March 2024 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.

Majority of Plan Sponsors Concerned Future Retirees Will Run Out of Money in Retirement

In 2024, more Americans are reaching the traditional retirement age of 65 in the same year than at any time in history, creating more than 4 million potential new retirees this year alone. While the U.S. faces this significant milestone, findings from a recent MetLife poll show a vast majority (91%) of plan sponsors are concerned that their future retirees will run out of money in retirement. When asked about what percentage of future retirees will run out of money in retirement, 83% of plan sponsors believe more than 1 in 4 retirees will deplete their retirement savings prematurely.

Source: Metlife.com, March 2024

ESG in 401k Plans in the Wake of Spence v. American Airlines, Inc.

Whether investment decisions for pension, 401k, and other plans covered by ERISA should be influenced by environmental, social, and governance factors has become a flashpoint, and, unlike most ERISA issues, the controversy extends into the political arena. The recent opinion of a federal district court denying a motion to dismiss claims that ESG factors were improperly applied for 401k plan investments shows that ESG can bring risk to fiduciaries, even if they are not pursuing ESG strategies.

Source: Ktslaw.com, March 2024

Retirement Plans: What Categories of Employees May be Excluded?

The law firm Verrill Dana is often asked about the permissibility of excluding certain categories of employees from participating in an employer's tax-qualified retirement plan. Their response here provides a high-level summary of what is and is not permitted.

Source: Verrill-law.com, March 2024

Action Steps an Employer Can Take to Support Gen Z in Saving

Generation Z is looking ahead and shows a healthy regard and respect for their financial future, long-term. Studies show that they have a strong interest in financial literacy, saving, and employer-provided retirement benefits. Members of Gen Z also expect to spend 30 years in retirement, according to the Transamerica Institute. At the same time, Transamerica also says that a majority -- 57% -- of the members of Gen Z they studied agree that they need to save more for retirement. So what should employers do with that information?

Source: Ntsa-net.org, March 2024

AllianceBernstein 401k Lawsuit Booted

The US District Court for the Southern District of New York dismissed the plaintiffs' claims without prejudice, meaning that they can file an amended complaint to address the legal shortcomings within 30 days. The lawsuit, which was filed in 2022, failed to show that the asset manager could have breached its duties of prudence and loyalty, and it did not successfully allege any prohibited transactions, the court stated.

Source: Investmentnews.com, March 2024

Defense Contractor L3Harris Settles ERISA Class Action

A Florida district court judge has administratively closed an ERISA class action lawsuit against defense contractor L3Harris after the parties settled following mediation, subject to court approval of class counsel's motion for preliminary settlement approval, to be filed within 60 days.

Source: Hallbenefitslaw.com, March 2024

Several New Reasons Employers Should Self-Audit Retirement Plans

Employee benefit plans must be reviewed regularly to determine whether there are compliance errors that need to be corrected before there are major correction costs and penalties. There are many reasons why doing self-audits of both tax and fiduciary compliance makes sense and provides retirement plan fiduciaries with protection. Here are four of them.

Source: Cohenbuckmann.com, March 2024

Automatic Enrollment: This Is the Way

Thanks to SECURE Act 2.0, newly established 401k and 403b plans must now have automatic enrollment. Plans with an automatic enrollment feature immediately enroll employees in the employer-sponsored plan once employees satisfy eligibility requirements. 401k and 403b plans established after December 29, 2022, must have the automatic enrollment feature.

Source: Benefitslawadvisor.com, March 2024

Rising Stocks, House Prices Boost US Retirement Outlook

While COVID was raging, the jump in house prices and a rising stock market were dramatically improving U.S. workers' retirement finances. In 2022, the share of households that were not saving enough to maintain their standard of living after they retired dropped to 39 percent, from 47 percent in 2019.

Source: Bc.edu, March 2024

CITs Dominate Investment Strategies for 2023

A new Morningstar report is doubling down on its prediction that collective investment trusts will overtake mutual funds in 2024. The firm's latest Target-Date Strategy Landscape Report found that in 2023, 67% -- or $104.5 billion -- of net inflows into target-date strategies went into CITs, for a total of $156 billion. Net flows increased year-over-year, for a record high of $3.5 trillion.

Source: 401kspecialistmag.com, March 2024

Key SECURE 2.0 Provisions to Look Out for Right Now

Experts shared the provisions of the SECURE 2.0 Act of 2022 that are generating the most buzz in a PLANADVISER practice webinar. Heather Bader, a partner in Faegre Drinker Biddle & Reath LLP, noted provisions with immediate impact, including the elevation of maximum cash-out thresholds for emergency savings and the introduction of emergency savings account withdrawals for personal crises.

Source: Planadviser.com, March 2024

DOL Defends ESG Rule Against 5th Circuit Appeal

The DOL filed with the U.S. 5th Circuit Court of Appeals a defense of its rule governing "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights," sometimes called the environmental, social, and governance rule, as complying with ERISA.

Source: Planadviser.com, March 2024

Legislation Calls for Retirement Plan Marketplace in Wisconsin

If bills before both chambers of the Wisconsin legislature are enacted, America's Dairyland will have a retirement plan marketplace to connect individuals and small employers with retirement plans offered by private financial services firms.

Source: Napa-net.org, March 2024

401k Sponsors Say Their Plan Is OK, But They Don't Have Any Idea

Plan sponsors often tell retirement plan providers that their 401k plan is OK without having any background or information to make that affirmative statement. Plan sponsors can claim that their 401k is fine, but that doesn't mean it is. In this article, attorney Ary Rosenbaum shows this claim may not be grounded in reality.

Source: Jdsupra.com, March 2024

Federal Court Approves $6.75 Million Settlement of LinkedIn ERISA Class Action Lawsuit

The U.S. District Court for the Northern District of California has given final approval to a $6.75 million settlement of a class action lawsuit filed by current and former LinkedIn employees regarding their investment options in the company 401k plan. The settlement covers more than 17,000 people participating in the company's retirement plan from August 14, 2014, to July 1, 2020.

Source: Hallbenefitslaw.com, March 2024

The New Fiduciary Rule: Robo Advice and Robo Conflicts

Under the current PTE 2020-02, the exemption relief is not extended to "pure" robo-advisers. Instead, only "hybrid" robo-advisers can provide non-discretionary fiduciary advice to retirement investors where the advice is conflicted. However, when the proposed amendments to the PTE become final and applicable, compensation resulting from conflicted nondiscretionary advice will be permitted if the conditions of the exemption are satisfied. This article discusses robo advice under PTE 2020-02.

Source: Fredreish.com, March 2024

Retirement Savings Calculator

This worksheet helps you determine what percent of pay to save for retirement. These calculators are provided only as general self-help tools. Results depend on many factors, including the assumptions you provide.

Source: Consultrms.com, March 2024

Counting Participants in a First Year Plan

The 2023 Form 5500 Annual Return/Report of Employee Benefit Plan includes some changes to previous filing requirements. One change is to the participant-counting methodology, specifically for defined contribution plans, to determine the plan filing type. But there is an important caveat for first-plan year filers.

Source: Belfint.com, March 2024

Small Business Retirement Plans: How Firms Perceive Benefits and Costs

At any given time, only about half of U.S. private sector workers are covered by an employer-sponsored retirement plan, and few workers save without one. The coverage gap, which undermines the retirement security of the nation's workers, is driven by a lack of coverage among small employers. This article presents the results of a new survey of small employers to understand why some offer retirement plans and others do not.

Source: Bc.edu, March 2024

DOL Releases Proposed Regulations for Automatic Portability Transactions

The DOL has released proposed regulations related to the implementation of section 120 of the SECURE 2.0 Act. Section 120 of SECURE 2.0 amended the Internal Revenue Code to add a prohibited transaction exemption to permit the receipt of fees and compensation by an automatic portability provider for services provided in connection with an automatic portability transaction. This exemption applies to qualified 401a plans (other than defined benefit plans), 403a plans, 403b plans, governmental 457b plans, and traditional and Roth IRAs.

Source: Ascensus.com, March 2024

Americans Reducing Retirement Savings and Taking on Debt Due to Inflation

Ongoing inflation has set back Americans' ability to prepare for their financial future by causing them to reduce savings, take on debt, and withdraw from retirement accounts, according to the 2024 Q1 Quarterly Market Perceptions Study from Allianz Life. Americans are more focused on their present finances than on setting themselves up for the future. About two in three (67%) say they are more concerned about paying bills than about their financial future.

Source: Allianzlife.com, March 2024

Bill to Ban ESG Consideration in Retirement Plans Floated by House Republicans

Another attempt at legislation to restrict the use of Environmental, Social, and Governance (ESG) factors in retirement plans was introduced in the House last week, this time by Congressman Greg Murphy, M.D. The "Safeguarding Investment Options for Retirement Act" seeks to prohibit tax-advantaged retirement plan trustees from considering factors other than financial risk and return when making investment decisions on behalf of workers, retirees, and their beneficiaries.

Source: 401kspecialistmag.com, March 2024

Managing Fiduciary Conflicts in the Age of Convergence

In recent years, retirement plan advisers for Employee Retirement Security Act plans and advisers for wealth management clients have joined forces within the same firm. Among the many challenges involved with integrating these two practices is complying with the fiduciary and prohibited transactions of ERISA and section 4975 of the Internal Revenue Code when providing advisory services to clients. ERISA expert David Kaleda discusses what the DOL's proposed Retirement Security Rule may mean for retirement and wealth management firms.

Source: Planadviser.com, March 2024*

Help Employees Guard Retirement Savings Against Market Volatility

A recent survey revealed that 86% of employees feel increasingly stressed about their finances and nearly 50% worry about not having enough saved for retirement. Workers who frequently fret about covering unexpected car or home repairs, paying off student loans or credit card debt, or saving for retirement may have their financial worries compounded by the market's current volatility. Employers can play an important role in alleviating some of that financial stress by adopting investment strategies for the organization's retirement plan and helping employees reduce the impact of market volatility on their retirement savings.

Source: Usicg.com, March 2024

SECURE 2.0 Expansion of the Employee Plans Compliance Resolution System (EPCRS)

On May 25, 2023, the IRS provided new interim guidance with Notice 2023-43 for plan sponsors participating in self-correction through the Employee Plans Compliance Resolution System (EPCRS). This notice provides guidance and clarity in the form of questions and answers with respect to the expansion of EPCRS for plan failures under section 305 of the SECURE 2.0 Act. Here is a review.

Source: Tri-ad.com, March 2024

Core Menus Need to Evolve

The role of the core investment menu in defined contribution plans has changed considerably over the last decade, as qualified default investment alternatives, particularly target-date funds, now capture more plan sponsor attention and participant assets than ever. This evolution requires plan sponsors and consultants to revisit key assumptions about optimal core menu design, especially as plan sponsors increasingly seek to retain participant assets during retirement, since older participants are more likely to use the core menu and invest conservatively.

Source: Planadviser.com, March 2024

Why You Should Clean Up Those Old 401ks

One study estimates about $1.65 trillion is sitting in abandoned accounts, representing the savings of 30 million workers. The problem is most acute for people who leave behind small accounts. Increased job switching has accelerated the problem. Accumulating the savings you'll need in retirement is tough enough. Don't make it tougher by leaving behind a trail of abandoned 401k accounts.

Source: Morningstar.com, March 2024

The DOL Fiduciary Rule Requires a Recommendation. What Is That?

The DOL's proposed fiduciary regulation includes a new and expanded definition of when a representative of a broker-dealer, investment adviser, bank, or insurance company will become a fiduciary under ERISA and the Internal Revenue Code. The new definition starts with whether a "recommendation" has been made. This article discusses the definition of "recommendation."

Source: Fredreish.com, March 2024

Failure to Make Safe Harbor Contribution: A Common Mistake in 401k Plans

Many companies opt for a safe harbor 401k because of its tax advantages and talent attraction capabilities. However, failure to make safe harbor contributions may result in penalties and legal repercussions for small businesses. If your company has missed these contributions, promptly addressing the oversight is crucial. This guide will walk you through safe harbor 401k requirements and offer strategies to maintain compliance and prevent future failures.

Source: Forusall.com, March 2024

Route to Success: Setting a Course of Action Prior to the DOL Fiduciary Rule 4.0

This is the presentation material from a program where Eversheds Sutherland attorneys Issa Hanna, Carol McClarnon, and Mark Smith provide practical steps to consider before the DOL's Fiduciary Rule proposal becomes final in the coming months.

Source: Eversheds-Sutherland.com, March 2024

Hawaii Retirement Savings Program Auto-Enroll Getting Closer

Automatic enrollment of eligible employees in the Hawaii Retirement Savings Program is closer to being put in place. Sen. Sharon Moriwaki introduced SB2553 on Jan. 19, 2024. Under the bill, employees would no longer be required to opt in to participate in the Hawaii Retirement Savings Program but rather would be automatically enrolled. When the program began, one of the features that distinguished it from other states' programs was that employees must actively opt-in if they want to participate.

Source: Asppa.org, March 2024

How Men and Women Invest Differently, and What We Can Learn From Each Other

Studies have shown that men and women have different approaches to investing money that can impact their long-term results. This 14-page paper looks at what those differences are, how they affect a portfolio, and what investors can do to gain balance in their investment style and strategy.

Source: Arnerichmassena.com, March 2024

The Fiduciary Rule: Effective Date and Lawsuits

In this podcast series of updates, Fred Reish and Brad Campbell offer a high-level view of current trends and recent ERISA developments. In this newest episode (about 23 minutes), they discuss The Fiduciary Rule: Effective Date and Lawsuits.

Source: Spotlightonbenefits.com, March 2024

Millennials Redefine Retirement as "Financial Independence"

Millennials are "redefining" what retirement means, according to a new survey conducted by IRALogix. More than half believe retirement is defined not by age 65 but by "financial independence." While some Millennials said ceasing all work by age 65 is a goal they are highly focused on working toward, many said they view retirement not necessarily as a complete exit from the workforce, but rather as a "time of greater flexibility in their lives."

Source: Planadviser.com, March 2024

Defendants in ESG Litigation File Motion for Summary Judgment

On February 26, 2024, defendants in Spence v. American Airlines filed a brief in support of a motion for summary judgment. Defendants' motion comes just days after the court had handed down a decision denying defendants' motion to dismiss. In this article, the authors review the defendants' arguments in this case, mainly because they usefully raise the issues of proof and causation that vex challenges to the prudence (and loyalty) of certain proxy voting positions. They begin with a more abstract discussion of challenges to fiduciary proxy voting decisions, as a way of framing the specific arguments, and then try to get an understanding of what is going on in Spence.

Source: Octoberthree.com, March 2024

Plan Advisors: Help Plan Sponsors in Fiduciary Litigation While Protecting Yourself

Instances of retirement plan litigation have skyrocketed in recent years and show no signs of stopping. Litigation against a plan sponsor inevitably draws in the plan's investment advisor and can cause significant costs and disruption. Here's what to do.

Source: Napa-net.org, March 2024

Realities of Retirement: Women vs. Men

How are you tracking toward retirement? Your savings are dependent on several variables, from income and earnings potential to life expectancy and societal expectations, all of which differ based on gender. Advisors are acutely aware of the perfect storm women face in saving for a secure retirement. Not by their own doing, women are finding themselves on a lower rung of the wealth ladder. This article takes a look at the hurdles women are facing and explores opportunities to overcome them.

Source: Manning-napier.com, March 2024

Inaugural Report From the Collaborative for Equitable Retirement Savings

Morningstar Retirement, Defined Contribution Institutional Investment Association, and Aspen Institute Financial Security Program release the first report to address race and gender disparities in 401k plans. The new report reveals how retirement plan design can address the racial and gender retirement savings gap.

Source: Dciia.org, March 2024

An Easy Read on the Past and Future of 401k Plan Litigation

There is a story in Plan Adviser on the past and future of ERISA litigation over 401k plans. It's a fun and short read, neither of which is normally true of articles on this subject. That's a little tongue-in-cheek, but that phenomenon is nobody's fault. At its core, the article presents the question of whether the long and highly contentious history of this area of litigation has actually benefited participants. There are three points from the Plan Adviser article that the author touches on here.

Source: Bostonerisalaw.com, March 2024

2024 Plan Limits for Puerto Rico

On January 31, 2024, the Puerto Rico Department of the Treasury issued Internal Revenue Circular Letter No. 24-01 (CL IR 24-01) announcing the 2024 limits for Puerto Rico-qualified retirement plans according to Section 1081.01(h) of the Puerto Rico Internal Revenue Code of 2011. Here is a chart of the applicable 2024 limits for qualified defined contribution retirement plans in Puerto Rico.

Source: Belfint.com, March 2024

Retirement Income Dilemma

Plan sponsors focused on retirement income often limit discussions to product selection, overlooking the importance of a strategic philosophy informed by market insights and past experiences. This MFS white paper introduces a retirement income roadmap, guiding sponsors between Accumulation and Destination Plans, and underscores the necessity of revisiting and refining these strategies as circumstances evolve.

Source: 401kspecialistmag.com, March 2024

Fiduciaries Incite Revenge of the Baby Boomers

The author suggests that "The next time target-date funds suffer large losses, Baby Boomers won't care that risk was rewarded until it wasn't. They'll be angry that academic theory was not followed because the theory would have protected them. After all, TDFs say they follow the theory, but they don't, they're much riskier. 78 million Boomers are currently in the 'Risk Zone.' Many are in TDFs."

Source: 401kspecialistmag.com, March 2024

Redefining 401k Data Collection for Racial and Gender Groups

A new study released today is shifting the way participant data is collected across the retirement planning industry. The research highlights gender and race-focused defined contribution administrative data typically found in human resource systems, with the hopes of combining it with qualitative research to better assess wellness platforms and tools for employers and participants. According to the research, data on nonwhite households remains relatively small with limited information on contributions, loans, and withdrawal and asset allocation activity.

Source: 401kspecialistmag.com, March 2024

401k World: The Litigators

The era of plan litigation began, from the plaintiffs' view, seeking to protect workers from retirement plan negligence. From the position of many plan fiduciaries and their defense attorneys, the trend has spurred a host of copy-cat complaints aiming to wring settlements from large plan sponsors and providers. Whichever side is more accurate at any given moment -- or if it's some combination of both -- one thing is certain: DC litigation remains relatively robust. This PLANADVISER In-Depth story considers 401k litigation's present and future.

Source: Planadviser.com, March 2024*

Recordkeepers Enter a New Era

For retirement plan recordkeepers, the past few years have marked a significant transformation, set in motion by the dual forces of consolidation and the unyielding quest for innovation and scale. As the number of recordkeepers dwindles, those that remain are redefining what it means to be a recordkeeper in today's market.

Source: Captrust.com, March 2024

Don't Set It and Forget It: Keeping up Your Fiduciary Committee

It's a perfect time to think about an issue that might get lost in the summertime and year-end shuffles: fiduciary committees. Having a committee isn't a set-it-and-forget-it situation, it requires regular action to ensure the committee is properly undertaking its role as a plan fiduciary. Here are some best practice items committees should consider annually.

Source: Benefitslawadvisor.com, March 2024

Plaintiffs Request Judge Approve Settlement in ERISA Data Breach Lawsuit

Retirement plan participants whose personal identifiable information was exposed in a 2021 data breach have asked a Georgia federal judge to approve an $8.733 million agreement to resolve allegations, which claimed national consultant Horizon Actuarial Services LLC failed to safeguard their sensitive data.

Source: Plansponsor.com, March 2024

In PEPs, Attaining Economy of Scale Is Critical, Sometimes Illusive

Retirement plans that include multiple employers have continued to grow in assets, but the growth of assets necessary to reach the critical size where economies of scale can be achieved may take years. The forecasted cost savings to plan sponsors of joining a pooled employer plan over using a single employer plan may not materialize, depending on the sponsor's pooled plan provider.

Source: Plansponsor.com, March 2024

Americans Want Retirement Investment Advice to Be in Their Best Interest: Survey

A new survey commissioned by the CFP Board reveals that nearly 97% of Americans agree that the financial professional who provides one-time recommendations or other one-time advice about retirement investments should be required to act in their client's best interest. This includes a recommendation to roll over funds from a workplace retirement savings program into an IRA or an annuity.

Source: Prnewswire.com, March 2024

Record Number of Participants Raised Deferral Rate in 2023, Vanguard Reports

In 2023, a record-breaking 43% of participants raised their rate of salary deferral into retirement savings, marking the highest level observed by the Vanguard Group since tracking began, according to a preview released Monday of the recordkeeper and asset manager's "How America Saves" report.

Source: Planadviser.com, March 2024

Plan Sponsor Attitudes Toward Retirement Plan Management and Fiduciary Outsourcing

This 18-page study measured how retirement plan sponsors view 3(16) fiduciary outsourcing as a tool to help them better manage their retirement plans. It also captured plan sponsor perspectives on how such outsourcing can help drive improved plan outcomes. The study was conducted in January 2024.

Source: Pentegra.com, March 2024

A Primer on MEPs, PEPs and GoPs

The SECURE Act 1.0 enacted at the end of 2019 established new retirement plan types, including Pooled Employer Plans and Defined Contribution Group of Plans. It also ratified the existence of "open" Multiple Employer Plans, which had been used by many service providers without formalized reporting requirements. The goal of these changes was to expand retirement coverage to more workers across the U.S. This is a primer on these plan types.

Source: Newfront.com, March 2024

Traditional Retirement Accounts Exhausted Faster Than Roths: Study

A new study finds that people who rely on "deferred tax" accounts to save for retirement may exhaust their savings faster than people who use "currently taxed" accounts. The researchers developed an experiment designed to assess how people would spend money in a deferred tax or currently taxed account. The researchers then enlisted 350 study participants, all of whom were U.S. adults over the age of 40 who had filed at least five tax returns over the previous seven years.

Source: Napa-net.org, March 2024

Yale University Challenges Appeal in 403b Excessive Fee Suit

In a lengthy filing (109 pages), Yale University says the plaintiffs who lost their excessive fee case in a jury trial shouldn't get a "do-over." More specifically, the Yale fiduciary defendants in that case have filed the aforementioned brief stating that the Second Circuit need not concern itself with entertaining an appeal of that judgment, the first (and to date only) jury trial in this genre of cases.

Source: Napa-net.org, March 2024

Tax Credit for Small Employer Start-Up Plans

Although available for over two decades, it is still surprising to see the general lack of awareness that most employers have regarding their eligibility for a tax credit in connection with their establishment of a retirement plan. This article is intended to familiarize readers with this tax credit so that they can evaluate its applicability to their client's situation.

Source: Legacyrsllc.com, March 2024

Slide Deck From Presentation on the DOL's Fiduciary Rule: The Impact on Recommendations of Annuities

Faegre Drinker discusses the DOL's proposed fiduciary regulation and its amendments to Prohibited Transaction Exemptions 84-24 and 2020-02 and their anticipated impact on annuity sales. These proposed rules, to be finalized this year, will impose significant requirements on recommendations of annuities to retirement investors -- ERISA and tax-qualified private-sector retirement plans, participants and IRA owners -- including recommendations for rollovers and transfers.

Source: Faegredrinker.com, March 2024

Access to 401ks Surges Past 70 Million in 2023: Capitalize

According to the firm Capitalize, the number of private sector workers in the U.S. with access to 401k plans surged 6.35% in 2023 to reach more than 71.5 million individuals, or nearly 6 in 10 U.S. workers for the first time.

Source: 401kspecialistmag.com, March 2024

Beware of the Dark Side of the 401k Business

Like Gotham in the Batman comics, there is an ugly underbelly to New York City. The same can be said of the retirement plan business, there is a dark side and this article will highlight some of the bad in the business that you should avoid if you are a plan sponsor.

Source: Jdsupra.com, March 2024

Expect a Stronger, More Lawsuit-Proof Fiduciary Rule Very Soon

The DOL continued its fast-track pace on its fiduciary rule, sending a final version to the White House last week that will likely be released in a matter of weeks. Lawyers who have been carefully reviewing the fiduciary rule say that it's not likely that the Department of Labor will change much from the contentious proposed version of the rule and its prohibited transaction exemptions. The department is racing ahead to make it difficult for Congress or a new president to undo the rule.

Source: Investmentnews.com, March 2024

Past is Prologue: DOL Proposes to Change the Definition of "Investment Advice"

On November 3, 2023, the DOL published in the Federal Register its proposed, Retirement Security Rule: Definition of an Investment Advice Fiduciary. In this article, Groom principal David Kaleda covers the DOL's 1975 fiduciary rule, changes made to the rule in 2016, and the changes proposed in 2023.

Source: Groom.com, March 2024

IRS Issues Favorable Initial PLESA Guidance on Match Restrictions

Notice 2024-22 brings important initial guidance on appropriate matching restrictions for Pension-Linked Emergency Savings Accounts, which was added to the Internal Revenue Code by Section 127 of SECURE 2.0, and is effective this year. In this article, Groom principals Elizabeth Dold and David Levine offer a simplification of the requirements for employers and recordkeepers to offer PLESAs.

Source: Groom.com, March 2024

The American Airlines ESG Fiduciary Case Exposed the Problem With Mandated Proxy Voting

On January 31, 2003, the SEC adopted Rule 206(4)-6(c) under its Rules and Regulations of the Investment Advisers Act of 1940. Since that time, it has revised that rule to account for some concerns that arose out of the original regulations. The question is whether they've addressed the real problem.

Source: Fiduciarynews.com, March 2024

The Hy-Vee Summary Judgment Record Highlights How Many Large Plan Sponsors are Unfairly Sued: Opinion

In March 2022, the prolific Capozzi law firm sued the jumbo Hy-Vee, Inc. defined contribution plan for excessive recordkeeping fees. The lawsuit was brought with false pretenses of alleged fiduciary malpractice based on misleading circumstantial evidence and false facts to survive a motion to dismiss. The Hy-Vee case is worth studying to understand the prejudicial effect of allowing the trial bar to serve as America's fiduciary regulator of plan fees and investment performance.

Source: Encorefiduciary.com, March 2024

SECURE 2.0 Act: Catch-up Contributions

Section 603 of the SECURE 2.0 Act of 2022 placed restrictions on catch-up contributions such that individuals having earnings of more than $145,000 in the previous calendar year would be required to make all catch-up contributions as Roth after-tax contributions. In this article, the Public Retirement Research Lab Database is analyzed to assess the impact of this provision on public-sector retirement plans and participants.

Source: Ebri.org, March 2024

Is Your Plan Cyber-Secure? Fiduciaries and Vendors Face Ongoing Challenges

No steps will ever provide 100% protection against breaches, but in this article, attorney Carol Buckmann discusses the state of the law, court cases in which participants have sued to get stolen benefits restored, and practical steps that can be taken by the company's fiduciaries to better protect participants and lower the risk of loss.

Source: Cohenbuckmann.com, March 2024

Demand for Increased Personalization Could Come from Younger 401k Participants

The momentum behind personalized retirement outcomes may come from younger generations. According to Cerulli, younger 401k participants have a greater willingness to share personal data regarding health and balance sheet information. Asset managers and recordkeepers should pay closer attention to younger 401k participants and engage them by offering more personalized solutions.

Source: Cerulli.com, March 2024

DOL Sends Fiduciary Rule to Office of Management and Budget

The Office of Management and Budget (OMB) received the fiduciary rule, listed as Retirement Security Rule: Definition of an Investment Advice Fiduciary, from the DOL on March 8. The OMB will review its costs and benefits within 90 days. However, the compressed two-month period in which the DOL finalized the rule has industry watchers predicting that the OMB will also move quickly in its review.

Source: Asppa.org, March 2024

401k World: Cyber Thieves

With a quick Google search, anyone can get a sense of the massive amount of money in workplace retirement plans and individual retirement accounts. What may be less known, but not too hard to figure out for hackers, is that retirement plans' unique business model creates multiple potential openings for breaches, according to experts. This article delves into cybersecurity threats to retirement plan assets and the industry's approach to combatting them.

Source: Planadviser.com, March 2024*

Retirement Savers Ended 2023 on a Positive Note

Even with other ongoing financial struggles, retirement savers ended the year on a positive note with improved market conditions and consistent contributions helping boost average account balances to their highest level in nearly two years. The good news comes from Fidelity's Q4 2023 analysis, which is based on the savings behaviors and account balances for more than 45 million IRA, 401k, and 403b retirement accounts on the firm's platform.

Source: Ntsa-net.org, March 2024

Washington State Poised to Adopt State Plan

Add the Evergreen State to those that provide retirement plan coverage for private-sector employees whose employers do not. Well, soon. Sen. Mark Mullet introduced SB 6069, the measure creating Washington Saves, on Jan. 9, 2024. The Senate passed it on Feb. 12; the House initially passed it on March 1 in a 57-39 vote, and on March 6 passed a version that incorporated Senate views on the amendments it had made. The Senate passed the amended version in a 35-12 vote on March 7. The measure now awaits the signature of Gov. Jay Inslee.

Source: Ntsa-net.org, March 2024

DOL Sends Final Fiduciary Rule to OMB

On March 8, 2024, the DOL sent a final version of the Retirement Security Rule: Definition of an Investment Advice Fiduciary to the Office of Management and Budget for review. OMB review is typically the final stage of the regulatory process before the publication of a final rule and can take anywhere from a few days to several months.

Source: Groom.com, March 2024

Younger 401k Participants Seek Personalization Features

Younger participants enrolled in employer-sponsored retirement plans share a greater desire for personalization, finds new research from Cerulli Associates. According to the findings, Generation Z was the most willing out of all other generations to share personal information, such as retirement savings/account balances (51%), nonretirement savings/account balances (37%), and expected retirement age (66%). Forty-five percent of Gen Z respondents added that they are "very comfortable" sharing their current and/or projected spending with 401k providers.

Source: 401kspecialistmag.com, March 2024

$61 Million Settlement Finalized in GE ERISA Case

Final approval on the long-running GE ERISA case came with Judge Indira Talwani of the U.S. District Court for the District of Massachusetts granting a $61 million cash settlement in the case Haskins, et al. v. General Electric, et al. It marks the largest settlement ever in an ERISA case alleging a retirement plan improperly offered proprietary funds.

Source: 401kspecialistmag.com, March 2024

CITs in 403bs Bill Headed to Senate

A bill that would authorize the use of collective investment trusts in 403bs is headed to the Senate after the House of Representatives passed it. The Expanding Access to Capital Act (HR 2799), sponsored by House Financial Services Committee Chair Patrick McHenry, includes three measures that were approved as amendments, including the 403b plan measure.

Source: 401kspecialistmag.com, March 2024

What Was the Average 401k Match in 2023?

If you work for a larger company, there's a pretty good chance that one of your workplace benefits will include access to a 401k plan. And if you're lucky, that plan will include some type of employer match. In 2023, 81% of workers with 401ks at Fidelity received some type of employer matching contribution. And the average amount might surprise you, in a good way.

Source: Usatoday.com, March 2024

Price Chopper, Tops Owner Sued Over 401k

Northeast Grocery, the conglomerate that owns Price Chopper/Market 32 and the Tops supermarket chains, is being sued in federal court over its management of the 401k retirement accounts it offers to employees. The lawsuit alleges supermarket conglomerate didn't manage mutual fund fees, leading to lower overall returns for retirees.

Source: Timesunion.com, March 2024

Another 401k Plan Sponsor Faces Novel Suit Regarding Its Use of Forfeiture Funds

This latest suit alleges that the plan sponsor failed to use forfeiture funds to lessen plan administrative expenses, which would have reduced or eliminated the amounts charged to the accounts of plan participants for administrative expenses. In some of the prior lawsuits, plaintiffs have alleged that the governing plan documents explicitly provided that plan sponsors could use forfeitures to lower contributions owed to the plans. This complaint is devoid of such allegations and is a "novel theory."

Source: Jonesday.com, March 2024

The New Fiduciary Rule: Can Wholesalers Become Fiduciaries?

It is well known that the expansive definition of fiduciary in the DOL's proposed regulation will cause many more advisors and insurance agents to be fiduciaries for their recommendations to retirement investors. However, it is less known that the same rules can apply to wholesalers of securities and insurance products.

Source: Fredreish.com, March 2024

Race, Retirement, and the Savings Gap

Dramatic racial and ethnic disparities in retirement savings persist in the U.S., with no simple solution. This research shows that Black and Hispanic workers are lagging in plan participation and savings while also facing a greater range of competing financial priorities. The retirement industry can act now to help close the gap with thoughtful plan design, wellness and education programs, and improved data-sharing practices.

Source: Troweprice.com, March 2024

Can Multiple Employer Plans Help Close the Retirement Coverage Gap?

As only about half of U.S. private sector workers are covered by an employer-sponsored retirement plan at any given time, a lack of consistent coverage is a major threat to the nation's retirement income security. Advertised as a more cost-efficient and less burdensome way for small employers to offer a retirement plan, pooled solutions may not be the perfect solution to this coverage gap.

Source: Plansponsor.com, March 2024

NEPC's 2023 Defined Contribution Plan Trends and Fee Survey Results

NEPC's Defined Contribution team released its 2023 Defined Contribution Plan Trends and Fee Survey results. This is the 18th annual version of the survey, which examines current plan investment trends, features, and innovations across major sectors, and how these plans have evolved over the years.

Source: Nepc.com, March 2024

Multi-Billion Dollar 401k Settles Excessive Fee Suit

The parties in yet another 401k excessive fee suit have come to terms after two years of litigation. In exchange for releasing their claims, the Settlement (Stengl et al. v. L3Harris Technologies) provides that the L3Harris defendants will pay $650,000 to Class Members.

Source: Napa-net.org, March 2024

More Proof Prudence Prevails in 401k Litigation: Podcast

Some recent suits -- and federal court rulings -- provide some timely reminders about the importance of a prudent process and following the plan document. In this podcast, Nevin Adams and Fred Reish discuss the background, issues, and implications.

Source: Napa-net.org, March 2024

Employer Roth Contributions: Tips for Employers

Under the SECURE 2.0 Act, it is now possible to offer plan participants in 401k, 403b, and 457b plans the option to treat employer contributions as Roth contributions. Industry experts at the American Retirement Association offer their insights on this new benefit option and employer benefits plan administrator Watkins Ross provides some tips.

Source: Napa-net.org, March 2024

Invest. Advice to Plans and Participants and Litigation Risks

While plan sponsors are generally the focus of litigation, retirement plan advisors can also be a target of lawsuits for breach of fiduciary duties under ERISA. There has been a recent increase in ERISA claims filed against retirement plan advisors and this article discusses the allegations and the court's conclusions in selected cases.

Source: Napa-net.org, March 2024

SECURE 2.0 DC Retirement Plan Provisions Summary

SECURE 2.0 is a law designed to substantially improve retirement savings options, including 401k and 403b plans. The number of retirement plan provisions in SECURE 2.0 is expansive and can feel overwhelming for a plan sponsor. If you are looking for a summary organized by effective date to help you understand how this relates to your DC plan, this resource can be a useful tool for you.

Source: Multnomahgroup.com, March 2024

IRS Issues Guidance on De Minimis Financial Incentive Benefits, Other Optional Features in SECURE 2.0 Act

Congress passed the SECURE 2.0 Act of 2022 to encourage workers to save for retirement. Section 113 of the SECURE 2.0 Act, a notable provision in the legislation, refers to the "de minimis financial incentive benefit." Under Section 113, employers may offer small financial incentives to increase employee participation in retirement plans. The IRS recently issued guidance on various provisions of the SECURE 2.0 Act in the form of IRS Notice 2024-2, including the de minimis financial incentive benefit.

Source: Hallbenefitslaw.com, March 2024

New Research Finds That 21.9 Million Americans Could Qualify for SECURE 2.0 Saver's Match

A research report about the SECURE 2.0 Saver's Match provision published today by the Employee Benefit Research Institute found that 21.9 million Americans could qualify to receive a matching retirement plan contribution from the federal government starting in 2027.

Source: Ebri.org, March 2024

How to switch From a SIMPLE IRA to a Safe Harbor 401k -- SECURE 2.0 Made It Easier

Small businesses with a SIMPLE IRA may want to switch to a Safe Harbor 401k due to the higher contribution opportunities and flexible plan design options. The passage of the Secure 2.0 Act of 2022 has made it easier for employers to make this switch. Here is a short review.

Source: Conradsiegel.com, March 2024

Do You Know Where Your "Missing" Retirement Plan Participants Are?

In the laundry list of retirement plan administrative and operational requirements, plan sponsors may sometimes overlook their obligations concerning terminated vested employees. Even though these individuals have left the company, the plan sponsor still retains fiduciary obligations to them. To provide them with their benefits under the plan, you will need to maintain contact information for them. Here are some suggestions for minimizing missing participants in your plan.

Source: Brickergraydon.com, March 2024

The DOL Issues New Guidance on PLESA

PLESAs allow eligible participants to contribute up to $2,500 (as Roth contributions) to an emergency savings account linked to a defined contribution plan. In consultation with the Treasury Department and the IRS, the DOL recently issued guidance regarding PLESAs in the form of FAQs. There are no earth-shattering revelations in the FAQs, but there are a few nuggets to glean from them.

Source: Benefitslawadvisor.com, March 2024

Saving for Retirement Can Mean Adding Some Debt Too

In today's world, workers need to save if they want to be comfortable in retirement. But there are also limits to what many people can afford. A new study finds that when U.K. workers were automatically enrolled and started contributing to a retirement savings plan, their household debt -- credit cards, bank overdrafts, and other unsecured loans -- increased. For every 32 to 38 pounds (or $40-48) in combined monthly contributions by the employer and employee, their debt rose by just over 7 pounds (about $9).

Source: Bc.edu, March 2024

Defending the 401k With ICI's Sarah Holden

The 401k has been under attack on multiple fronts lately. ICI has been very active in debunking recent attacks on defined contribution plans, and Sarah Holden, senior director of retirement and investor research at the Investment Company Institute, makes some great points in defense of the 401k in this podcast.

Source: 401kspecialistmag.com, March 2024

TDFs Continue as Leading Investment Vehicle in DC Retirement Plans

New findings today from the NEPC show that target-date funds remain the dominant investment option among DC plans. The organization's latest Defined Contribution Plan Trends and Fee Survey, which surveyed 128 clients representing $259 billion in aggregate assets and 2.6 million plan participants, reports that 86% of respondents currently offer a TDF paired with systematic distributions to their participants. Ninety-seven percent of clients offer target-date fund options, and 96% use the vehicle as the qualified default investment alternative.

Source: 401kspecialistmag.com, March 2024

2024 Puerto Rico Retirement Plan Limits

As announced through Circular Letter No. 24-01 (CL IR 24-01), issued by the Puerto Rico Treasury Department, the following chart outlines the 2024 limits for retirement plans qualified under the Puerto Rico Revenue Code of 2011, as amended.

Source: Voya.com, March 2024*

A Return to Retirement Income Plans?

Alaska debates reopening its defined benefit retirement plan to new public employees. The United Auto Workers and automakers negotiated a significant increase to individual retirement plan accounts. IBM announces a transition from matching 401k contributions to a hybrid-defined benefit plan design. These are some of the headline-making recent events that counter the narrative that the defined benefit retirement plan is dead. What is causing this shift and what lessons can stakeholders in other retirement programs learn? First and foremost, it's all about meaningful retirement income and lifetime financial security.

Source: Segalco.com, March 2024

401k World: DCIO Managers Adjust to Fee Pressures

Defined contribution investment-only asset managers have played a vital role in the retirement plan ecosystem as it has evolved. However, these fund managers have also faced myriad business challenges in recent years. Continued fee pressure and an uptick in shopping for the right funds have plan sponsors increasingly embracing collective investment trusts and passive strategies, pushing out the once DCIO-dominant actively managed mutual fund. The fourth story in this PLANADVISER In-Depth series considers how the rise of CITs and passive options has changed retirement investing.

Source: Planadviser.com, March 2024

"Exploding Market" for 401ks May Help Shrink Coverage Gap

According to research released Tuesday by payroll and small workplace plan retirement provider Paychex Inc., less than half (37.6%) of U.S. employers offer a retirement plan. While those numbers are dispiriting for many, some in the retirement industry see an opportunity to close that gap, particularly with relatively new opportunities stemming from provisions in the SECURE 2.0 Act of 2022, state mandates, pooled employer plans, and advancements in technology that can help advisers sign up more clients with small businesses.

Source: Planadviser.com, March 2024

New Voluntary Correction Rules Could Be Finalized Soon

The Department of Labor should be finalizing its proposed update to the Voluntary Fiduciary Correction Program in "the next few months," according to a representative of the Employee Benefit Security Administration speaking at a conference on Tuesday.

Source: Planadviser.com, March 2024

FlexPATH, Wood Group Beat TDF-Selection-Based Lawsuit

A California district court has ruled in favor of the defendants in a case brought by 401k participants alleging that the plan sponsor and investment manager breached their fiduciary duties by imprudently selecting and sticking with target-date funds affiliated with the 3(38) investment manager and plan adviser. The 401k participants alleged that, rather than acting in the best interest of participants under ERISA, the plan sponsor and NFP Retirement prioritized investing in collective investment trusts managed by NFP affiliate flexPath, as well as failing to use the plan's size to bargain for lower fees.

Source: Planadviser.com, March 2024

Prevent Problems by Using Auto Rollover IRAs for Force-Outs Below $1,000

Have you done something for a long time without really thinking about it, and when you finally do you realize you could be doing it better? Most service providers and plan sponsors continue to pay force-out distributions of less than $1,000 in cash via checks without recognizing there is a more efficient solution.

Source: Penchecks.com, March 2024

IRS Provides Guidance on Hodgepodge of SECURE 2.0 Provisions

The IRS released a notice providing guidance on various provisions of the SECURE 2.0 Act of 2022. This article focuses on the changes most relevant to large plan sponsors with more than 100 participants, i.e., automatic enrollment changes, de minimis financial incentives, an exception to the 10% tax for terminally ill participant withdrawals, an automatic enrollment error correction, the Rothification of employer contributions, and amendment deadlines extensions.

Source: Morganlewis.com, March 2024

The Duties Must Change for 401k Plan Sponsors

Attorney Ary Rosenbaum says organizations that are poorly run have a hard time changing because the people who poorly run things usually don't step aside voluntarily. "401k plan sponsors that run a poor plan have to change, they must change." This article reminds us what plan sponsors should do, but probably don't do.

Source: Jdsupra.com, March 2024

What the SECURE Act Requires 401k Sponsors to Do Right Now

The SECURE Act not only imposes significant changes on retirement plans but also offers optional provisions that employers may want to incorporate into their 401k and 403b retirement plans. There has been a lot of media attention on the whole array of SECURE Act changes which are phased in over the next few years. But, what do employers need to do about their retirement plans right now? Here are a few items.

Source: Gct.law, March 2024

Looking for earlier information? Go to our Archive.

401khelpcenter.com, LLC is not the author of the material referenced in this digest unless specifically noted. The material referenced was created, published, maintained, or otherwise posted by institutions or organizations independent of 401khelpcenter.com, LLC. 401khelpcenter.com, LLC does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com, LLC.

About | Glossary | Privacy Policy | Terms of Use | Contact Us

This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.