January 2021 Digest

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, 403(b) 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.

Use the SEARCH feature to located specific items from this digest and from our ARCHIVE.

Cybersecurity: A Plan Sponsor Obligation

A recently filed lawsuit against a trust company serving as a 401k plan trustee, the second of its kind in the last few months, highlights the need for plan sponsor diligence in protecting participant data and accounts in an increasingly electronic world.

Source: Spotlightonbenefits.com, January 2021*

Survey Finds Limited Use of Alternative and ESG Investments in DC Plans

New research from PGIM, conducted by Greenwich Associates, found that despite having the ability to bring more sophisticated investment options to plan participants at institutional pricing, most DC plan sponsors have chosen not to do so.

Source: Plansponsor.com, January 2021

Defending Against Excessive Fee Cases: It's All About Procedure

There has been a surge of excessive fee lawsuits filed against plan sponsors in recent years. But there are strategies retirement plan sponsors and their attorneys can take to defend themselves, Carol Buckmann, ERISA attorney and founding partner of Cohen & Buckmann. "Even if a trial progresses, there are a lot of effective arguments that fiduciaries can make," Buckmann says.

Source: Plansponsor.com, January 2021

How Much Did the CARES Act Impact Retirement Savings?

At the time of its passage, many in the retirement industry were concerned that the CARES Act would "open the floodgates" to a large percentage of workers cashing out years of retirement savings. Fortunately, that did not happen. A Vanguard analysis shows that a modest portion of workers did access their retirement savings in 2020, but that the vast majority of participants "remained steadfast on their retirement journey."

Source: Napa-net.org, January 2021

2021 401k Catch Up Contribution Rules

When you turn 50, you become eligible to put aside more tax-shielded money into your 401k plan. The tax deduction for a catch-up contribution can save you more than $1,000 on your annual IRS bill. On top of that, you'll be earning investment returns and compounding interest on the additional money saved.

Source: Myubiquity.com, January 2021

2021 Could See More Retirement and Health Legislation

There is optimism that one or more savings-focused bills could be enacted in 2021. Several introduced during the past two years will likely be re-introduced in the 117th Congress.

Source: Futureplan.com, January 2021

The Impact of 2020 on Retirement

Without a doubt, 2020 was a historic year of turbulent and unprecedented change. Within the past year, the world has dealt with a global public health crisis, devastating environmental disasters, severe economic fallouts, and civic unrest. Everything about our lives has been affected, even retirement. This infographic explores how retirement has been impacted by 2020.

Source: Fidelity.com, January 2021

In Rehire Mode? Keep March 31, 2021 in Mind for Your 401k Plan

If your business is one of the many that reduced employees in the early days of the COVID-19 pandemic, you need to keep March 31, 2021, marked on your calendar, particularly if you are fortunate enough to be ramping up activity and adding workers back to your payroll.

Source: Eforerisa.wordpress.com, January 2021

New Guidance for 401k Plans on Missing Participants

The DOL issued official guidance on locating missing participants in retirement plans, including 401k plans. The guidance appears in three separate documents: (i) "Best Practices for Pension Plans"; (ii) "Compliance Assistance Release 2021-01"; and (iii) "Field Assistance Bulletin 2021-01." This latest guidance expands upon and updates previous DOL guidance, and is separate from guidance issued previously by the IRS on the same topic.

Source: Compliancedashboard.net, January 2021

Post-CARES Act: A Checklist for Retirement Plan Sponsors

At this point in early 2021, the loan and distribution provisions of the CARES Act have not been extended. This means that these provisions expired on or before December 31, 2020. Plan sponsors should ensure that any CARES Act provisions added to their retirement plans are administered in accordance with this expiration date.

Source: Cammackretirement.com, January 2021

What to Do If You Borrowed Money From Your 401k in 2020

If you are one of the Americans who took out a 401k loan, you might be wondering what the next steps are. Here's a brief overview of the things you should be aware of regarding your loan, along with a few tips on what to avoid.

Source: Yahoo.com, January 2021

Rep. Neal Releases Policy Priorities for Equity in Retirement Security

House Ways and Means Committee Chairman Richard Neal has laid out his party's vision for economic equity in health care and retirement. In a letter included in his Policies and Priorities report, Neal says one of their priorities is increasing retirement security for U.S. workers, which would be achieved by policies strengthening Social Security benefits, growing multiple employer plan participation, and mandating automatic enrollment for 401k plans.

Source: Plansponsor.com, January 2021

DOL Objects to Terms of Excessive Fee Settlement

The DOL has called "foul" on the terms of a proposed excessive fee litigation settlement involving DST Systems' 401k plan. The move comes following three class action settlements filed Jan. 8 in a federal district court by DST, investment manager Ruane, Cunniff & Goldfarb, and the former CEO of Ruane, in which the defendants agreed to pay nearly $80 million to settle claims made by participant-plaintiffs in the DST 401k profit-sharing plan.

Source: Napa-net.org, January 2021

The Problems and Perils in Changing Your 401k TPA

This article is all about the TPA change, which involves a conversion process that can start a whole host of problems for you as a plan sponsor.

Source: Jdsupra.com, January 2021

2021 403b Retirement Plan Compliance Calendar

This plan compliance calendar for 2021 highlights critical compliance deadlines for 403b retirement plans. While all major dates are covered, some may only apply to particular plan types (and are noted accordingly) and there may be additional deadlines for specific plans that are not covered here. Plans with non-calendar plan years may be subject to different deadlines.

Source: Cammackretirement.com, January 2021

DOL Tips to Address Missing Participants

Aside from the challenges missing participants present for plan sponsors, it is also one of heightened focus for DOL. As a point of emphasis in their retirement plan investigations, it is understandable why retirement plan sponsors desire to minimize the number of missing participants. On January 12, 2021, the DOL released guidance on locating missing participants, expanding on past guidance that mostly focused on enforcement.

Source: Cammackretirement.com, January 2021

Four Big Trends for Retirement Plan Advisors in 2021

Pooled employer plans and the changes they will bring to the industry will lead many of the trends retirement advisors face in 2021, according to a panel of industry experts.

Source: 401kspecialistmag.com, January 2021

403b Plan Investment Lineups Have Changed

Annuities were the only investment type 403b plans were allowed to use before the passage of ERISA. ERISA added custodial accounts, i.e., mutual funds, as permissible investments. Since regulations were passed in 2007, mutual funds have been embraced more by 403b plan sponsors and participants, and mutual fund fees have decreased.

Source: Plansponsor.com, January 2021

Avoiding Retirement Plan Operational Errors

Understanding the plan document, establishing a plan administrative policy, having good service providers and doing regular checks can help plan sponsors avoid operational errors.

Source: Plansponsor.com, January 2021

Four-Fifths of Large ERISA 403b Plans Had Employer Contributions

Four-fifths of large 403b plans subject to ERISA had employer contributions and nearly three-quarters of large ERISA 403b plan participants were in plans that offered employer contributions in 2017, according to a joint research study released today by BrightScope and the Investment Company Institute. The study examines 403b retirement plan design and investment lineups.

Source: Ici.org, January 2021

DOL Releases Guidance on Addressing the Missing Participant Problem

The DOL issued two pieces of helpful guidance, (i) outlining best practices for dealing with missing participants and (ii) explaining EBSA's processes concerning its Terminated Vested Participants Project audit program. The DOL also issued Field Assistance Bulletin 2021-01 on the use of the PBGC Missing Participant Program by terminating defined contribution plans, which is addressed in a separate blog post.

Source: Erisapracticecenter.com, January 2021

DOL Fiduciary Rule 3.0, How Long Will It Last?

The Labor Department's new rule provides an exemptive solution for fiduciaries to provide investment advice to ERISA plans and IRAs notwithstanding conflicted interests. Eversheds Sutherland attorneys explain that the rule faces obstacles from the Biden administration.

Source: Bloomberglaw.com, January 2021

How to SECURE Your Safe Harbor Plan

The IRS issued Notice 2020-86, which guides the rules that apply to safe harbor plans that were changed by the SECURE Act. The guidance covers the increase in automatic contributions permitted under a qualified automatic contribution arrangement safe harbor plan, safe harbor notice requirement changes, and issues related to the retroactive adoption of safe harbor status.

Source: Beneficiallyyours.com, January 2021

IRS Signals Compatibility of Pre-Approved Plan Documents and PEPs

The IRS in its January 20, 2021 edition of Employee Plans News has revealed that pre-approved qualified retirement plan documents may be used to establish arrangements known as pooled employer plans, or PEPs.

Source: Ascensus.com, January 2021

2021 Hot Topics in Retirement and Financial Wellbeing

In early 2020, few people could have predicted that COVID-19 would have the everlasting societal impact that it has. Fortunately, despite market pressures, many employers remained steadfastly committed to helping their workers save and plan for retirement. This 32-page report shares the latest trends and changes in employer-sponsored defined benefit and defined contribution plans.

Source: Alight.com, January 2021

What Labor Nominee Walsh Means for the Fiduciary Rule's Future

President Biden named Boston Mayor Martin Walsh as his nominee for Secretary of Labor. Walsh's nomination raises questions for the future of the DOL's fiduciary rule, which regulates investment fiduciaries under ERISA. In particular, the new fiduciary rule guidelines promulgated by the DOL in December 2020 appear to be in jeopardy under a Biden administration with Walsh as Labor Secretary.

Source: 401kspecialistmag.com, January 2021

Mercedes-Benz Participants Steer 401k Complaint Into Court

Participants in a 401k plan run by Mercedes-Benz U.S. International sued the company and its fiduciaries, alleging violations of their duties under ERISA. "Failures by ERISA fiduciaries to monitor costs for reasonableness have stark consequences for retirees," said the complaint filed Jan. 19 in a U.S. District Court in Tuscaloosa, Ala.

Source: Pionline.com, January 2021*

ERISA Breaches Cited in Takeda 401k Plan Suit

Three 401k plan participants filed suit against Takeda Pharmaceuticals alleging the company, its executive compensation committee, and officials mismanaged the investment options in the plan. The suit, filed in U.S. District Court in Boston, said the company and other defendants violated the ERISA by utilizing a target-date fund lineup that underperformed compared to comparable target-date funds.

Source: Pionline.com, January 2021

Dealing With Missing Participants in Terminating Puerto Rico 401k Plans

For a host of legal and practical reasons, the only feasible alternative for disposing of the accounts of missing participants in a terminating 401k or other defined contribution retirement plan qualified only in Puerto Rico is, after making reasonable efforts to locate the missing participants, depositing with the proper state unclaimed property fund(s) the retirement money of those participants who cannot be located.

Source: Ogletree.com, January 2021

Unlocking the Process: Guide to ERISA Individual Prohibited Transaction Exemptions

Congress granted authority to the DOL to grant individual or class prohibited transaction exemptions. From 1996-2020, the DOL granted more than 1,200 individual exemptions from the ERISA prohibited transaction rules. This guide summarizes and collects individual prohibited transaction exemption practices during this period.

Source: Eversheds-Sutherland.com, January 2021

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

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

Source: Wagnerlawgroup.com, January 2021

DOL's Proxy Voting Regs Confirm Fiduciaries Need Not Vote on Every Proxy Proposal

This new rule will likely be reviewed by the Biden administration but it generally becomes effective prior to the inauguration, on January 15, 2021. The DOL could choose to follow a non-enforcement policy for the regulation but any formal changes to the rule must be preceded by the normal notice and comment procedures. As with other DOL regulatory actions taken in the closing months of the Trump administration, we will monitor events to see if a non-enforcement policy is put in place.

Source: Wagnerlawgroup.com, January 2021

Yellen Offers Support for Retirement Security Reforms

President-elect Biden's Treasury Secretary nominee Janet Yellen appeared before the Senate Finance Committee on February 19, fielding questions on the economy, taxes, and debt, as well as her views on various retirement security issues. Yellen is widely expected to be confirmed by the Senate, perhaps as soon as this week, so the hearing was, in large part, more of a formality, but the former Federal Reserve chair and Treasury nominee did share some important insights.

Source: Napa-net.org, January 2021

Biden to Order ESG Rule Review

President Biden will sign executive orders today that will, among other things, press for a review of the Labor Department's recent ruling on ESG investments. The widely anticipated executive orders -- more than a dozen -- are said to direct nearly 100 agency actions aimed at unraveling President Trump's environmental policies.

Source: Napa-net.org, January 2021

401k Sponsors in the Dark About Cognitive Decline

Last month, a Department of Labor advisory council compiled a wealth of testimony on the challenges that plan sponsors, advisers, recordkeepers and others face in identifying retirement savers' cognitive decline and what options they have when they suspect it. The report included several recommendations for the regulator.

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

Retirement Plan Provisions in the Consolidated Appropriations Act of 2021

On December 21, 2020, Congress passed the Consolidated Appropriations Act of 2021, a spending bill that combines $900 billion in stimulus relief for the COVID-19 pandemic with a $1.4 trillion omnibus spending bill for the 2021 federal fiscal year. This is a review of the key retirement-related provisions of the Act.

Source: Icemiller.com, January 2021

Missing Retirement Plan Participants? The DOL Says You Should Follow These Best Practices

In response to ongoing pleas for guidance, the DOL has published an informal outline expressing its views on how retirement plan administrators should be addressing missing or unresponsive participants. Through contrasting lists of "red flags" and "best practices," the publication reveals the DOL's expectations of plan administrators and provides helpful guideposts for them to follow. This article provides a summary of the publication, as well as tips for plan administrators to maintain, in the words of the DOL, a "well-run plan" with respect to missing and unresponsive participants.

Source: Bradley.com, January 2021

Retirement Plan Relief in Consolidated Appropriations Act, 2021

The Consolidated Appropriations Act, 2021 combines COVID-19 stimulus relief with several year-end appropriations bills, and it includes numerous provisions that will impact retirement plans. The retirement plan relief provisions in the CAA are divided between (1) qualified disaster relief (including actions Congress has historically taken to relax normal retirement plan distribution and withdrawal rules in light of a natural disaster) and (2) separate COVID-19 relief (including new rules for retirement plans in light of the ongoing COVID-19 pandemic).

Source: Truckerhuss.com, January 2021

New DOL Guidance on Missing Participants in Retirement Plans

Investigations of missing retirement plan participants have been a major component of the DOL's plan audit program for many years. For most of that time, plan sponsors have been requesting that the DOL clarify what procedures and information it is looking for and that there be regional consistency.

Source: Segalco.com, January 2021

Where Cybersecurity and Fiduciary Responsibility Meet

It's rare to go a day without seeing a headline about a data breach, fraud, ID theft, or some other cybersecurity issue occurring. As a plan sponsor, you need to make sure the vendors and providers that have access to your employees' data and workplace accounts are safeguarded against data breaches and hackers. You must vet your providers and ensure that they have strict controls in place to protect employees.

Source: Schneiderdowns.com, January 2021

Dueling Dismissal Motions Denied in BlackRock Self-Dealing Lawsuit

A new ruling has been issued by the U.S. District Court for the Northern District of California in an ERISA lawsuit involving BlackRock. Underlying the lawsuit are allegations that BlackRock engaged in self-dealing within its retirement plan. The complaint suggests plan fiduciaries selected and retained high-cost and poor-performing investment options with "excessive layers of hidden fees that are not included in the fund expense ratios."

Source: Planadviser.com, January 2021

Retirement Plan Trustee Faces Cybersecurity-Related Lawsuit

A plan sponsor is suing the trustee for its 401k plan for breaches of fiduciary duties related to a fraudulent distribution from a participant's account made in 2020. American Trust is the trustee for the Mandli Communications 401k Plan and Trust. One of the services it provides to the plan is reviewing and approving all distributions from the plan.

Source: Planadviser.com, January 2021

Court Filing Details $13M UPenn 403b Lawsuit Settlement

A new court filing in the U.S. District Court for the Eastern District of Pennsylvania describes the terms of a settlement reached between the University of Pennsylvania and plaintiffs in a long-running and complex ERISA fiduciary breach lawsuit.

Source: Planadviser.com, January 2021

Recordkeeper Consolidation May Be Coming, But Don't Squeeze the Participant

George and Abigail Revoir of AMRev Consulting, writing in the November 4th, 2020 edition of RPA Convergence opine on recordkeeper consolidation and the ever-widening gap between mega and midsize providers. No question there is revenue pressure in our business, but one comment in their otherwise satisfactory analysis of this trend stopped us in our tracks. The end game, says the Revoirs, is to "monetize the participants."

Source: Nwpsbenefits.com, January 2021

401k Participants Endured 2020 Roller Coaster

It was an up-and-down year for the markets, rewarding those who stood pat, but it appears that some 401k plan participants broke the cardinal rule about selling low and buying high. According to Alight Solutions, 401k investors in 2020 were busy traders out of equities as stocks were falling and slowly returned to them after their rebound.

Source: Napa-net.org, January 2021

Beware Asset-Based Fees on Your Retirement Assets

Saving and investing receive plenty of attention, but in a recent article published by the Star Tribune, Francis Investment Counsel's Mike Francis summarizes how controlling fees can also positively impact retirement assets.

Source: Francisinvco.com, January 2021

When Can 401k Fiduciaries Get Excessive Fee Suits Dismissed? Anatomy of Two Recent Wins

Fiduciaries are wondering if it is ever possible to avoid a trial or extensive discovery if they are sued. Sometimes it is, as two recent federal district court decisions have shown. One was dismissed with prejudice, which means that the plaintiffs can't refile and bring the claims again. These decisions may provide a template for further dismissals of cases filed based on conclusory allegations and speculation rather than the actual conduct of the defendants.

Source: Cohenbuckmann.com, January 2021

BlackRock 401k Plan Class Action Headed for Trial

A class action alleging that BlackRock entities favored their proprietary funds when selecting investment options for BlackRock's 401k Plan is headed for trial after Judge Haywood S. Gilliam, Jr. denied both parties' motions for summary judgment. BlackRock sought summary judgment on Plaintiffs' claims for breaches of fiduciary duty. The court denied the motion for several reasons.

Source: Benefitslawadvisor.com, January 2021

Fake 401k Distribution Request Triggers Suit

A new case of 401k theft has led to a lawsuit by the participant, and the plan, against a provider. The suit alleges that on Feb. 14, 2020, "American Trust made an unauthorized distribution in the total amount of $124,105 from Mr. Mandli's Plan account in response to a request for a distribution from an unknown third party."

Source: Asppa.org, January 2021

DOL Guidance to Aid Retirement Plans Facing Missing Participant Issues

The DOL has released a three-part guidance package to assist retirement plan fiduciaries in dealing with issues of missing or unresponsive participants. These issues typically involve terminated participants who have vested benefits remaining in an employer-sponsored plan, or terminating or abandoned plans. The guidance package consists of several components.

Source: Ascensus.com, January 2021

SDBAs Among 2021 Benefits Trends: Fidelity

More than 20% of workplace savings plans offer an SDBA along with their other benefits, according to Fidelity internal data. The number of employers that offer self-directed brokerage accounts is up three times over 2010, the company said.

Source: 401kspecialistmag.com, January 2021

Tips to Prepare for Your Upcoming 401k Plan Audit: From the Auditor Perspective

Audit request lists will soon be going out to Plan Sponsors to confirm audit dates and information request dates. While the receipt of these request lists can cause blood pressure to rise at the plan sponsor, there are some simple tasks the plan sponsor can perform to prepare for the annual audit of their 401k plan, and make the audit process smoother. Whether you are a plan sponsor, TPA, or advisor, here are some tips which will help to make the audit process go smoother for all parties involved.

Source: Linkedin.com, January 2021*

DOL Issues Missing Participants Guidance

On January 12, 2021, the DOL issued three pieces of guidance detailing the DOL's view of what steps plan fiduciaries should take to locate and distribute retirement benefits to missing or non-responsive participants. The guidance is largely consistent with positions taken by DOL in investigations.

Source: Groom.com, January 2021

Love Hurts: Have Your QDRO Procedures at the Ready

Retirement Plans should ensure they are ready in case the pandemic also leads to an increase in QDROs. Qualified plans that are subject to ERISA are required to have written QDRO procedures to determine whether a domestic relations order submitted to the plan meets the requirements for approval as a QDRO.

Source: Employeebenefitslawblog.com, January 2021

Best Practices for ERISA Plan Fiduciary Governance

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

Source: Winston.com, January 2021

SECURE Act Guidance for 401k Plan Sponsors to Remember in the New Year

The IRS continues to provide important guidance for 401k plan sponsors regarding the Setting Every Community Up for Retirement Enhancement Act of 2019. Most immediately impactful is additional guidance concerning long-term, part-time employee eligibility for 401k plans and qualified birth and adoption distributions from 401k plans.

Source: Thompsonhine.com, January 2021

COVID Pressured a Few Employers to Suspend Their 401k Match

Data suggest that less than 1% of plan sponsors (with more than 100 participants) covering 1.6% of plan participants have suspended the match. A similar calculation for the Great Recession in 2008-2009 showed 5% of participants saw their employer’s match suspended. The conclusion seemed to be that companies were not affected by the pandemic, did not experience liquidity pressures, and saw no need to suspend the employer match.

Source: Marketwatch.com, January 2021

Households Are Plundering 401ks to Survive the Covid-19 Crisis

Large numbers of American households were forced to plunder their retirement accounts to make ends meet during the last year, even as the federal government plunged trillions of extra taxpayers' dollars into the economy to keep it afloat. And that grim news is going to add to the looming retirement crisis already faced by tens of millions.

Source: Marketwatch.com, January 2021

When You Have to Tailor Your 401k Plan

When it comes to 401k plans, most plan sponsors forget to realize that the plan should be perfectly tailored to fit their needs. And those needs change from time to time. This article is all about how you need to make sure that the 401k plan is tailored to your needs as a plan sponsor and employer.

Source: Jdsupra.com, January 2021

2021 Appropriations Bill Includes New and Expanded Relief for Employee Benefit Plans

The Consolidated Appropriations Act, 2021 was passed and signed into law in late December 2020. In addition to funding for the current fiscal year, the Act also includes numerous provisions addressing employee benefit plans and providing a range of relief provisions relating to the COVID-19 pandemic and other disasters. While many of these changes are new, some of them extend or add on to previous legislation issued earlier in 2020 under the CARES Act. This article describes the key provisions of the Act applicable to employer-sponsored welfare and retirement plans.

Source: Huntonak.com, January 2021

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

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

Source: Dechert.com, January 2021

Amending Your 403b Plan for Updated Hardship Withdrawal Regs

A guide to what 403b plan sponsors need to know about upcoming plan amendments for IRS final hardship withdrawal regulations, CARES Act, and SECURE Act. Five key takeaways for 403b plan sponsors.

Source: Voya.com, January 2021

The Emerging Patchwork of Fiduciary Investment Advice Regulation: Putting the Pieces Together

Many fiduciary and best interest investment advice regulations advanced at both the federal and state levels last year. As we begin 2021, firms subject to these regulations face challenges in dealing with rules that impose a host of new obligations, and that at times overlap and conflict with one another. This chart is intended to help firms take stock of the evolving framework and aid firms in putting the pieces together.

Source: Eversheds-sutherland.com, January 2021

Missing Participants: Best Practices for Pension Plans

This DOL document outlines best practices that the fiduciaries of defined benefit and defined contribution plans, such as 401k plans, can follow to ensure that plan participants and beneficiaries receive promised benefits when they reach retirement age.

Source: Dol.gov, January 2021

DOL's Fiduciary Interpretation and Exemption: Impact on Rollover Recommendations

Since the effective date for the exemption is after the inauguration of the Biden administration, it is almost certain that the effective date will be further delayed. During that delay, we think it is likely the exemption will be revised or possibly withdrawn. But, it is just as likely that the expanded definition of fiduciary advice for rollover recommendations will be retained and possibly expanded. That could make life more difficult for broker-dealers, investment advisers, and insurance companies. While these rules will affect all of those industries, this article focuses on the impact of the likely outcomes on broker-dealers.

Source: Brokerdealerlawblog.com, January 2021

Barriers to In-Plan Retirement Income Adoption

Annuities have been part of successful individual retirement income strategies for a long time. But the adoption of income solutions has eluded the institutional market for decades. This is because the design of these first-generation income solutions has been fundamentally flawed, creating six barriers to adoption.

Source: 401kspecialistmag.com, January 2021

DOL's Rule on Investment Duties of ERISA Fiduciaries and Its Impact on Retirement Plan ESG Investing

The DOL adopted the final rule amending the investment duties regulation which governs the obligations of ERISA fiduciaries when selecting investments for ERISA plans. Although the final rule does not mention ESG investing, it is clearly intended to govern the use of ESG investments in ERISA plans. This article covers the final rule's impact on retirement plan ESG investing.

Source: Workforcebulletin.com, January 2021

Form 5500: The Body Language of ERISA Compliance

Last month, the DOL, the IRS, and the PBGC released advance copies of the 2020 Form 5500 Series. When filed, they will join those of prior years' morphing into the body language of ERISA compliance. Here's how.

Source: Retirementplanblog.com, January 2021

The Mechanics of Moving to a PEP

The goal of the provisions of the SECURE Act that created pooled employer plans was to encourage employers that didn't have retirement plans for employees to offer one. But employers that already sponsor a plan may also decide a PEP is a better choice for them and their participants. With a lack of regulatory guidance, plan sponsors can rely on certain existing rules to know the steps to take if they decide to move from a single-employer plan to a pooled employer plan.

Source: Plansponsor.com, January 2021

Vail Resorts Wins Dismissal of ERISA Fiduciary Breach Lawsuit

A new ruling out of the U.S. District Court for the District of Colorado grants the dismissal motion filed by the defense in an ERISA lawsuit known as Kurtz v. Vail Corp. The underlying lawsuit accuses the Vail Corp. of permitting excessive fees in the Vail Resorts 401k Retirement Plan.

Source: Planadviser.com, January 2021

401k Plan Administrator Sues VALIC Over Surrender Fees Charged to Plan

The administrator of the D.L. Markham, DDS, MSD, INC. 401k Plan has filed a lawsuit against the Variable Annuity Life Insurance Co. over fees he says were improperly withheld from plan assets. The insurer is charged with engaging in a prohibited transaction under ERISA when the fees were charged during a move to a new provider, as well as with self-dealing.

Source: Planadviser.com, January 2021

DST Systems Settles Lawsuit Over Risky Retirement Plan Investment

The lawsuit said the DST Systems Inc. profit sharing and 401k plans were invested too much in Valeant Pharmaceuticals. A settlement amount of $27 million to be paid by DST Systems was reached.

Source: Planadviser.com, January 2021

Temporary Enforcement Policy Regarding the Participation of Terminating DC Plans in the PBGC Missing Participants Program

This Field Assistance Bulletin No. 2021-01 announces a temporary enforcement policy regarding the transfer of a missing or non-responsive participant's account balance in a terminating or abandoned individual account plan to the Pension Benefit Guaranty Corporation.

Source: Dol.gov, January 2021

The Saver's Credit - 2021

This is a description of the Saver's Credit, updated for 2021, with a question and answer explanation intended for employers and employees who want to know all the related details. Also, a two-page notice to explain the rules to employees.

Source: Consultrms.com, January 2021

Vail 401k Lawsuit Dismissed

Vail Resorts on Wednesday won dismissal of a lawsuit over the Colorado-based skiing company's 401k plan. The plaintiff failed to raise issues with the company's process of selecting and monitoring funds, a judge wrote.

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

IRS Rev. Proc. 2021-4 Updates the Determination Letter Program

The Internal Revenue Service (IRS) issued Revenue Procedure 2021-4, which makes several changes to the determination letter program and Voluntary Correction Program fees.

Source: Westlaw.com, January 2021

Annual Plan Deadlines for the Plan Year Ending December 31, 2021

This 7-page chart explains key plan events and the deadline for each for Section 401(a) and 401k defined contribution plans with a plan year ending December 31, 2021. Off-calendar year plans should adjust the deadlines accordingly based on the time frames described in the chart. The chart is intended as a tool to assist employers with monitoring the key annual plan requirements.

Source: Voya.com, January 2021

Appropriations Act Includes Several Provisions Applicable to Qualified Retirement Plans

The Consolidated Appropriations Act of 2021 includes several provisions affecting qualified retirement plans. A relaxation of the partial plan termination rules should provide relief to plans which see unusual turnover in the number of active participants during the COVID-19 pandemic. Other provisions, including an amendment of the CARES Act which allows coronavirus related distributions to be made from money purchase pension plans, may provide retroactive relief to plan sponsors.

Source: Reinhartlaw.com, January 2021

DOL Issues Final Investment Advice Prohibited Transaction Exemption

Under the PTE, plan fiduciaries are required to meet impartial conduct standards, provide certain disclosures, conduct annual reviews, maintain policies and procedures, and keep records. However, the PTE relaxes proposed restrictions on fiduciary compensation to allow fiduciaries to be compensated for advice to rollover assets from retirement plans to individual retirement accounts and engage in transactions that previously were not permitted.

Source: Icemiller.com, January 2021

Value Taking Centre Stage When It Comes to DC Investment Fees

Anyone flipping through a prospectus for an employer's DC pension plan or group registered retirement savings plan will notice a recurring theme when it comes to statements on investment fees: "Better than retail!" they might as well scream. It's a familiar refrain from both capital accumulation plan sponsors and providers trumpeting the lower rates available with group offerings, but it doesn't do much for Michelle Loder, a partner in DC solutions at Morneau Shepell Ltd. "It's a very low bar to clear," she says. "There's not much cause for celebration when you realize that Canada is one of the worst places in the world for retail investment fees."

Source: Benefitscanada.com, January 2021

Why Should Taking a Hardship Distribution Be a Hardship?

Self-certification facilitates automation of the hardship approval by the recordkeeper. However, electronic approval of hardship distribution requests through the plan website is not always the default. Thus, there continue to be instances in which neither backup nor compliant self-certifications were obtained for hardship distributions. Unfortunately, self-certification does not mean that an email or a phone call from the participant is sufficient.

Source: Belfint.com, January 2021

Senate Tilt Portends Big Policy Shifts

The election of the two Georgia Senate Democratic candidates and the resulting shift in control of the U.S. Senate could have profound implications for President-elect Joe Biden's policy agenda, including retirement plans.

Source: Asppa.org, January 2021

3(38) Advisor in 2021

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

Source: Alliant401k.com, January 2021

Partial Employee Benefit Plan Terminations

The AICPA Employee Benefit Plan Audit Quality Center has prepared this 18-page advisory to provide plan sponsors, administrators, or trustees with an understanding of partial plan terminations under ERISA and your related responsibilities. As a plan fiduciary, you are subject to certain responsibilities, such as following the plan document and prudently carrying out your responsibilities.

Source: Aicpa.org, January 2021

Americans Need to Change Their Retirement Trajectory

There is a problem with the difference between Americans' current retirement trajectory and where they want to be when they actually get there. A new report from digital financial wellness platform Savology on the current state of personal finance in the U.S. shows Americans need to make changes to achieve the retirement they expect.

Source: 401kspecialistmag.com, January 2021

Poll Finds 60% Raided Retirement Accounts During Pandemic

While we've often seen studies showing that people have largely refrained from raiding their 401ks to help cover expenses during the COVID-19 pandemic, every now and then we hear differently. According to a new poll released Jan. 6, nearly 60% of Americans withdrew or borrowed money from an IRA or 401k during the pandemic, and nearly two-thirds (63%) used those retirement savings to cover basic living expenses.

Source: 401kspecialistmag.com, January 2021

Benefits-Plan Sponsors Face a Tough Year on Compliance

The pandemic, remote work, and changing needs have created unique and novel challenges that have necessarily dominated employer attention in the past nine months. The pandemic hasn't affected, however, the constant drum of change to employee benefit plan requirements. Here are some things for plan sponsors to look out for this year.

Source: Wagnerlawgroup.com, January 2021

Allstate Faces Additional ERISA Fiduciary Breach Lawsuit

A new complaint filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, accuses Allstate of various breaches of fiduciary duty and prohibited transactions under ERISA. A new complaint echoes allegations leveled against the insurance company in a complaint from November.

Source: Planadviser.com, January 2021

Plaintiffs Claim Fiduciary Breach in Recent Retirement Plan Class Action

Nestle USA and its board of directors have been served with an ERISA class action on behalf of 401k plan participants and their beneficiaries. The suit alleges that Nestle and its representatives failed to monitor fees or act to reduce expenses passed along to plan participants. Plaintiffs claim fiduciary breach while acknowledging insufficient data to determine reasonable fee levels.

Source: Hallbenefitslaw.com, January 2021

Retirement Fiduciary Calendar for 2021

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

Source: Tri-ad.com, January 2021

Qualified Retirement Plan Relief in the Consolidated Appropriations Act of 2021

The Consolidated Appropriations Act of 2021 contains various relief provisions applicable to qualified retirement plans. This article summarizes provisions in the Act, including the temporary rule preventing partial plan terminations, coronavirus-related distributions, and qualified disaster distribution and loan relief provisions.

Source: Shermanhoward.com, January 2021

Analysis Shows Participant Fees Higher in Plans With Revenue Sharing

Mutual funds that pay revenue sharing to recordkeepers of DC plans are more likely to be added to plan investment menus and are less likely to be deleted from them, according to researchers from Vanderbilt University; the University of Texas at Austin, and the National Bureau of Economic Research; and the Board of Governors of the Federal Reserve System. In a paper, the researchers also noted that Investment Company Institute data shows that in 2018, mutual funds managed more than 60% of the $5.2 trillion invested in 401k plans.

Source: Planadviser.com, January 2021

When You May Have to Fire Your 401k Advisor

For most 401k plan sponsors, it's the financial advisor that serves as their ombudsman. When things aren't going so well it is often the result of the financial advisor not doing their job competently. This article is about situations where, as a plan sponsor, you may have to fire your financial advisor.

Source: Jdsupra.com, January 2021

The Risks Recordkeepers See With PEPs

The forthcoming plans present challenges and opportunities. Retirement plan recordkeepers see some promise in pooled employer plans, but they also anticipate even more risk to their businesses, regardless of whether they provide them.

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

Employers Beware! Retirement Plan Disclosures Are Required Under 408(b)(2)

To fulfill their fiduciary obligations, plan sponsors need to ensure that service providers subject to 408(b)(2) rules satisfy their disclosure requirements under ERISA. If a service provider fails to meet their reporting requirements under 408(b)(2), the plan sponsor is required to act by sending the service provider a written request for compliance.

Source: Hallbenefitslaw.com, January 2021

2020 ERISA Litigation Trends Hint at What's Ahead This Year

By any measure, 2020 was a record-setting year for litigation under the Employee Retirement Income Security Act. The U.S. Supreme Court issued four ERISA decisions, more than it has issued in a single year in the 45-year history of the statute. And just over 200 new ERISA class actions were filed, a record that represents an 80% increase over the number of ERISA class actions filed in 2019 and more than double the number filed in 2018. This trend shows no sign of slowing down, with important developing issues related to fee and performance litigation for smaller retirement plans, COBRA notices, arbitration clauses and class action waivers, actuarial assumptions, cyber theft, and employee stock ownership plans, or ESOPs.

Source: Groom.com, January 2021

Comparing Seven Defined Contribution Plan Designs - 2021

Here is an example showing the results of comparing seven plans for a small business. The owner was willing to spend on staff an amount equal to 5.0% of their total combined payroll. In this case, a cross-tested plan with 401k safe-harbor features was the best design. The results show the differences that can be obtained from various plan designs. The best design for any given situation will vary depending on employee ages and salaries, as well as company objectives.

Source: Consultrms.com, January 2021

Year-End Stimulus Bill Effectively Extends Key Cares Act 401k Provisions

On December 27, 2020, President Trump signed the Consolidated Appropriations Act of 2021, which includes the much-heralded coronavirus stimulus package that has been the subject of intense negotiations in recent months. For 401k plans, the Stimulus Act's provisions in many ways replace or extend similar provisions that were contained in the CARES Act.

Source: Compliancedashboard.net, January 2021

Retirement Plan Provisions in the New COVID-19 Relief Acts

The recently enacted COVID-19 Related Tax Relief Act of 2020 and the Taxpayer Certainty and Disaster Tax Relief Act of 2020, both of which are part of the "Consolidated Appropriations Act, 2021," includes the following provisions that expand and extend changes intended to provide relief to retirement plan sponsors and participants affected by the COVID-19 pandemic and other disasters.

Source: Bradley.com, January 2021

Partial Plan Termination Relief Explained

There is a lot to unpack in the recently passed COVID relief legislation, but the most significant element for plan sponsors impacted by the COVID-19 pandemic may well be the temporary rule preventing partial plan termination. Here's what it means for you and your plan sponsor clients.

Source: Asppa.org, January 2021

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