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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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Seeing the Bigger QDIA Picture

A close look at selecting and evaluating qualified default investment alternatives forces some questions about the value an adviser can add to the process. For instance, though advisers may be good at helping to craft custom funds, this might not always be appropriate. Simply put, there are so many different low-cost, off-the-shelf solutions that most plan sponsors can typically find one that meets their needs.

Source: Planadviser.com, July 2021

DOL Cyber Scrutiny Higher for "Those Running the Systems"

The DOL wants everyone to be attentive to cybersecurity protocols as a fiduciary responsibility, but there's a higher expectation for those "running the systems" according to Tim Hauser, Deputy Assistant Secretary for National Office Operations at the Department of Labor's Employee Benefits Security Administration.

Source: Napa-net.org, July 2021

Congress Urged to Act on Numerous Retirement System Changes

In a hearing before the Senate Finance Committee, witnesses urged lawmakers to include changes such as mandatory coverage, student loan provisions, and emergency savings in whatever legislative package materializes, such as the SECURE 2.0 bills in the House and Senate.

Source: Investmentnews.com (registration may be required), July 2021

Fifth Circuit: Plan Participants Lacked Standing to Bring ERISA Fiduciary Breach Claims

American Airlines, Inc. and its affiliated credit union recently defeated an appeal challenging a low-yield investment option in the airline's 401k plan when the Fifth Circuit ruled that the plan participants lacked Article III standing to bring their ERISA claims.

Source: Erisalitigationadvisor.com, July 2021

More Plan Sponsors Meeting Members' Retirement Goals in 2021: Survey

A majority (72 percent) of plan sponsors believe their retirement savings plan is meeting its goals this year, up from roughly 66 percent in 2020, according to a new survey by Fidelity Investments Inc. While 68 percent said their employees are saving enough for retirement -- up from 59 percent in 2020 -- 86 percent believe at least some members are delaying retirement due to a savings shortfall and 60 percent believe the coronavirus pandemic has had an impact on employees' retirement decisions.

Source: Benefitscanada.com, July 2021

Khawar: Cryptocurrency Guidance on the Horizon

Speaking July 27 at the 2021 NAPA D.C. Fly-In Forum, the Acting Assistant Secretary for the DOL's Employee Benefits Security Administration outlined the key areas the department is working on, including both cryptocurrency and cybersecurity issues.

Source: Asppa.org, July 2021

DOL Official Sheds Light on Rollover Recommendations

Cautioning those looking to "game the system," a senior Labor Department official affirmed July 27 that suggesting investments that could occur after a rollover is tantamount to recommending the rollover, and if it meets the rest of the five-part test will constitute fiduciary advice regardless of how it's phrased.

Source: Asppa.org, July 2021

Gomez Nominated for EBSA Post

President Biden has nominated Lisa M. Gomez for Assistant Secretary of Labor for the Employee Benefits Security Administration. Ms. Gomez is a partner at the law firm of Cohen, Weiss and Simon and chair of the firm's management committee.

Source: Ascensus.com, July 2021

2021 RIA Benchmarking Study

The RIA Benchmarking Study by Schwab Advisor Services is a leading study of the RIA industry. The study features insights based on self-reported information on topics such as asset and revenue growth, sources of new clients, products and pricing, staffing, compensation, marketing, technology, and financial performance. Now in its fifteenth year, more than 1,300 independent advisor firms representing over $1.5 trillion in AUM participated in this year's study.

Source: Schwab.com, July 2021

2021 Recordkeeping Survey

The annual PLANSPONSOR Recordkeeping Survey is compiled from self-reported data submitted by recordkeepers of defined contribution plans. This year's results represent nearly $9 trillion in DC assets and are estimated to account for over 90% of the total DC market, according to internal analysis based on the "2021 Investment Company [Institute] Fact Book."

Source: Plansponsor.com, July 2021

2021 Recordkeeping Survey: Seek and Find

Fifty-eight percent of sponsors surveyed for the 2021 PLANSPONSOR Plan Benchmarking Report said their organization has been using its DC plan recordkeeper for more than seven years, and another 12.3% said it has been more than five years but less than seven. So the timing may be right for these sponsors to take a fresh look at the dynamic recordkeeping marketplace and how it has changed since they last did a request for proposals. Four plan advisers give their insights, and recommendations, as to five key preliminary steps when preparing to conduct an RFP.

Source: Plansponsor.com, July 2021

The Allure of PEPs for Current Plan Sponsors

What should current plan sponsors do when a pooled employer plan is pitched to them as a solution for offering a retirement plan to employees? Many current plan sponsors already use help that is available -- 3(16) plan administrators, 3(38) investment managers -- so they should weigh the appeal of offloading some responsibilities to a pooled plan provider carefully.

Source: Plansponsor.com, July 2021

EBSA Addresses Timing of Lifetime Income Disclosures

Under a set of Frequently Asked Questions issued by the DOL, participant-directed plans now have a firm compliance date to provide lifetime income illustrations. Plans which must issue quarterly statements under ERISA Section 105 can incorporate their first LII on any quarterly statement up to the second calendar quarter of 2022, ending June 30, 2022.

Source: Napa-net.org, July 2021

Senate Democrats Introduce Bill Providing 401k, IRA Match

Ron Wyden, the ranking member of the Senate Finance Committee, and six other Democratic senators have introduced legislation that would enhance the incentives to save for retirement. The existing nonrefundable saver's credit would become a $1,000-a-year matching contribution from the government.

Source: Investmentnews.com (registration may be required), July 2021

DOL Provides Cybersecurity Guidance: Meeting Fiduciary Duty, and Avoiding Incorrect Advice to Plan Sponsors

Plan sponsors and fiduciaries have traditionally relied on advisers -- from attorneys to accountants to investment consultants -- to help guide decisions for their retirement plans. For decades, a cornerstone of this assistance has been making recommendations about retirement plan investment portfolios. With the rise of cyberattacks on financial institutions, many plan sponsors and their advisers have started to focus more time and resources on the security of their plan data, including the participant information held by service providers. The DOL also recognized the vulnerability of plans to cyberthreats and recently published three important documents.

Source: Georgetown.edu, July 2021

A Ninth Circuit Ruling Reminds ERISA Plans of the Importance of Administrative Accuracy

The Ninth Circuit's recent decision in Bafford v. Northrop Grumman affirmed the district court's dismissal of the plaintiffs' breach of fiduciary duty claims under ERISA but vacated the district court's holding that state-law professional and negligent misrepresentation claims were preempted. The plaintiffs alleged that Northrup, the Committee, and the recordkeeper breached their fiduciary duties and failed to provide benefits information required under ERISA. In addition, the plaintiffs alleged that the recordkeeper was liable for professional negligence and negligent misrepresentation.

Source: Faegredrinker.com, July 2021

Plaintiff Lacks Standing to Challenge Retirement Plan Investment Options and Fees

On July 16, 2021, the District Court for the Western District of Wisconsin dismissed without prejudice four ERISA claims brought by a former employee alleging mismanagement of Infinity's DC 401k plan. Plaintiff alleged that plan fiduciaries violated their fiduciary duties by offering allegedly imprudent, actively managed investment options, and by paying excessive administrative and recordkeeping fees. The court found that the plaintiff lacked standing to assert her ERISA claims for two main reasons.

Source: Erisalitigationadvisor.com, July 2021

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

Updates to EPCRS Correction Programs Encourage Employers to Self-Identify, Correct Mishaps

On July 16, 2021, the IRS issued Revenue Procedure 2021-30, the most recent comprehensive official guidance concerning the IRS's Employee Plans Compliance Resolution System. This article is intended as a general overview of Rev. Proc. 2021-30 as it affects 401k plans and is not meant to address the details of plan qualification.

Source: Compliancedashboard.net, July 2021

DOL Plan Audits Updated to Include Several Questions About Compliance With Its Cybersecurity Guidelines

The DOL updated its audit inquiries to include probing questions for plan fiduciaries about their compliance with agency cybersecurity guidelines. So, what do those inquiries look like? In short, the DOL is asking plan sponsors to produce: "all documents relating to any cybersecurity or information security programs that apply to the data of the Plan, whether those programs are applied by the sponsor of the Plan or by any service provider of the Plan."

Source: Benefitslawadvisor.com, July 2021

Form 5500 and SAS 136

The AICPA postponed the mandatory effective date of the new audit standard, SAS 136, until next year, but the DOL had already updated Form 5500 to incorporate the new reporting rules. So now what?

Source: Belfint.com, July 2021

Industry Best Practice: Fraud Controls

The protection of retirement accounts can only be fully realized with a partnership between plan sponsors, fiduciaries, recordkeepers, participants, and where applicable advisors. There must be layered controls as there is not a single solution to protect accounts. These controls should be a combination of preventative, detective, and responsive controls. This fraud control chart is intended to highlight a minimum set of controls that should be considered and set expectations for all parties involved.

Source: Sparkinstitute.org, July 2021*

Engaging Participants: Communication Strategies for DC Plan Sponsors

With success measurement largely limited to the accumulation phase, participation becomes a major criterion, but helping participants to help themselves requires engagement. How do plan sponsors achieve this level of engagement or action from participants? Are defined contribution participants more likely to respond to messages of fear or encouragement? This 4-page report explores key questions that plan sponsors often ask and offer recent research to help provide answers.

Source: Dciia.org, July 2021

DC Plan Distributions: Considerations and Recommendations

The COVID-19 pandemic has challenged individuals and organizations to continue operating during a time where face-to-face interaction may not be plausible, and access to organizational resources may be restricted. However, life has not stopped, and participants in your employee benefit plan may continue to make important decisions based on their financial needs. To help you prepare for a potential IRS examination, this article has listed some requirements for participants to receive Required Minimum Distributions, hardship distributions, and coronavirus-related distributions, recommendations of actions you can perform, and documentation to retain as added internal controls.

Source: Berrydunn.com, July 2021

IRS Proposes Electronic Filing Requirements for Certain Information Returns

The IRS has released a pre-publication version of proposed regulations amending rules intended to increase the filing of electronic returns in accordance with the Taxpayer First Act of 2019. Additionally, the IRS has withdrawn previously proposed regulations regarding electronic filing that were published on May 31, 2018. The new proposed regulations reduce the threshold by which filers must electronically file from 250 to 100 returns for the 2022 calendar year.

Source: Ascensus.com, July 2021

Women's Retirement Protection Act Reintroduced in Congress

U.S. Senator Patty Murray, who is the current chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, and Representative Lauren Underwood have reintroduced the Women’s Retirement Protection Act of 2021. According to the lawmakers, the legislation aims to address the gender-based retirement savings gap and bolster women's financial security overall.

Source: Planadviser.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

ERISA Record Retention: How Long Is Long Enough?

ERISA record retention may not be of those sizzling retirement plan topics for some folks. But it's an important issue in today's ERISA's environment in which Plan Administrators and other fiduciaries must meet complicated compliance reporting requirements, oversight from regulatory agencies, and sometimes litigation. So here is some basic information about document retention for ERISA plans in a Q and A format.

Source: Retirementplanblog.com, July 2021

MetLife Accused of Favoring Proprietary Index Funds in 401k

Current and former participants of the MetLife 401k Plan have filed a lawsuit alleging the plan's fiduciaries violated ERISA's duties of loyalty and prudence "by applying an imprudent and disloyal preference for MetLife index fund products within the plan, despite their poor performance, high costs and lack of traction among fiduciaries of similarly sized plans." According to the complaint, the defendants' conduct has cost plan participants millions of dollars over the period defined in the lawsuit.

Source: Planadviser.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

How Ethical Is Automatic Enrollment in Retirement Plans?

It's no industry secret that automatically enrolling employees in a workplace retirement account has been successful in increasing the number of people saving for their retirement. And due to this success, the adoption of automatic-enrollment workplace retirement plans has grown over time. Although widely implemented, no studies have assessed how employees feel about such interventions. To find out, the author designed an experiment in which people evaluated retirement plans based on their enrollment feature: opt-in vs. automatic enrollment vs. automatic enrollment with automatic escalation.

Source: Morningstar.com, July 2021

IRS Updates 401k Plan Correction Program

On July 16, 2021, the IRS published Revenue Procedure 2021-30, which makes significant improvements to the Employee Plans Compliance Resolution System. Recognizing that mistakes (late enrollments, missed elective deferrals, loan failures, etc.) frequently occur in the day-to-day administration of 401k plans, the EPCRS permits 401k plan sponsors to correct certain plan failures under a Self-Correction Program, a Voluntary Correction Program, or under Audit CAP for failures discovered during an IRS audit.

Source: Masudafunai.com, July 2021

New DOL Prohibited Transaction Exemption Regulates Investment Advice Fiduciaries

On April 13, 2021, the DOL issued clarifying guidance for Prohibited Transaction Exemption 2020-02, Improving Investment Advice for Workers & Retirees, which became effective on February 16, 2021. The DOL guidance for investment advice providers comes in a series of 21 FAQs that address three main subjects reviewed here.

Source: Hallbenefitslaw.com, July 2021

The Newest EPCRS: All Good News (Except When It's Not)

The IRS issued the long-awaited update of its Employee Plans Compliance Resolution System. Revenue Procedure 2021-30 supersedes the previous EPCRS procedure, Rev. Proc. 2019-19. The new procedure is generally effective as of July 16, 2021, but there are two provisions with special effective dates. This piece discusses the details.

Source: Ferenczylaw.com, July 2021

401k Plan Restatements Required By July 2022

Every six years, the IRS requires employers with qualified, pre-approved plans to restate their plan documents to reflect changes that have occurred since the plan documents were created or last restated. For defined contribution plans, the current restatement cycle -- called Cycle 3 -- opened on Aug. 1, 2020, and will close on July 31, 2022, meaning all plan documents need to be not only restated by then, but also certified by the IRS, and adopted by employers. Missing this deadline will force plans out of compliance and may result in IRS penalties.

Source: Bdo.com, July 2021

New Research Finds Millennials and Gen X Increasingly Concerned About Retirement in Wake of Pandemic

A national survey finds that Millennials and Generation X are more worried about retirement as compared to older generations. Sixty-four percent of Millennials and 54 percent of Generation X are more concerned about their retirement security in the wake of the COVID-19 pandemic. The level of concern is at 42 percent for Baby Boomers and 25 percent for the Silent Generation.

Source: Prnewswire.com, July 2021

Defined Contribution Plan Recordkeeper Services Review

ERISA requires plan fiduciaries to ensure that fees paid out of plan assets are reasonable in light of the services being rendered. In other words, in your judgment, are the fees fair for the associated services? This discussion guide is intended to facilitate a committee's review of the primary services offered by their recordkeeper.

Source: Multnomahgroup.com, July 2021

2021 Defined Contribution Plan Participant Survey Findings

This DC Plan Participant Survey was conducted as the COVID-19 pandemic disrupted financial markets, workplace trends, and spending patterns. Against this backdrop, participants remained broadly resilient in maintaining their retirement savings efforts, but many also continued to appear overwhelmed and unsure about the various aspects of retirement planning.

Source: Jpmorgan.com, July 2021

Limited Access Is Key to Retirement Saving Success

In a voluntary retirement savings system, it is important to provide limited pre-retirement access to retirement accumulations. In the United States, tax rules provide the framework for limited access.

Source: Ici.org, July 2021

The Economics of Providing 401k Plans: Services, Fees, and Expenses, 2020

The study found that 401k plan participants investing in mutual funds tend to hold lower-cost funds, the expense ratios that 401k plan participants incur for investing in mutual funds have declined substantially since 2000, and the downward trend in the expense ratios that 401k plan participants incur for investing in hybrid and bond mutual funds continued in 2020.

Source: Ici.org, July 2021

Best Interest Standard of Care for Advisors #59

This article looks at DOL FAQ #9 that explains that Prohibited Transaction Exemption 2020-02 provides relief from the prohibition on compensation from a rollover IRA due to a fiduciary recommendation to roll over.

Source: Fredreish.com, July 2021

IRS Plays Musical Chairs With Voluntary Correction Programs

On July 16, 2021, the IRS published the latest EPCRS upgrade in Revenue Procedure 2021-30, in which, like musical chairs, some ground is gained while some is taken away. Here is a summary of some of the key changes.

Source: Eforerisa.com, July 2021

Missing Participants Matter: How to Overcome the Issue

CAPTRUST's Mike Webb provides an expert look at the problem of missing retirement plan participants. Armed with institutional insights on why it happens, why plan sponsors should care, and what they can do to break the cycle. Webb digs in on reuniting participants with their money.

Source: Captrust.com, July 2021

A Mid-Year Check-In for Retirement Plan Sponsors

Jennifer Doss and Scott Matheson provide a mid-year check-in on the retirement themes making headlines -- including environmental, social, and governance investing SECURE Act 2.0, and the double-edged sword of technology.

Source: Captrust.com, July 2021

State Auto-IRAs are Building Momentum

About half of the nation's private-sector employees do not have a retirement savings plan at work, and that hasn't changed in at least 40 years. Some states are trying to fix this coverage gap in the absence of substantial progress by the federal government in solving the problem. And the state reforms are gaining momentum.

Source: Bc.edu, July 2021

IRS Releases Updated EPCRS Guidance

The IRS has released Revenue Procedure 2021-30, which contains long-awaited guidance updating the Employee Plans Compliance Resolution System. Plan sponsors use EPCRS to correct certain plan qualification failures. EPCRS is composed of the Self-Correction Program, the Voluntary Correction Program, and the Audit Closing Agreement Program, and there are several noteworthy changes.

Source: Ascensus.com, July 2021

The Value vs. Growth Debate and Its Impact on DC Plans and Participant Behaviors

This 6-page paper reviews notable differences between growth and value investing and evaluates the recent performance trends while providing historical context. It also explores how the recent outperformance of growth investing compared to value investing impacts defined contribution plans and plan participant behavior. Finally, it provides conceptual arguments that support the cases for growth and value investing on a forward-looking basis.

Source: Sageviewadvisory.com, July 2021*

TIAA Subsidiary's SEC Settlement Requires Rollover Reforms

The SEC revealed that TIAA-CREF Individual & Institutional Services LLC, a firm known as "TC Services," will pay $97 million to settle charges of making inaccurate and misleading statements to rollover clients. According to the SEC, the settlement will also resolve allegations that the firm failed to adequately disclose conflicts of interest to thousands of participants in TIAA record-kept employer-sponsored retirement plans.

Source: Plansponsor.com, July 2021

Target-Date Funds: Facing Increasing Congressional, Regulatory, and Legal Scrutiny

Target-date funds have become a very popular investment option on participant-directed defined contribution plan investment lineups. But, as TDFs have grown in popularity, there are signs of increasing scrutiny around TDFs used in participant-directed defined contribution plan investment lineups. This increasing scrutiny is expected to raise new regulatory initiatives generating new questions and may favor increased process review by ERISA plan fiduciaries.

Source: Morganlewis.com, July 2021

New Escheatment Guidance for Qualified Plans

Most of the focus on missing participants has been with the DOL and its retirement plan audits, but over the last few years, the IRS also has been getting into the game with targeted guidance in this area. In this 4-page article, Groom Law principal Elizabeth Thomas Dold provides a review of this guidance in question and answer format.

Source: Groom.com, July 2021

Many 401k Investors Don't Use Target-Date Funds the Right Way

Target-date funds have ballooned in popularity over the past 15 years, yet many investors aren't using them the way they were intended. The funds were designed as a one-stop-shop that put retirement savings on autopilot. Investors are meant to park their nest egg in one fund, generally based on their retirement year, which automatically shifts from stocks to bonds over time. However, a third of investors aren't limiting themselves to one target-date fund, according to 401k data from Vanguard. They're piling other funds on top.

Source: Cnbc.com, July 2021

The Discretion Decision: 3(21) Versus 3(38)

In this podcast, Jennifer Doss and Scott Matheson chat with Jenny Eller, principal at Groom Law Group, about discretionary versus nondiscretionary investment advisory services and the reasons behind the trend toward 3(38) investment managers.

Source: Captrust.com, July 2021

Survey: 84% of Workers Say Auto-Enrolment Is Key to Saving Earlier for Retirement

The vast majority (84%) of workers that were automatically enrolled in their workplace retirement plan say they started to save for retirement sooner than if they had to take action to make the enrollment decision on their own. However, only one-third of employers currently offer automatic enrollment, and among those that do, just 21% have an automatic deferral rate of 6% of eligible pay, according to the latest quarterly Principal Retirement Security Survey.

Source: Principal.com, July 2021

DC Survey Reveals Plan Participants Stayed the Course During COVID-19

J.P. Morgan Asset Management released findings from its sixth research study of plan participants, revealing that while nearly four in five respondents did not change their contributions or investments during COVID-19, more than half feel like they're overloaded with information and don't know where to start planning for retirement.

Source: Prnewswire.com, July 2021

How to Know When It's Time to Update Your Investment Options

As the plan sponsor, it's your fiduciary responsibility to make sure your plan funds reflect the best interests of your participants. This usually requires regular monitoring of your investment fund menu and making updates as you see fit. With that in mind, here are three signs it may be time to add or replace investment options in your company's retirement plan.

Source: Planpilot.com, July 2021

Workers More Receptive to Auto-Features, Post-COVID-19

Eighty-four percent of workers who have been automatically enrolled into their workplace retirement plan say they are glad that their savings have been jump-started. They say auto-enrollment has gotten them on the retirement savings path at an earlier age than if they had decided on their own. This is according to Principal's latest "Retirement Security Survey," which is based on a poll of more than 2,000 workers and retirees, and 230 plan sponsors.

Source: Planadviser.com, July 2021

The DOL-Approved Way to Handle Missing Participant Accounts

Although not considered formal guidance, it identifies prudent considerations for retirement plan administration that can minimize and mitigate the problems associated with missing participants while providing evidence of a company's efforts to comply with Safe Harbor standards. This guidance is less aimed at the solutions available once a participant is determined to be missing. Rather, it is intended to provide advice on ways plan sponsors can minimize or eliminate their incidences of missing participants, to begin with.

Source: Penchecks.com, July 2021

Fiduciary Liability Insurance Is Worth It

This piece is about plan sponsors who don't insure their risk by buying fiduciary liability insurance or buying a plan service that could review their plan expenses and/or their plan document/administration. Fiduciary liability insurance helps protect plan sponsors who find themselves also appearing as defendants in a plan lawsuit filed by an aggrieved plan participant in a town near you.

Source: Jdsupra.com, July 2021

New EPCRS Rev. Proc. 2021-30

This revenue procedure updates the comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of sections 401(a), 403(a), 403(b), 408(k), or 408(p) of the Internal Revenue Code, but that have not met these requirements for a while. This system, the Employee Plans Compliance Resolution System ("EPCRS"), permits Plan Sponsors to correct these failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis. The components of EPCRS are the SelfCorrection Program ("SCP"), the Voluntary Correction Program ("VCP"), and the Audit Closing Agreement Program ("Audit CAP").

Source: Irs.gov, July 2021

Data Find That Employer Contributions Are Widespread in 401k Plans

Employer contributions are prevalent in 401k plans, according to an updated study on 401k plans from BrightScope and the Investment Company Institute. The study found that in 2018, 87 percent of large 401k plans (typically those with 100 participants or more, as defined by the DOL) covering more than nine out of 10 401k participants had employer contributions.

Source: Ici.org, July 2021

IRS Highlights Top Mistakes in Retirement Plan Correction Submission Filings

The IRS has updated its Top Mistakes in Voluntary Correction Program Submissions webpage to ensure submissions by plans sponsors or their representatives are free of errors that could result in a delay of the IRS' review of the submission as well as a holdup in issuing the compliance statement. The updated list includes new items concerning the electronic submission of VCP.

Source: Hallbenefitslaw.com, July 2021

Comparison of Provisions in SECURE 2.0 and Cardin-Portman

Groom has prepared a comparison of the provisions in two key retirement bills being considered by the 117th Congress: the Securing a Strong Retirement Act of 2021 (H.R. 2954, "SECURE 2.0") and the Retirement Security & Savings Act (S. 1770, "Cardin-Portman").

Source: Groom.com, July 2021

District Court Denies Interlocutory Appeal for Novel Issue of "Hardwired" 401k Plans

A federal district court in Maryland recently declined to certify an interlocutory appeal to the Fourth Circuit on the issue of whether financial institutions can "hardwire" a preference for their proprietary investment vehicles into their employees' 401k plans. In so ruling, the district court prevented, at least for now, an opportunity for an appellate court to consider an issue that could significantly impact the adjudication of fiduciary breach challenges to the offering of proprietary funds in 401k plans.

Source: Erisapracticecenter.com, July 2021

Supreme Court Will Hear Case Challenging Retirement Plan Investment and Recordkeeper Fees

The Supreme Court recently granted the writ of certiorari requested by Northwestern University retirement plan participants, following the Solicitor General's plea for the Court to hear the case. The certiorari petition phrased the question presented as: "[w]hether allegations that a defined-contribution retirement plan paid or charged its participants fees that substantially exceeded fees for alternative available investment products or services are sufficient to state a claim against plan fiduciaries for breach of the duty of prudence under ERISA."

Source: Erisalitigationadvisor.com, July 2021

Summertime Blues for Your 401k Plan, P.2: Eligibility Failures

This is the second installment in five posts covering the most common 401k plan operational issues that arise during Form 5500 prep season for calendar year plans, which happens to be summertime. This part will focus on a few selected errors related to eligibility under the plan: who gets to participate in the plan and when.

Source: Eforerisa.com, July 2021

Form 5500 Filing Date Fast Approaching

DB plans, DC plans, and 403b annuity arrangements with calendar year plan years, the Form 5500 filing deadline for the 2020 plan year is not far off. In most years that would mean July 31, but not in 2021. The form must be filed by the end of the seventh month after the end of a plan year. Since most plans set their plan years to the calendar year, most plans have to file by July 31.

Source: Asppa.org, July 2021

Koch Industries Agrees to $4 Million Settlement of ERISA Excessive Fee Suit

Koch Industries has agreed to pay $4 million to settle a lawsuit alleging the company, Koch Business Solutions, and the Koch Benefits Administrative Committee allowed excessive recordkeeping fees to be charged to participants in Koch-affiliated DC retirement plans. In addition to the monetary relief, the terms of the proposed settlement provided that the defendants will issue an RFP for recordkeeping services for the plans within 180 days of the settlement effective date.

Source: Planadviser.com, July 2021

DOL Intensifies Cyber Readiness Inquiries Among Retirement Plan Administrators

In light of recent reports of an increase in cybersecurity inquiries by the DOL, retirement plan administrators should accelerate their preparedness strategies for avoiding and addressing cybersecurity attacks against retirement plans. Media outlets are reporting that the DOL has begun asking plan sponsors questions related to cybersecurity policies and procedures.

Source: Debevoise.com, July 2021

Cold Water Thrown on Need for New Brokerage Window Guidance

Witnesses testifying before the ERISA Advisory Council largely panned the idea for additional fiduciary or disclosure obligations on DC plans that contain brokerage windows. During the two-day hearing held June 24-25, witnesses representing private companies, law firms, industry groups and other retirement plan stakeholders echoed similar themes throughout their testimony, noting, among other things, that participants who use brokerage windows are sophisticated investors familiar with the risks and that existing disclosures already inform participants.

Source: Asppa.org, July 2021

Hiring an Investment Manager? Go Beyond the RFP Responses

Retirement plan sponsors and committees that are fiduciaries often ask for guidance when hiring investment professionals. The best practice is to do a formal request for proposals that target likely candidates for the job. The RFP will identify the most qualified candidates, but other, less objective factors will differentiate them.

Source: Rpaconvergence.com, July 2021

PEPs Are Here. But How Successful Will They Be?

The case for pooled employer plans is compelling, especially to address the fact that there are 5 million to 6 million companies in the U.S. and just 650,000 DC plans. But as we wait for the DC market to adopt PEPs, the results so far have been muted. A few vendors have applied to be pooled plan providers, but not in the numbers many predicted.

Source: Investmentnews.com (registration may be required), July 2021

Tenth Circuit Addresses Damages for Excessive Recordkeeping Fee Claims

One of the recent cases challenging the recordkeeping fees of 401k plans recently made its way to the Tenth Circuit Court of Appeals. Following a bench trial that resulted in a determination that the fiduciaries of Banner Health’s 401k plan had failed to monitor the plan's uncapped, asset-based, revenue sharing arrangement with Fidelity, the Court affirmed the district court's rejection of the plaintiffs' expert testimony on damages and fashioning of its method to calculate the plan's losses due to the excessive recordkeeping fees.

Source: Erisapracticecenter.com, July 2021

ERISA 401k Performance and Fee Litigation Dismissed for Failure to Provide Comparable Benchmark

The District Court for the Southern District of Iowa recently dismissed an ERISA putative class action lawsuit challenging 401k performance and fees after plan participants failed to identify appropriate benchmarks in their complaint. The court reinforced the Eighth Circuit's standards for stating such claims, requiring that the plaintiffs allege facts establishing "a meaningful benchmark for assessing the performance of the challenged funds."

Source: Erisalitigationadvisor.com, July 2021

Summertime Blues for Your 401k Plan, Pt. 1

Summertime is for fun, relaxation, and a break from work, but it is also a crucial period for calendar year 401k plans. This is the first in a series of five posts covering the 401k mishaps that are as reliable a feature of my summers as are the 4th of July, outdoor barbecues, and sunscreen.

Source: Eforerisa.com, July 2021

IRS Updates Internal Summary of Hardship Distribution Rules

The IRS has updated its "Issue Snapshot" summarizing the requirements for hardship distributions from 401k plans. These latest updates to the snapshot on hardship distributions incorporate changes made by the Bipartisan Budget Act of 2018, which expanded the sources of funds for hardship distributions, removed the requirement for participants to exhaust available plan loans, and directed the IRS to delete the safe harbor requirement that elective deferrals and employee contributions be suspended after a hardship distribution.

Source: Thomsonreuters.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

House Panel Crafting Bill to Limit IRA Savings

House Ways and Means Committee Chairman Richard Neal is mulling legislation that would limit "the total amount of money that can be saved in tax-preferred retirement accounts, and putting an end to the tax-dodging some do when saving in IRAs," he told ThinkAdvisor via email on Thursday.

Source: Treasuryandrisk.com, July 2021*

Plan Checkup for Maximizing Outcomes

Plan Sponsors have a lot on their plates. Not only must they focus on providing competitive employee benefits, but also protecting themselves against potential litigation. For many, retirement plan responsibilities are among several competing corporate responsibilities, all rightfully demanding full attention. Plan committees must work efficiently and effectively to fulfill all of their plan responsibilities. Here are 12 suggested committee agenda items, which when carried out, can help mitigate fiduciary risks.

Source: Porteval.com, July 2021

Percentage of 401k Participants With Loans Dropping

At the end of the first quarter, about 14% of 401k participants had outstanding loans. The percentage fell steadily throughout last year after edging up to 16.3% in the year-ago period from 16.1% in the fourth quarter of 2019.

Source: Pionline.com, July 2021

Schlichter Excessive Fee Bid Gets Whacked

After a split decision on the merits and a $3.1 million settlement, the plaintiffs' attorneys asked for a fee of $5.4 million. Guess what the judge allowed? In the case at hand -- Ramos v. Banner Health -- the plaintiffs just last month lost their appeal of parts of a decision that, largely, favored the fiduciary defendants in the $2.2 billion 401k plan.

Source: Napa-net.org, July 2021

401k Lawsuit Alleges Excessive Adviser Compensation

A comprehensive lawsuit filed this week against large AAA member groups alleges that plan participants overpaid for years for investments and services, including compensation to Wells Fargo and Captrust. The defendants did not appear to solicit competitive bids for record-keeping services and allowed funds with high revenue-sharing to compensate service providers, according to the complaint.

Source: Investmentnews.com (registration may be required), July 2021

Supreme Court Set to Tackle Pleading Standard in Northwestern Retirement Plan Lawsuit

On July 2, 2021, the Supreme Court agreed to hear Hughes v. Northwestern, which involves a challenge to investment fees and recordkeeping fees in two 403b plans maintained by Northwestern University. The district court dismissed the complaint about failure to adequately plead a breach of the fiduciary duty of prudence, and the Seventh Circuit affirmed the dismissal. The Supreme Court will now weigh-in for the first time on the critical issue of what allegations are sufficient to state a plausible breach of fiduciary duty claim for excessive investment and recordkeeping fees.

Source: Groom.com, July 2021

Four Considerations for Creating a Strong IPS

This paper describes four considerations to use in helping determine if an IPS is strong. The overarching theme of these four considerations is thoroughness as it relates to documenting the governance, oversight, investment management, and monitoring/evaluation functions of the investment program.

Source: Pnc.com, July 2021

401k Plan Investors Tilt Further Towards Equities

Average asset allocation in equities rose to 70.2% during June, the highest level in 20 years, though the proportion of new contributions going to equities remained at 69.2%.

Source: Plansponsor.com, July 2021

Sweeping Excessive Fee Suit Targets Motor Club's 401k

An excessive fee suit filed by a litigator new to the ERISA space makes a series of new, sweeping allegations (including the plan's advisor and auditor) alongside some familiar challenges. The plaintiffs' arguments are extraordinarily detailed and tread ground(s) not often seen in these type of filings.

Source: Napa-net.org, July 2021

How Different Generations Define Retirement

There's the conventional way to define retirement: an objective age at which one can exit the workforce, begin collecting Social Security benefits, and have the ability to access retirement savings without penalties. But on the other hand, research has shown the psychology behind retirement to be much more complex. In a review of the literature, you can identify three general perspectives on retirement.

Source: Morningstar.com, July 2021

Top 10 Payroll Issues in 401k Plans

Payroll-related mistakes can not only be time-consuming and costly for a plan sponsor to correct, but they also may jeopardize a plan's compliance with IRS and DOL regulations. Depending on the severity and magnitude of the correction, it may be necessary to involve legal counsel to make a submission into one of the IRS's corrective programs. Here is a list of the top 10 payroll-related matters most commonly identified in 401k plan audits.

Source: Lindquistcpa.com, July 2021

Physical Presence Relief for Elections and Consents

On June 24, 2021, the IRS issued Notice 2021-40 which further extends the temporary relief from the "physical presence requirement" previously granted to certain 401k plan elections and consents, and hinted that permanent relief from the requirement might be forthcoming.

Source: Compliancedashboard.net, 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

Court Affirms Arrangement Between Sponsor and Recordkeeper Not a Prohibited Transaction

The 10th U.S. Circuit Court of Appeals was asked to review a lower court's decision in Ramos v. Banner Health, in which participants in Banner Health's 401k plan alleged plan fiduciaries breached their duties under ERISA. Following an eight-day bench trial, the U.S. District Court for the District of Colorado concluded that Banner's uncapped, revenue-sharing agreement with its recordkeeper Fidelity did not constitute a prohibited transaction under ERISA.

Source: Planadviser.com, July 2021

How a 401k Plan Sponsor Can Be Proactive

As a 401k plan sponsor, not only is your plan a great benefit for you and your employees, it has some negative aspects if you're not proactive in maintaining it. Future, if you ignore your plan, it could be used as a weapon against you because of the potential liability exposure from litigation by participants or penalties from the IRS or DOL. This article is about how you can be proactive in maintaining your 401k plan.

Source: Jdsupra.com, July 2021

SCOTUS Agrees to Hear ERISA "Excessive Fee" Case

The Supreme Court granted a petition for a writ of certiorari to review the Seventh Circuit's decision in Divane v. Northwestern University. Hughes is one of the numerous "excessive fees" class action cases that have come to dominate the ERISA fiduciary litigation landscape in recent years.

Source: Steptoe.com, July 2021*

High Court Agrees to Review Northwestern University ERISA Suit

The U.S. Supreme Court has agreed to review the case of Hughes v. Northwestern University. The question before the high court is whether participants in a DC plan stated a plausible claim for relief against plan fiduciaries for breach of the duty of prudence by alleging that the fiduciaries caused the participants to pay investment management or administrative fees higher than those available for other materially identical investment products or services.

Source: Planadviser.com, July 2021

Availability of State Auto-IRAs Appears to Complement Private Market for Retirement Plans

As more states enact retirement savings programs for private-sector workers who can't save through their jobs, policymakers and analysts have speculated about the potential impact on employers: Would these state programs "crowd out" the private market for plans such that businesses would not adopt their own 401ks or comparable alternatives? Preliminary data from DOL annual filings by employer-sponsored plans suggests that in states that have created what is known as an auto-IRA, employers with plans continue to offer them, and businesses without plans are still adopting new ones at similar or higher rates than before the state options were available.

Source: Pewtrusts.org, July 2021

Understanding the Importance of Commonality When It Comes to Retirement Advice

When looking for an advisor, Black and Hispanic Americans were asked if "working with an advisor who has had a similar upbringing or life experience as you" was an important criterion: 61 percent of Black respondents and 57 percent of Hispanic respondents, vs. 41 percent for White respondents, said this criterion was important. However, one cohort that expressed less interest in having an advisor with a similar upbringing or life experience was female workers, with 45 percent saying this was important.

Source: Ebriorg.wordpress.com, July 2021

Incorporating ESG in DC Plans: A Resource for Plan Sponsors

Increasingly, retirement plan sponsors are considering whether sustainable investments and investment options could enhance their DC plan retirement offerings. Heightened public awareness, evolving regulatory guidance, strides in data reporting, and investment product innovation have led plan sponsors to ask for more tactical guidance on applying strategies that integrate environmental, social and governance criteria into plan design. This 11-page paper provides tips for plan fiduciaries considering how to incorporate sustainable investing into a plan.

Source: Dciia.org, 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

Graff: Current Legislative Environment Is 'Challenging'

There is plenty of activity on Capitol Hill, but it comes amid a climate that creates challenges for the retirement industry, American Retirement Association CEO Brian Graff noted June 29. The environment now is very different, remarked Graff. There is a lot of discussion, he said, "but not a lot of agreement." He added that it is challenging to "keep retirement policy out of the fray."

Source: Asppa.org, July 2021

Average 401k Continued Climbing in Q2

U.S. stock markets finished at, or near, record highs in the second quarter. Guess what that meant for the average 401k balance? The 401k's of older (age 55-64) workers with more than 20 years of tenure is now 10.4% higher year-to-date, while that of younger (25-34), less tenured (1-4 years) workers has increased 16.3%, according to estimates from the nonpartisan Employee Benefit Research Institute.

Source: Asppa.org, July 2021

The Obvious, if Overlooked, Retirement Crisis Solution

The retirement crisis is real. Most baby boomers have not saved enough. Fully 70% of baby boomers, which is 55 million people, have saved less than $300,000. But a recent SEC report on "Perspectives on Retirement Readiness" says the solution is not to increase investment risk, as has been the justification for target-date fund risk at the target retirement date. Rather, the solution is modifying behavior by encouraging beneficiaries to save more.

Source: 401kspecialistmag.com, July 2021

ExxonMobil Restarting 401k Match; American Express Doubling Auto-Enroll Percentage

Some good news about a couple of large corporate 401k plans in recent days, as ExxonMobil plans to restart employer contributions and American Express will double the automatic enrollment percentage in its plan. This is positive news for a pair of large corporate retirement plans as economy continues to reopen.

Source: 401kspecialistmag.com, July 2021

New Study Reveals the Impact Lay Fiduciaries Have on the Country's Fiscal Health

There are 17.5 million men and women who have the legal responsibility for managing the assets of pension plans, foundations, endowments, health and welfare plans, and personal trusts. These "lay fiduciaries" generally come from outside the financial services industry, usually don’t get paid for their fiduciary jobs, and have little, if any, training on what the law requires of them in managing more than $26.6 trillion of our investments.

Source: Businesswire.com, July 2021

IRS Now Requires an Employer Discretionary Match to Be "Definitely Determinable"

"Definitely Determinable" is one of those pre-ERISA concepts that are still applicable. It means that for a retirement plan to be considered "qualified," a participant's retirement benefit had to be determined following a stipulated formula that is not subject to the discretion of the employer. The purpose of which is, of course, to eliminate the possibility of benefits favoring the higher paid employees. It's long been required for defined benefit pension plans in which it's a straightforward matter. But what about those 401k plans?

Source: Retirementplanblog.com, July 2021

Is There Demand for Cryptocurrency in Retirement Portfolios?

Most people remain hesitant to invest in cryptocurrency in their DC plans, but a recent survey finds that there's a small "crypto-curious" contingent. With the increased attention of cryptocurrency, Stan Treger, a behavioral scientist at Morningstar, notes that analysts at the firm began to wonder if investors would welcome this asset into their retirement portfolios. As such, they posed this question as part of a larger, nationally representative survey of about 1,400 people conducted in May 2021.

Source: Napa-net.org, July 2021

As a Retirement Plan Provider, Think Differently

Becoming a retirement plan provider who is successful is all about getting "over" and there are plenty of tactics you can use that very few other plan providers are doing. This article is all about what you can do as a retirement plan provider that most of your competition isn't.

Source: Jdsupra.com, July 2021

How the 401k World Will Adapt as It Wakes Up After Long Pandemic

There will be vast differences, but the fundamentals of the business will be the same, as will the importance of strong relationships and brands.

Source: Investmentnews.com (registration may be required), July 2021

RIA Aggregators Drive Advisor Managed Accounts Adoption in 401ks

Cerulli analyzes mutual fund and exchange-traded fund product trends as of May 2021, discusses registered investment advisors' growing use of advisor-managed accounts, and explores what strategies providers can use to develop marketable retirement income products.

Source: Cerulli.com, July 2021


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