving responsibilities, which contribute to women's precarious financial situations in retirement. Key data points illustrate disparities in savings, income, and pension access. The findings aim to raise awareness about the unique hurdles women encounter and advocate for policy changes to improve their retirement prospects.

Source: Transamericainstitute.org, October 2024

Company's Retirement Philosophy and Distribution Options

As qualified retirement plan sponsors consider the new distribution options from SECURE 2.0, they should reflect on their company's retirement philosophy. This foundational understanding will guide their decisions on potential plan changes. The article identifies three distinct philosophies observed among clients regarding the implementation of these new options.

Source: Spotlightonbenefits.com, October 2024

DOE Regulations Could Interfere With the Student Loan Match, Industry Warns

The article discusses potential issues arising from new Department of Education regulations that may interfere with student loan matching programs. Industry experts warn that these regulations could complicate or negatively impact efforts to help employees manage student loan debt, particularly regarding employer-sponsored assistance programs. Concerns include the potential for increased administrative burdens and reduced participation in these beneficial programs, ultimately affecting employees' financial well-being. The article emphasizes the need for a careful balance between regulatory compliance and effective support for those managing student loans.

Source: Psca.org, October 2024

UC Schools Report Fraudulent Activity in Fidelity Retirement Accounts

The University of California reported fraudulent activity related to Fidelity retirement accounts, revealing unauthorized transactions and breaches of account security. An internal investigation uncovered multiple instances of fraud, leading the university to implement stronger security measures. Affected individuals have been advised to closely monitor their accounts for suspicious activity. Fidelity is cooperating with the investigation to improve security and prevent future incidents.

Source: Planadviser.com, October 2024

ERISA Row Related to How Employers Use 401k Forfeitures Deepens

Since last fall, plaintiffs have initiated over twenty ERISA class actions alleging breaches of fiduciary duties concerning 401k plan forfeitures. Despite existing guidance from the Treasury Department and the Department of Labor, this new legal theory is gaining traction. Two preliminary rulings have permitted these forfeiture claims to advance, further encouraging this trend. However, two recent decisions, one addressing fiduciary discretion and the other exploring the limits of ERISA, provide valuable insights and nuanced discussions on the issue.

Source: Nixonpeabody.com, October 2024

"Flawed" Methodology, Comparisons Doom Excessive Fee Suit

In a recent case (Matthew A. Miller v. Pfizer Inc. et al.), a federal court dismissed an excessive fee lawsuit against a retirement plan, citing flawed methodology in the comparisons used by the plaintiffs. The court found that the plaintiffs failed to adequately demonstrate that the fees in question were excessive by relying on inappropriate benchmarks. The decision underscores the importance of using correct methodologies when challenging fees in retirement plans, as the court emphasized the need for precise and relevant comparisons to support claims of excessive charges. This ruling highlights the challenges plaintiffs face in proving their cases in similar lawsuits.

Source: Napa-net.org, October 2024

SECURE 2.0: Navigating the Current Guidance Gaps and Opportunities

At the 2024 ASPPA Annual Conference, Bob Kaplan and Robert Richter from the American Retirement Association discussed the implications of the SECURE 2.0 Act for plan consultants and service providers. They highlighted the opportunities and challenges arising from recent law changes and stressed the need for proactive communication and strategic planning to navigate uncertainties. Kaplan emphasized that effective communication is crucial for managing these challenges.

Source: Napa-net.org, October 2024

DOL, Treasury Rules to "Heat Up" This Fall: Senior DOL Official

During a session at the ASPPA Annual Conference on September 22 in Orlando, key figures from the DOL and Treasury discussed regulatory priorities using sports metaphors. Jeff Turner and Kyle Brown provided insightful updates on topics like the fiduciary rule, LTPTE, ESOPs, and Form 5500 modernization. Turner advised the audience to remain engaged with the evolving status of the Retirement Security Rule, indicating more developments were on the horizon.

Source: Napa-net.org, October 2024

How 401k Plan Sponsors Can Avoid the Scams and the Cons

Attorney Ary Rosenbaum writes that in 26 years in the retirement plan industry, he has encountered numerous scams and has even exposed a few. He's known individuals, including a plan sponsor and providers, who were imprisoned for embezzling plan assets. While the technology for 401k plans is advancing, it's also making it easier for thieves to commit fraud. It's crucial to be aware of potential scams and take steps to avoid them.

Source: Jdsupra.com, October 2024

How Long Must We Store our 401k Records?

As regulatory complexities grow, maintaining detailed records for employee benefit plans is essential. The IRS and DOL have set guidelines for record retention, which apply directly to plan sponsors. While service providers may store some records, sponsors are still legally responsible for retaining all relevant documentation.

Source: Dwc401k.com, October 2024

How to Calculate Years of Service in your Retirement Plan

One of the most fundamental requirements in managing a qualified retirement plan is counting an employee's length of service. It is the basis for determining such items as plan eligibility, entitlement to company contributions, vesting, and even retirement itself. Although this seems like a straightforward task, the rules are quite complex and create traps for the unwary.

Source: Dwc401k.com, October 2024

How to Determine Eligibility for Your 401k Plan

Companies sponsoring retirement plans have considerable flexibility in defining eligibility criteria, but they must ensure that the plan documentation aligns with their goals. There are four key variables to consider. Each of these factors needs careful consideration and precise wording in the plan documents to effectively reflect company objectives.

Source: Dwc401k.com, October 2024

PIMCO DC Consultant Study: What's Trending, What's Challenging, What's New - Podcast

For 18 years, PIMCO has conducted its annual U.S. Defined Contribution Consultant Study, making it one of the longest-running studies of its nature. The study seeks insights from leading retirement consultants covering 15,000 U.S. retirement plans and nearly $9 trillion in assets. In this recent episode of Revamping Retirement, hosts Matt Patrick and Peter Ruffel discuss current trends, challenges, and innovations in defined contributions with PIMCO's Vidur Mehra and Joseph Szalay, focusing on plan design and retirement income solutions.

Source: Captrust.com, October 2024

Adding Emergency Savings Solutions to Retirement Plans

Research shows that having a liquid savings pot for immediate expenses reduces the likelihood of withdrawing from 401k plans. Saving for short-term needs can coexist with long-term savings, especially when individuals have resources to manage both. Findings indicate that those with emergency savings are over 70% more likely to contribute to their retirement plans. When combined with automatic features and behavioral nudges, this effect becomes even stronger.

Source: Blackrock.com, October 2024

Plan Sponsors Show Rising Interest for Consultancy Services

Morgan Stanley's 2024 Retirement Plan Survey, which included nearly 200 plan sponsors with 401k plans worth at least $50 million, reveals a trend among employers to collaborate with plan consultants to enhance retirement benefits. Over 80% of respondents are currently working with a plan consultant, and there's an increase in the adoption of 3(38) relationships. Although 3(21) partnerships still dominate (55% vs. 27%), the gap is narrowing, with 48% of plan sponsors showing interest in partnering with a 3(38) investment manager.

Source: 401kspecialistmag.com, October 2024

Half of New Retirement Plan Adopters Opt for Pooled Plans

Transamerica's inaugural survey on pooled retirement plan adopters reveals that 47% of over 400 participating employers utilized a pooled plan to launch their first employee retirement plan. The findings highlight how these shared plans facilitate access to retirement savings, particularly for small to mid-sized organizations and startups that previously avoided offering retirement plans due to cost and administrative concerns.

Source: 401kspecialistmag.com, October 2024

More than 6 in 10 Retire Earlier Than Expected: John Hancock

A recent report from John Hancock Retirement reveals that 62% of U.S. retirees exited the workforce earlier than anticipated, which has led to a shorter savings period and prolonged retirement years. The findings are part of the John Hancock Financial Resilience and Longevity Report, based on a survey of U.S. retirement plan participants and retirees.

Source: 401kspecialistmag.com, October 2024

DOL Cuts Back on Reporting to Retirement Savings Lost and Found Database

In April 2024, the DOL proposed collecting information from plan administrators to create an online tool for individuals to locate potentially lost retirement benefits, as mandated by the SECURE 2.0 Act. This initiative aims to establish a Retirement Savings Lost and Found database by December 29, 2024. While under review by the Office of Management and Budget, the DOL updated its proposal, reducing the information required from terminated participants and excluding transferred benefits. Additionally, the DOL will not utilize the Form 5500 EFAST system for this reporting.

Source: Wtwco.com, October 2024*

ERISA Advisory Council to Meet Again on QDIA Topic

The DOL will hold the 2024 Advisory Council on Employee Welfare and Pension Benefit Plans, or ERISA Advisory Council, on October 22. The online, public meeting will focus on recommendations for the secretary of Labor regarding two key study topics: improving accessibility of welfare plan claims and appeals procedures, and assessing lifetime income and qualified defined investment alternatives.

Source: Plansponsor.com, October 2024

ERISA Committee Wants More Guidance From IRS on Student Loan Matching

The ERISA Industry Committee is seeking more guidance from the IRS regarding non-discrimination testing and other specific issues related to the student loan match program authorized by the SECURE 2.0 Act of 2022. On Friday, ERIC submitted a letter to the IRS requesting additional technical guidance to assist defined contribution plan sponsors in providing employer-matching contributions based on participants' qualified student loan payments.

Source: Planadviser.com, October 2024

Forfeiture Litigation, Meeting Minutes and More: Nevin and Fred Live

Recent litigation has emerged targeting the use of forfeitures to offset employer contributions in retirement plans. A panel discussion featuring Nevin Adams, Fred Reish, Bonnie Treichel, and Tom Clark at the Strategic Retirement Partners annual conference explored the implications of this trend and offered guidance for plan fiduciaries. They discussed the current legal landscape and strategies for addressing these new challenges.

Source: Asppa-net.org, October 2024

The Impact of Remote Work on Retirement Savings Patterns

The shift to remote work has brought both challenges and benefits for employers and employees, particularly regarding productivity and accountability. However, one area that needs more focus is the impact of remote work on retirement plans and employee saving behavior. Research by firms like Morningstar indicates that physical absence from the office may affect employees' participation in employer-sponsored plans. Consequently, plan sponsors should consider adapting their retirement plans to better accommodate remote workers, enhancing goodwill and satisfaction among employees.

Source: Planpilot.com, October 2024

2024 Retirement Plan Year-End Amendments and Operational Compliance

As 2024 nears its end, plan sponsors should review their plan documents and operations to ensure compliance with complex qualification requirements and deadlines. Although no mandatory plan amendments are due this year, sponsors must stay vigilant about discretionary amendment deadlines, ensure operational compliance with legal changes, and verify that later-adopted amendments accurately reflect plan operations.

Source: Groom.com, October 2024

IRS Issues Student Loan Match Guidance: Save for Retirement While Repaying Student Loans

In the article from TAXES -- The Tax Magazine, titled "IRS Issues Student Loan Match Guidance -- Save for Retirement While Repaying Student Loans," Groom principals Elizabeth Thomas Dold and David Levine explain the IRS's new guidance on qualified student loan payments. They address common questions about this guidance and provide suggestions for plan sponsors and recordkeepers on the necessary next steps to take.

Source: Groom.com, October 2024

Retirement Income, Longevity Risk and Liquidity Needs: Striking a Balance

A white paper by T. Rowe Price suggests that combining a drawdown withdrawal strategy with guaranteed income from a deferred annuity can enhance retirement income while ensuring retirees retain sufficient liquidity. As the focus of retirement discussions shifts from accumulation to decumulation, T. Rowe Price identifies retirement income as a pressing issue for the industry to address.

Source: Asppa-net.org, October 2024

4 in 10 Taking Early 401k Withdrawals; 2 in 3 Not Paying It Back

Research from FinanceBuzz reveals that 40% of Americans with retirement accounts have made early withdrawals, with over 10% doing so multiple times. Additionally, two-thirds of those who withdrew have not repaid the full amount. The study, based on a survey of 1,000 U.S. adults, aimed to examine the prevalence of early withdrawals, the amounts taken out, and the reasons behind these financial decisions.

Source: 401kspecialistmag.com, October 2024

Three Ways Financial Guidance Adds Value for 401k Plan Participants and Employers

With five generations in the workforce and 75% of employees under 55, retirement plans are evolving. Employers must provide versatile retirement solutions to attract and retain talent, requiring strong plan features, education, and personal support. As the emphasis on effective retirement preparation increases, professional financial guidance is crucial. Tom Conlon of Morgan Stanley highlights how advisors and sponsors can enhance 401k engagement through financial guidance.

Source: 401kspecialistmag.com, October 2024

Plan Sponsor Eyes are Lighting Up as T. Rowe Price Launches Set-It-But-Don't-Forget-It Target-Date Funds

T. Rowe Price has introduced a target-date fund within a managed account framework, enabling a more dynamic approach to managing retirement assets. This new model functions similarly to a robo-advisor, adjusting allocations based on a participant's entire investment portfolio and changing risk profile, rather than being a static long-term investment. Scott Smith from Cerulli Associates noted that this upgrade addresses a significant limitation in traditional target-date funds.

Source: Riabiz.com, October 2024

Small Plan Balance Cashouts and Missing Participants

Plan sponsors often find managing missing participants and distributing plan balances a significant administrative challenge. While there are no strict regulations governing how to handle small balances from terminated employees, this issue is a common focus during DOL audits. The DOL expects plan sponsors to implement a prudent process and demonstrate a good-faith effort in distributing funds to ex-participants. To understand current practices, the PSCA conducted a survey in September 2024, sponsored by Inspira, gathering responses from 234 plan sponsors from various sizes and industries.

Source: Psca.org, October 2024

Northern Trust Reaches Tentative Settlement in 401k Suit

Northern Trust Co. has reached a tentative settlement regarding a class-action lawsuit related to the use of in-house target-date funds in its company benefit plan. The lawsuit, originating in 2021, involved six participants who alleged that the plan committee did not prudently select or monitor investment options for performance and fees. The plaintiffs specifically criticized the decision to retain 11 Northern Trust Focus Funds from the firm's asset management division. The settlement aims to resolve the long-standing dispute.

Source: Planadviser.com, October 2024

Back-to-School Special: IRS Offers Insight on Implementing Qualified Student Loan Payments

On August 19, 2024, the IRS released Notice 2024-63, offering guidance on implementing Section 110 of the SECURE 2.0 Act of 2022. This section allows employers with 401k or 403b plans to make matching contributions based on employees' student loan payments. The Notice addresses key topics such as eligibility rules, employee certification, nondiscrimination testing, and other administrative procedures through a series of questions and answers. This article is an in-depth look.

Source: Mwe.com, October 2024

Does Tolerance for Risk Change in Retirement?

The article discusses how risk tolerance may change as individuals transition into retirement. It highlights that many retirees may have different priorities and concerns compared to those still accumulating wealth. As retirees begin to withdraw funds, their focus shifts from growth to preserving capital and ensuring sustainable income, which can alter their risk appetite. The piece emphasizes the importance of financial advisors reassessing clients' risk tolerance in the context of their retirement goals and needs, rather than relying solely on pre-retirement assessments. This tailored approach can help retirees manage risks more effectively during this significant life phase.

Source: Morningstar.com, October 2024

What to Know About the New RMD Rules

The SECURE Act passed in late 2019, altered the Required Minimum Distribution rules for account holders and most non-spouse beneficiaries. In 2022, the IRS issued proposed interpretations of these regulations. After a two-year wait, the final regulations have now been released, confirming most of the initial proposals and introducing additional new rules.

Source: Manning-Napier.com, October 2024

Offering Self Directed Brokerage Accounts in a 401k Plan Can Give You a Good Headache

The article discusses the risks associated with offering self-directed brokerage accounts within 401k plans, particularly for business owners. It argues against the use of these accounts, likening them to a casino, and suggests that participants are likely to achieve better retirement savings results by sticking to the plan's core lineup of mutual funds. The article emphasizes the hidden dangers of self-directed brokerage accounts in 401k plans.

Source: Jdsupra.com, October 2024

Federal Judge Refuses to Dismiss Intuit Lawsuit as 401k Forfeiture Suits Continue to Proliferate

A federal judge in California has declined to dismiss a lawsuit against Intuit, where retirement plan participants allege the company improperly used forfeited funds from its 401k plan. This ruling upholds key claims in the lawsuit and highlights a growing trend of 401k forfeiture cases under ERISA in federal courts. U.S. District Court Judge P. Casey Pitts allowed claims of breach of fiduciary duties based on the assertion that Intuit used unvested forfeited funds for matching contributions for new employees, rather than reducing overall plan expenses.

Source: Hallbenefitslaw.com, October 2024

The New Fiduciary Rule: The Loper Bright Decision and What it Means for DOL Exemptions

In the context of the DOL's fiduciary regulation and its related exemptions, the Supreme Court's decision in Loper Bright Enterprises et al. v. Raimondo could have implications for ongoing litigation. While it may influence outcomes, it might do so in unexpected ways. The article explores this connection by examining the Department of Labor's Prohibited Transaction Exemptions 84-24 and 2020-02.

Source: Fredreish.com, October 2024

The New Fiduciary Rule: The Loper Bright Decision and What it Means for DOL Regulations

The Supreme Court's decision in Loper Bright Enterprises et al. v. Raimondo could potentially influence the litigation surrounding the validity of the DOL's fiduciary regulation and its related exemptions. While the impact is affirmative, it may not be as straightforward as expected. The article explores how the Loper Bright decision relates to the review of the DOL's fiduciary regulation.

Source: Fredreish.com, October 2024

Understanding Solo 401k Plans and Selecting the Right Provider

Navigating retirement savings can be particularly challenging for self-employed professionals and small business owners considering a solo 401k. These plans enable sole proprietors and freelancers to save for retirement while also offering tax benefits. However, the features and services of solo 401k providers can vary significantly. This article highlights key features to consider and compares fees and services among the top solo 401k providers.

Source: Forusall.com, October 2024

How to Compute the 15-Year Special Catch-Up for 403b Plans

Plan sponsors need historical data to accurately calculate the maximum 403b catch-up contributions for employees. If this data is unavailable, especially due to excluded contracts, sponsors should reconsider offering such a provision, as it may lead to inaccurate administration. Templates provided here can help document calculations for the 15-year catch-up eligibility, which is a unique feature of 403b plans. Without complete information, it may be wiser to forgo the provision altogether.

Source: Belfint.com, October 2024

Roth or Regular?

Vanguard's "How America Saves 2024" reveals that 82% of employers provide a Roth 401k option alongside a traditional 401k, but only 17% of employees utilize the Roth option. Having access to a Roth 401k can enhance your retirement income and tax strategy, offering greater diversity and flexibility. The article outlines important factors to consider when choosing between a Roth and a traditional 401k.

Source: Axiaadvisory.com, October 2024

Safe Harbor in Replacing a SIMPLE IRA: Nothing Is Simple

The article discusses the process of replacing a SIMPLE IRA plan with a safe-harbor 401k or 403b mid-year. While the transition may appear simple, it requires careful planning to ensure a smooth execution. The article emphasizes the importance of thorough planning to avoid potential issues during the transition.

Source: Asppa-net.org, October 2024

Supreme Court to Decide ERISA Prohibited Transaction Dispute

On October 4, 2024, the Supreme Court agreed to hear the appeal in Cunningham v. Cornell University, which addresses discrepancies among U.S. Courts of Appeals regarding the pleading requirements for plaintiffs challenging the relationship between benefit plans and service providers under ERISA. By granting the plaintiff's petition for writ of certiorari, the Court aims to resolve this circuit split, with a decision expected next year as the current term has just begun.

Source: Groom.com, October 2024*

Court Says '23 Budget Not Legally Enacted: Could that Affect SECURE 2.0?

A federal district court has determined that the Consolidated Appropriations Act of 2023, which includes SECURE 2.0, was passed in violation of the Constitution's Quorum Clause. While this ruling currently does not affect SECURE 2.0, Allison Wielobob, Chief Legal Officer of the American Retirement Association, advises monitoring the situation for future implications.

Source: Asppa-net.org, October 2024

IRS Provides Helpful Answers Regarding Long-Term Part-Time Employees in 403b Plans

In November 2023, the IRS proposed regulations regarding long-term part-time employee eligibility for 401k plans, noting that additional guidance was needed for 403b plans. The recent IRS Notice 2024-73 provides important clarifications for 403b plan sponsors, particularly benefiting colleges, universities, and teaching hospitals. This notice addresses various issues related to 403b plans, focusing specifically on the treatment of part-time and student employees.

Source: Verrill-law.com, October 2024

Fidelity Data Breach Exposed Info of 77,000 Clients

A data breach this summer exposed the personal information of approximately 77,000 Fidelity clients. From August 17 to August 19, a third party gained unauthorized access to client information using two recently created customer accounts, as reported by Fidelity to the Office of the Maine Attorney General. The breach did not allow access to clients' actual Fidelity accounts.

Source: Planadviser.com, October 2024

Another 401k Excessive Fee Suit Settles for Cash and Change

A $400 million retirement plan has reached a $1.5 million cash settlement in an excessive fee lawsuit. The suit, filed in 2022 against the fiduciaries of the Nova Southeastern University 401k plan, alleged that the plan included underperforming, higher-cost funds, as well as excessive recordkeeping fees, despite the availability of cheaper alternatives. Changes to the plan will also be implemented as part of the settlement.

Source: Napa-net.org, October 2024

Borrowing From 401k Loans Is Actually Okay, Study Finds

A recent study by the Wharton Pension Research Council found that retirement plan contributions remain stable even after participants take loans or hardship withdrawals from their 401k accounts. This challenges the belief that allowing loans could negatively impact savings behavior. The research suggests that, when managed properly, loans can help individuals borrow responsibly. With many 401k participants automatically enrolled and sticking to default contribution rates, their saving habits tend to remain consistent over time, as noted by Aaron Goodman, a Vanguard economist and co-author of the study.

Source: Investmentnews.com, October 2024

Bank of America Faces ERISA Suit Claiming Misuse of Forfeited 401k Funds

Bank of America has been hit with a class action lawsuit claiming it misused forfeited 401k funds, allegedly violating its fiduciary duty under ERISA. Participants in the retirement plan argue that the bank improperly benefited from matching contributions that employees forfeited upon leaving the company. This lawsuit is part of a broader trend, with several major companies facing similar legal challenges across the country.

Source: Hallbenefitslaw.com, October 2024

Offering Employees Choice: DC, HSA/HRA, or Student Loan Repayments

The IRS has approved a new flexible plan design in a private letter ruling (PLR 202434006) that allows employees to direct employer contributions according to their individual financial needs. This enables employees to allocate contributions for various purposes, including retirement savings, student loan repayment, or healthcare expenses, acknowledging their diverse financial objectives.

Source: Callan.com, October 2024

IRS Issues Guidance Regarding Long-Term Part-Time Employees and 403b Plans Subject to ERISA

On October 3, 2024, the IRS released Notice 2024-73, which offers guidance on Long-Term Part-Time Employees in ERISA 403b plans. The notice clarifies that part-time employees who typically work less than 20 hours per week must be permitted to participate in the plan for elective deferral if they meet certain criteria. The notice also addresses how these rules interact with nondiscrimination standards.

Source: Voya.com, October 2024

Survey Shows Income a Major Retirement Concern

As around 11,200 Americans turn 65 daily, American Century Investment conducted its 11th annual retirement survey, querying 1,500 individuals aged 25-65 about their retirement income strategies. The survey findings highlighted concerns regarding income replacement, showing that the percentage of non-retirees with a defined benefit pension is 30 points lower than that of retirees. This year's survey also incorporated insights from over 500 plan sponsors.

Source: Prnewswire.com, October 2024

401k Traders Shifting to Fixed Income

As of the end of September, equity investing among 401k investors diminished, according to the Alight 401k Index. Equity allocations dropped to 72.2% from 72.9% in August. In contrast, fixed-income funds experienced significant interest, with net inflows on 18 of the 20 trading days in September, and bond funds making up 45% of all transactions.

Source: Planadviser.com, October 2024

Supreme Court to Review ERISA Prohibited Transactions

The U.S. Supreme Court will hear a case involving participants of Cornell University's retirement plan focusing on the burden of proof for prohibited transactions under ERISA. Lindsey Camp, an ERISA litigation partner at Holland & Knight, notes that the Court's decision to take the case highlights key issues regarding the pleading requirements for prohibited transaction claims, specifically whether plaintiffs must indicate any imprudent conduct related to the transaction in their complaints.

Source: Planadviser.com, October 2024

Avoid an IRS Audit Surprise by Checking These Areas of Your 401k Plan

When notified of an impending IRS audit for a 401k plan, it's crucial to take proactive steps rather than remain inactive. Collect all requested materials and review your 401k plan for potential errors. Conducting a mock audit with an ERISA attorney and your third-party administrator can help identify and correct any significant issues before the official audit takes place.

Source: Jdsupra.com, October 2024

The New Fiduciary Rule: What is a Best Interest Process?

The article outlines the expectations of different standard-setters regarding the development of best interest recommendations. Both the DOL and the SEC have consistent and rigorous requirements for creating these recommendations for ERISA-governed retirement plans, their participants, and IRA owners. In contrast, the National Association of Insurance Commissioners model rule is less demanding in this respect. The article elaborates on the essential requirements needed for a best-interest recommendation process.

Source: Fredreish.com, October 2024

IRS Issues 403b Plan LTPT Guidance

On October 2, 2024, the IRS issued Notice 2024-73, which offers guidance on the long-term, part-time employee (LTPT) rules for ERISA-covered 403b plans. Non-ERISA 403b plans are not affected by these rules and can disregard them.

Source: Ferenczylaw.com, October 2024

The ABCs of RMDs: A Guide to Required Minimum Distributions

Required Minimum Distributions were created to ensure individuals start withdrawing funds from retirement accounts, like 401ks and IRAs, at a certain age, allowing the government to collect taxes on previously tax-deferred savings. Recently, the age for RMDs has been increased to accommodate longer life expectancies, providing individuals with more time for their savings to grow before withdrawals begin.

Source: Cohenbuckmann.com, October 2024

Asset Managers Seek to Bring Alternatives to DC Plans via CITs and Interval Funds

Adoption of alternative investments in defined contribution plans remains limited, but new research from Cerulli indicates that asset managers are looking to enter this space through collective investment trusts and interval fund structures. The report reveals that approximately 25% of asset managers currently offer these options, while 17% and 25% are considering introducing them to DC plans in the next two years.

Source: Cerulli.com, October 2024

The Trouble With True-ups: Make Sure You Budget for the Maximum Match

Employers offering large bonuses often permit employees to maximize their 401k or 403b contributions from these bonuses. To ensure employees receive the full employer match, it is crucial for their plans to include a true-up match provision. This approach helps avoid surprises for both employers and employees.

Source: Belfint.com, October 2024

Will Auto-IRAs Help Households Cope With Emergency Expenses?

The most effective way to save for retirement is through a workplace-based retirement plan, but many workers lack access to one. To help close this gap, many states have adopted programs that require employers without a plan to auto-enroll their workers in an Individual Retirement Account. These accounts use the Roth structure, so workers pay taxes on their contributions up front, allowing them to withdraw contributions at any time without taxes or penalties. Such flexibility may be especially valuable to lower-paid workers, who often lack precautionary savings for emergencies. However, several factors may prevent them from taking money out.

Source: Bc.edu, October 2024

Sen. Warren Issues Report to Boost Argument for Retirement Security Rule

Arguing that it provides evidence that supports the DOL's currently stayed Retirement Security Rule, Sen. Elizabeth Warren has released a report concerning industry activity she suggests the rule is intended to address. The report is based on an investigation that began in April 2024, shortly after the rule was issued. According to the report, the investigation found that conflicts are pervasive in the annuity industry, third parties often facilitate these conflicts, and insurers use complicated and opaque disclosures when discussing these conflicts.

Source: Asppa-net.org, October 2024

IRS Addresses Long-Term, Part-Time Employees in 403b Plans in New

In guidance issued on October 3, the IRS addresses long-term, part-time employees in 403b plans under SECURE 2.0 for plans beginning in 2025. The guidance comes in Notice 2024-73. The guidance includes a question-and-answer section about applying the nondiscrimination rules for 403b plans regarding LTPTEs, including rules to exclude part-time employee and student employee participation.

Source: Asppa-net.org, October 2024*

Senior DOL Official Defends Fiduciary Rule; Says Appeals Could Take Years

Ali Khawar, the Principal Deputy Assistant Secretary of Labor for EBSA, at the CFP Board's 2024 Connections Conference defended the Retirement Security Rule and noted that the Department of Labor will appeal the court decisions that have paused its implementation. Khawar explained that the Retirement Security Rule is an important priority for the DOL.

Source: Asppa-net.org, October 2024

IRA and Employer Plan Disaster Relief

Congress has equipped the IRS with more sweeping authority to respond to disasters without having to wait for legislative action. The SECURE 2.0 Act permanently allows plan participants to take penalty-free distributions and to borrow more from their retirement savings when a major disaster has been declared by the President. This article summarizes current federal disaster relief guidance.

Source: Ascensus.com, October 2024

Avoiding the 401k Rollover "Mistake"

A recent Wall Street Journal article highlighted "The 401k Rollover Mistake That Costs Retirement Savers Billions." That "mistake" highlighted a recent study by Vanguard that found more than a quarter of individuals who rolled over their 401k balance during a job change left their IRA rollover invested in nothing more than a money market fund for years, thereby foregoing tens of thousands of dollars in potential investment gains. The Vanguard study noted above claims that just being invested in a target-date fund rather than casually invested in a default money market fund could provide, on average, an increase of at least $130,000 in retirement wealth at age 65 for individuals less than age 55.

Source: Penchecks.com, October 2024

Nvidia Strikes a Settlement in Excessive Fee Suit

Despite numerous attempts to quash the suit, the parties in an excessive fee suit say they are close to working out a settlement.

Source: Napa-net.org, October 2024

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. These mandatory distributions are known as "required minimum distributions."

Source: Legacyrsllc.com, October 2024

Circuit Split Deepens With Home Depot's 11th Circuit ERISA Win

A three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit has upheld the dismissal of a 401k-plan mismanagement suit brought by plan participants in favor of Home Depot. The ruling affirmed a Georgia federal court's grant of summary judgment in the suit, in which plan participants claimed that the home improvement retailer violated ERISA in charging excessive fees and maintaining subpar investments.

Source: Hallbenefitslaw.com, October 2024

Solo 401k: The Ultimate Guide to Secure Your Retirement

Retirement planning has many options, but the Solo 401k stands out for self-employed individuals. Often overlooked, this retirement plan offers benefits tailored to solo entrepreneurs and freelancers. This guide explains the Solo 401k retirement plan, its benefits, complexities, and importance for your retirement.

Source: Forusall.com, October 2024

The Growing Appeal of Phased Retirement

As financial concerns mount for older workers, the concept of phased retirement is gaining traction. For HR professionals and business leaders, understanding this trend is crucial, especially in light of new findings from the WTW Global Benefits Attitudes Survey.

Source: Blr.com, October 2024

Some "Good Deeds" Do Go Unpunished: Ineligible Hardship Distributions in 401k Plans

An employer who wants to help employees in a financial bind at all costs can lead him to authorize hardship distributions that are not permitted by the plan document's provisions. As the saying goes, Mr. Bleeding Heart had good intentions, but now he is in a bind of his own, an operational error that he needs to correct. He feels like "No Good Deed Goes Unpunished," but there is hope.

Source: Belfint.com, October 2024

Disaster Relief: Keeping Plans and Participants Afloat

Hurricane season proper starts June 1 and ends Nov. 1. But disasters do not respect the calendar. So a plan administrator, sponsor, or service provider may find it prudent to take steps and have information at their fingertips to ensure that the plan functions smoothly and continues to serve participants as intended even if the unexpected happens.

Source: Asppa-net.org, October 2024

More Changes for RMDs

In 2019, the SECURE Act made several changes to the rules for retirement plans and IRAs, including raising the applicable RMD age from 70 1/2; to 72. In 2022, the IRS released proposed regulations that revised long-standing RMD rules and provided guidance on certain SECURE Act provisions.

Source: Ascensus.com, October 2024

Recent Developments in Forfeiture Cases: Update

This article is the Wagner Law Group's sixth update reporting on and analyzing the nature of the "forfeiture" litigation claims raised by plaintiffs, the defenses asserted against them and the court opinions deciding the issues raised in these matters. In addition to providing an overview of the recent Thermo Fisher decision, this article also discusses the complaint filed against Knight Smith as well as a similar forfeiture complaint filed by the DOL in 2017.

Source: Wagnerlawgroup.com, October 2024

401k Student Loan Match Perk Hindered by Employer Hesitation

While offerings from administrators like Betterment, Fidelity, and SoFi have already been marketed as services to facilitate matching for student loan payments, plan sponsor uptake appears to be lagging. Companies have been slow to offer an enticing new perk because of compliance and logistical concerns even as the IRS cleared the way for employers to provide the benefit.

Source: Wagnerlawgroup.com, October 2024

American Voices: Public Policy Priorities for Retirement Security

Americans are now expected to self-fund a greater portion of their retirement income compared with prior generations. However, many are not fully equipped to take on this added responsibility. They need help from policymakers to fortify their future retirement. A new report from the Transamerica Center for Retirement Studies elevates America's diverse voices and illuminates their top public policy priorities for retirement security.

Source: Transamericainstitute.org, October 2024

A Guide to Buying and Maintaining Cyberinsurance

Plan sponsors should understand that their fiduciary liability policy is not a substitute for cyber insurance. The cyber insurance market is intricate. Some product sellers are more knowledgeable than others, and some have access to more potential markets. Cyber insurance is not standardized, so sponsors need basic knowledge to evaluate insurance options and policy details properly.

Source: Plansponsor.com, October 2024

Insider Threats: Are Disgruntled Employees a Cybersecurity Risk?

Most plan sponsors' cybersecurity concerns are that outside hackers will attempt to get access to their systems, but disgruntled employees can also pose a threat. Internal threats account for about 20% of security threats, according to the Verizon 2022 Data Breach Investigations Report, making them rarer than outsider cybersecurity hacks. Still, certain employees, such as those in human resources, information technology, or treasury, may have access to plan information or other personally identifiable information. There are, however, ways to prevent or limit potential damage caused by disgruntled employees.

Source: Plansponsor.com, October 2024

Plan Security Relies on Vetting 3rd-Party Providers

Retirement plan recordkeepers' increasing reliance on third-party vendors for various administrative services and tools poses a challenge for plan sponsors who need to vet these vendors, especially as many have been exposed to cybersecurity breaches in the past year. To protect participant data and personal information, plan sponsors should be aware of the subcontractors with which their recordkeepers work, of which have access to participant data, and of how to respond to a breach when one occurs.

Source: Plansponsor.com, October 2024

2024 PLANADVISER Adviser Value Survey

By comparing metrics from plans that work with an adviser to those that do not, the 2024 PLANADVISER Adviser Value Survey finds plans with advisers are more likely to use automatic escalation, have higher default deferral rates, and have stronger chances of a company match. But where adviser presence makes a difference is in plan governance and fiduciary training, to ensure clients are meeting regulatory needs, and staying protected from audit and litigation risks. So how can an advisory ensure it is keeping up with the market on governance and fiduciary needs?

Source: Planadviser.com, October 2024

Rate Cuts Changing DC Investing Landscape

With the Federal Reserve lowering the federal funds rate to a range from 4.75% through 5%, financial experts are predicting up to five more rate cuts to align with the market-driven two-year Treasury rate, which has dropped to 3.57%, remarked Jeff Cullen, the CEO of Strategic Retirement Planners. The rate cut regime, Cullen noted, is just in time for stable value funds that, while historically popular in defined contribution retirement investing, have been hurt as investors turned to equally risk-averse money market funds.

Source: Planadviser.com, October 2024

Understanding Fiduciary Duty Under ERISA and Avoiding Potential Breaches Leading to Lawsuits

Recent lawsuits have emphasized that employers who sponsor employee benefit plans under ERISA are fiduciaries. This fiduciary duty means that employers owe an increased duty of care to the plans and their beneficiaries. As a result, employers should take certain precautions to avoid lawsuits based on a breach of their fiduciary duty. Employers need to demonstrate a rational process behind their actions. Employers can demonstrate a rational process by adopting policies and procedures to interpret and administer their plans.

Source: Hallbenefitslaw.com, October 2024

State Auto IRA Policies Have Expanded the Market for Retirement Plans

State-facilitated automatic enrollment Individual Retirement Account programs provide workers with an opportunity to save for retirement through payroll deduction, which is a common and straightforward way to periodically put money aside for long-term financial security. Surprisingly, new evidence also shows that these state programs induce employers to establish their own retirement plans. A new study documents this latter and less expected effect of the state-facilitated retirement savings programs.

Source: Georgetown.edu, October 2024

QACA Safe Harbor 401k Plans: The Ultimate Guide for Business Owners

One increasingly popular small business option is the qualified automatic contribution arrangement safe harbor plan. The SECURE Act 2.0 now requires automatic enrollment for new plans. This makes QACAs one of the lowest-cost Safe Harbor designs. This applies to plans that start in 2024 or later. This guide discusses the difference between QACA and traditional Safe Harbor 401k plans. It also explores the requirements, benefits, and potential drawbacks of QACA safe harbor plans.

Source: Forusall.com, October 2024

The Final RMD Regulations: The High Points

The good news is that the final RMD rules did not make major changes to the 2022 proposed regulations. But there are important refinements and clarifications, and, of course, discussion of many of the SECURE 2.0 RMD changes that Congress passed after the Treasury released the proposed regulations. This article highlights some of the most important changes.

Source: Ferenczylaw.com, October 2024

Why Does the DOL Allow ERISA Regulation Through Litigation By Plaintiff Lawyers

Why would America's plan sponsors continue to offer retirement plans with generous company matches if the trial bar is going to turn these voluntary benefits into liability traps? Just wait for a recession, and smart employers that want to reduce liability risk will eventually eliminate employee benefit plans that are targeted by the plaintiff trial bar. If you think this is an exaggeration, then you have not been watching the latest five trends of the plaintiff ERISA trial bar as they work to create novel fiduciary liability as America's de facto fiduciary liability regulators.

Source: Encorefiduciary.com, October 2024

IRS Ruling on 401k Discretionary Contributions

On August 23, 2024, the IRS gave its approval to a novel arrangement in which employees participating in their employer's 401k plan would be permitted to elect to allocate certain employer discretionary contributions made under such plan among various other types of employee benefits offered by the employer. The IRS determined that, as long as specified conditions are met, the proposed arrangement would not cause the various plans to run afoul of the Internal Revenue Code rules applicable to the plans.

Source: Compliancedashboard.net, October 2024

Four Compelling Reasons for Plan Sponsors to Adopt Auto Portability

In July, an article noted that the adoption of auto portability was picking up steam with thousands of plan sponsors already signing up for the service, delivered by the Portability Service Network. As PSN operations have commenced, and as the automated plan-to-plan consolidation of small balances begins, a familiar industry adoption pattern is emerging where innovators within the plan sponsor community lead the charge and are quickly followed by others.

Source: 401kspecialistmag.com, October 2024

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