May 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.

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Employees Are More Confident in Their Retirement Savings Than Expected

Seventy-two percent of workers feel confident in their ability to retire comfortably, up 3% since March 2020, according to the 2021 Retirement Confidence Survey by the Employee Benefit Research Institute. Eighty percent of current retirees feel they have enough money to live on in retirement. While the pandemic has caused financial insecurity for many, employees have been able to keep up with their savings.

Source: Voya.com, May 2021*

Columbia University Settlement: A Reminder of ERISA Litigation Risk

On May 21, 2021, the terms of the proposed class action settlement in Cates v. The Trustees of Columbia University in the City of New York were announced. The case, which was filed in 2016, involved allegations that plan fiduciaries breached their ERISA duties by causing the plan and participants to pay excessive fees to service providers and by selecting and retaining expensive and poor-performing investment options. In addition to a monetary payment of $13 million, the settlement agreement includes several non-monetary terms.

Source: Faegredrinker.com, May 2021

Missing Participant Best Practices

The DOL has developed a list of best practices plan fiduciaries can implement to reduce missing participant issues and ensure participants and beneficiaries receive their plan benefits. According to EBSA, the first step in addressing any problem is knowing there is one. If your plan has one or more of the "red flags" listed here, you potentially have a missing participant issue.

Source: Employeebenefitslawblog.com, May 2021

Retirement Tier Glossary

DCIIA defined the term, Retirement Tier, as a range of products, solutions, tools, and services, all of which allow a DC plan sponsor to broaden their plan's goal from one wholly focused on saving to one that can transition to support benefit distribution for participants who are near, entering, or in retirement. This glossary defines many of the terms related to the Retirement Tier discussion.

Source: Ymaws.com, May 2021

ERISA Prudence, Methodology and the Aggregate of Outcomes

It's a matter of prudence to try to protect a retirement plan participant from economic loss because there is a strong possibility that it will impair them from reaching their desired lifestyle in retirement. Prudence, though, is a matter of behavior that causes an outcome -- like the investment options in a retirement plan -- and it's best judged by methodology or deriving methodology by quantifying the outcomes in aggregate. Any attempt to reach a conclusion based on one or few outcomes may lead to a myopic viewpoint and a distorted opinion.

Source: Plansponsor.com, May 2021

Contributions to TDFs Fell As the Market Rebound Increased Assets

A Morningstar report has found retirement savers' contributions continued to suffer even as the markets rebounded from last year's volatility. The findings were reported in Morningstar's 2021 "Target-Date Strategy Landscape Report," which said flows into target-date funds and collective investment trusts sank to $52.3 billion last year, a 59% decline from the previous year.

Source: Plansponsor.com, May 2021

Russell Investments Draws Self-Dealing Scrutiny

Plaintiffs in a new ERISA lawsuit say Caesars Entertainment allowed Russell Investments to pack its plan with proprietary investment options, to the disadvantage of plan participant outcomes.

Source: Planadviser.com, May 2021

State Street Sees Self-Dealing Allegations in ERISA Lawsuit

A new ERISA lawsuit has been filed in the U.S. District Court for the District of Massachusetts, wherein a proposed class of plaintiffs argues State Street Corp. has engaged in self-dealing within one of its retirement savings programs for employees, the State Street Salary Savings Program.

Source: Planadviser.com, May 2021

Protecting Participant Personal Data

Is the personally identifiable information shared with your retirement plan service providers safe? Many providers farm or harvest this data amongst their affiliates or others to market and solicit additional products or services. This gives the appearance that you, as the plan sponsor, endorse these additional products or services. Find out why allowing these practices may put you at risk of accusations of breaching fiduciary duties and what steps you can take to proactively protect yourself and your participants.

Source: Francisinvco.com, May 2021

How to Prevent Retirement Plan Leakage

In a new report, the Congressional Joint Committee on Taxation estimates that 22% of net contributions to 401ks and other workplace retirement savings plans made by those 50 or younger in any given year are withdrawn early in the form of hardship withdrawals, loans, or cash-outs by people switching jobs. These pre-retirement withdrawals from retirement accounts are often referred to as "leakage." Educating participants about the importance of remaining committed to retirement savings and of the value of consolidating accounts is a good place to start, experts say.

Source: Planadviser.com, May 2021

Court Finds Sponsor Not Liable for Plan Account Theft

The US District Court for the Northern District of Illinois handed down a decision in Bartnett v. Abbott Laboratories, dismissing the plaintiff's claims against defendant sponsor fiduciaries in a case involving the theft of $245,000 in the plaintiff's Abbott retirement plan account. Particularly interesting for plan sponsors is the court's discussion of the sponsor fiduciary's standard of care concerning a plan provider's cybersecurity.

Source: Octoberthree.com, May 2021

Terms of Another University 403b Excessive Fee Suit Unveiled

The law firm of Schlichter Bogard & Denton has announced the terms of another settlement of a 403b excessive fee case. According to a press release by the St, Louis-based law firm, it has filed a preliminary settlement approval motion on behalf of Columbia University employees and retirees in their suit against the university involving their 403b retirement plan.

Source: Napa-net.org, May 2021

Impact of COVID-19 on Pensions and Benefits in Canada

The COVID-19 pandemic has had significant implications for workplaces across the world. These implications extend into the realm of employee benefits, where employers and their workers must make difficult decisions regarding their retirement, health, and paid leave benefits. This International Foundation benchmarking survey captures a snapshot of current conditions.

Source: Ifebp.org, May 2021

Achieving Excellence Through a Retirement Plan Operational Review

The world of retirement plan administration can be summarized as good news, bad news, and some downright ugly news plan sponsors need to know. This 4-page paper outlines a path to excellence through a retirement plan operational review. Find out what an operational review is, the steps it entails, and the benefits of the process.

Source: Francisinvco.com, May 2021

Significant ESG Movement on the ERISA Front

Legislation is afoot that would amend ERISA to expressly permit fiduciaries to account for environmental, social, and governance factors as part of their fiduciary duties. Meanwhile, President Biden just issued an Executive Order on Climate-Related Financial Risk, in which he directed the DOL to consider proposing by September 2021 a rule that would suspend, revise or rescind the Financial Factors and proxy voting rules promulgated under the Trump Administration.

Source: Fiduciarygovernanceblog.com, May 2021

Third Circuit to Consider Class Certification Issues Percolating in ERISA Fee Litigation

The Third Circuit will review a Pennsylvania district court's decision to certify a 60,000+ person class in an ERISA fiduciary breach lawsuit claiming mismanagement of a defined contribution plan's investments and recordkeeping fees. This appeal queues up guidance on a hotly litigated issue in recent ERISA cases: can defined contribution plan participants challenge the prudence and loyalty of retaining a plan investment option they never invested in?

Source: Erisalitigationadvisor.com, May 2021

Understanding and Evaluating Retirement Plan Fees: Benchmarking Investment Fees

Benchmarking investment fees is essential to fulfilling a retirement plan sponsor's fiduciary obligation. However, it can be a complicated task. This article shares the importance of accurately benchmarking investment fees and how to overcome some common plan sponsor pitfalls.

Source: Captrust.com, May 2021

Executive Order Includes Review of ESG Factors in Retirement Plans

President Biden issued an Executive Order on Climate-Related Financial Risk, which includes a directive to the DOL Secretary to consider publishing, by September 2021, a proposed rule to suspend, revise, or rescind the Financial Factors in Selecting Plan Investments and Fiduciary Duties Regarding Proxy Voting and Shareholder Rights final rules that were published during the Trump administration regarding environmental, social, and governance investments and proxy voting by employee benefit plans.

Source: Ascensus.com, May 2021

As a Retirement Plan Adviser, if the DOL Investigates You

Here are five FAQs about Department of Labor investigations of retirement plan advisers, and answers from attorneys at the prominent ERISA law firm Faegre Drinker.

Source: Retirementincomejournal.com, May 2021*

The DOL's Cybersecurity Guidance in Practice

There's not much new information in the DOL guidance from what had already been suggested by experts; it has issued common-sense best practices that reflect the state of the industry. What is new is that the DOL has laid out thoroughly what it would expect plan fiduciaries to be looking for. "The DOL is saying, 'This is a fiduciary issue, and here's a road map.'"

Source: Plansponsor.com, May 2021

Bill Would Allow Retirement Plans to Use ESG Investments

U.S. Senators Tina Smith and Patty Murray and U.S. Representative Suzan DelBene have introduced legislation in both chambers of Congress that they say would provide legal certainty to workplace retirement plans that choose to consider environmental, social, and governance factors in their investment decisions or offer ESG investment options.

Source: Planadviser.com, May 2021

Portman, Cardin Reintroduce Sweeping Retirement Reform Bill

In what may be their final act teaming up on retirement security legislation, the bipartisan duo of Sens. Rob Portman and Ben Cardin on May 21 reintroduced their Retirement Security and Savings Act (S. 1770). Like the previous version introduced in the last session of Congress, the 163-page bill includes more than 50 provisions designed to strengthen Americans' retirement security by addressing four major opportunities in the existing retirement system.

Source: Napa-net.org, May 2021

The Latest Attack on Target-Date Funds

"The Unintended Consequences of Investing for the Long Run: Evidence from Target Date Funds," is a new academic investment paper. The paper, by Massimo Massa, Rabih Moussawi, and Andrei Simonov, fiercely criticizes its subject. The authors find that target-date funds underperform other funds to a "staggering" degree. This shortfall occurs because target-date funds "exploit" their relatively captive audiences, which are unlikely to punish subpar returns by redeeming their shares. For a similar reason, target-date funds also get away with "fee skimming."

Source: Morningstar.com, May 2021

401k Lawsuit Claims Caesars Gambled and Lost

A class-action lawsuit alleges that the company breached its fiduciary duties in connection with a change in the investment menu. Most of the assets in the $1.4 billion plan went into Russell Investment target-date funds, according to the complaint.

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

Delaware Joins the State Auto-IRA Push

The First State has now entered the push to provide its private sector workers who do not have access to an employer-sponsored retirement plan with access to a state-facilitated retirement plan. The legislation (HB 205), which was spearheaded by State Treasurer Colleen Davis and introduced May 20 by State Representative Larry Lambert in the Delaware House of Representatives, would establish the Delaware Expanding Access for Retirement and Necessary Savings program.

Source: Asppa.org, May 2021

Plan Sponsor Views on Adopting Dynamic QDIAs

The DCIIA Retirement Research Center completed a project in late 2020 focused on investments in DC plans, specifically the plan sponsor's use of the dynamic or hybrid qualified default investment alternative. The dynamic QDIA can be defined as an investment option that starts a participant off in one investment product or solution and, upon reaching a certain threshold, automatically transitions the participant into a second, more retirement-focused product or solution. This structure is the focus of this paper.

Source: Ymaws.com, May 2021

Use of Nonelective or Matching Contributions to Satisfy the Nondiscrimination Safe Harbor

Question: We are redesigning our 401k plan to use the Code Section 401(k)(13) nondiscrimination safe harbor for plans that make automatic deferrals. That safe harbor will also require our company to make nonelective or matching contributions. How do we decide which type of employer contribution to make?

Source: Thomsonreuters.com, May 2021

Retirement Plan Fees Worsen Enterprise Risk

A new era of employee activism is underway in which plaintiff lawyers find fertile ground for litigation opportunities, catching many employers unprepared. The focal point of the growing number of such lawsuits is the compensation that employers arrange for payment to the vendors of services to the ERISA plans. Underestimating the economic and reputational risks related to deficiencies in the prudent management of ERISA plans threatens an entire enterprise.

Source: Rolandcriss.com, May 2021

Requesting Plan Documents: What's Included?

A participant has requested copies of plan committee meeting minutes and notes for the last four quarters. Does the committee have to comply with this request?

Source: Retirementlc.com, May 2021

The Benefits of Enacting a Plan Sponsor Philosophy

Overwhelmed by a lengthy to-do list, including the perpetual need to meet many ERISA regulatory obligations, plan fiduciaries often lose sight of the foundation for sponsoring a retirement plan: its purpose. Enacting a Plan Sponsor Philosophy is an effective way for committee members to remind themselves of this basic goal.

Source: Porteval.com, May 2021

Evaluating Five Distinct Lifestyles in Retirement

As approximately 70 million Baby Boomers make their way into and through retirement, increased attention is being given to how they approach retirement spending as well as what constitutes a satisfactory lifestyle in retirement. One thing is clear, there is little homogeneity when it comes to the path retirees navigate.

Source: Porteval.com, May 2021

Two Approaches to Benchmarking Plan Fees

Benchmarking retirement plan fees has become more complex in recent years, as it has moved beyond just scrutinizing recordkeeping and administrative fees. There are two ways sponsors can benchmark their fees. There is the traditional approach of doing an external benchmark by issuing an RFI or RFP. The other approach is to use information from a database of plan sponsors to compare fees paid.

Source: Plansponsor.com, May 2021

Cybersecurity Best Practices, DOL Style: Setting the Groundwork

Many general business practices that are the essence of sound governance and responsible business practice also are applicable in establishing strong security policies, procedures, guidelines, and standards. The DOL suggests considering several practices outlined here.

Source: Napa-net.org, May 2021

Could a Quick Appeal Signal a Shift in ERISA Litigation?

A class action involving a $1.6 billion 401k plan has been fast-tracked to the U.S. Court of Appeals for the Third Circuit for a ruling on an issue of emerging concern in ERISA excessive fee litigation. The issue under consideration might produce a shift in litigation strategy, if not results.

Source: Napa-net.org, May 2021

EBSA Privacy and Cybersecurity Guidance

The DOL's new guidance formalized its long-held view that retirement plan fiduciaries must ensure proper mitigation of cybersecurity risks. More specifically, the DOL expects retirement plan fiduciaries to select and monitor the cybersecurity practices of their service providers. Ten key takeaways and next steps.

Source: Employeebenefitsblog.com, May 2021

The All-Out Battle Over the 401k Default Option

The fight for the 401k default option, like the competition to be a plan's recordkeeper or adviser, could change the largely cooperative DCIO landscape.

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

Senate Retirement Legislation Introduced

The Improving Access to Retirement Savings Act was introduced this week by Senator Charles Grassley, Senator Maggie Hassan, and Senator James Lankford. "The bill provides common-sense, bipartisan solutions that will help address the challenges and obstacles that continue to inhibit savings and producing income during retirement," wrote Paul Richman, IRI Chief Government and Political Affairs Officer.

Source: Myirionline.org, May 2021

Cybersecurity Best Practices, DOL Style: Systems

A Secure System Development Life Cycle Program (SDLC) process ensures that security assurance activities such as penetration testing, code review, and architecture analysis are an integral part of the system development effort. The DOL has enumerated best practices in this regard which are outlined here.

Source: Asppa.org, May 2021

2021 401k Universe Benchmarks Report

This annual report illustrates how workers are saving and investing in defined contribution plans. This year's version features data from 100 plans covering more than three million eligible participants. It highlights the most common benchmarking statistics, including plan participation rates, savings rates, balances, investment, and trading activity and distributions from accounts (e.g., loans, withdrawals, cash-outs, and rollovers).

Source: Alight.com, May 2021

401k Plan Balances and Savings Rates Hit Record Highs

Through a combination of increased contributions and high investment returns, workers' retirement accounts bounced back from the early economic turmoil caused by the pandemic to reach historic levels, according to a new report by Alight Solutions.

Source: Alight.com, May 2021

Withdrawing 401k Funds After Retirement Is Not the Problem

The big problem isn't helping people distribute their retirement assets to last their lifetime. The big problem is getting people to accumulate the assets they'll need in retirement. This shouldn't be news to anyone who follows the retirement industry. Most Americans haven't saved the money necessary to afford a comfortable retirement.

Source: Pension-Consultants.com, May 2021

ERISA Cybersecurity Lessons for Employers

Retirement plans are increasingly subject to cybersecurity issues, and the DOL is taking notice. Also, litigation arising under ERISA involving cybersecurity threats has highlighted a plan administrator's duty to prudently select and monitor service providers. The DOL's best practices guidance includes many specific action points. Several of their recommendations are highlighted here.

Source: Ogletree.com, May 2021

Empire State Moves Toward Mandatory Auto-IRA Program

New York State's legislature is now looking at making its existing auto-IRA program mandatory. The state's General Assembly on May 11 passed NY A03213A that would make the New York State "secure choice" auto-IRA program mandatory for private-sector employers that do not offer a retirement plan and employ 10 or more employees. The legislation is now pending in the New York State Senate.

Source: Napa-net.org, May 2021

Major Bipartisan Retirement Reform Bill Gets House Committee Approval

The House Ways and Means Committee passed a major bipartisan package of retirement reforms clearing the way for possible House approval this year. The legislation carries over most provisions from an earlier version of the bill but contains some tweaks and several additional sections, including some revenue offsets that would direct more workplace savings into after-tax Roth accounts. It also draws several provisions from broad Senate legislation (S 1431) introduced in the prior Congress and likely to see reintroduction soon, suggesting that a combined retirement bill may advance this year.

Source: Mercer.com, May 2021

Updating Your 401k Retirement Plan Committee's Responsibilities

If you are like many 401k plan sponsors, you worry about whether your retirement plan committee is using its time wisely talking about what is important? The author believes that your retirement plan committee should focus on six main areas which are reviewed here.

Source: Lawtonrpc.com, May 2021

Substitutions That 401k Plan Sponsors Can't Afford to Make

401k plan sponsors think they can substitute a part of their job with something else. As plan fiduciaries, they do so at their financial peril. This article is all about four substitutions that plan sponsors can't afford to make.

Source: Jdsupra.com, May 2021

Why You Should Save for Your Retirement Before for Your Kids' College

Choosing where to put your savings is a question that does not have a simple answer that works for everyone. Deciding how much of your discretionary dollars to put towards retirement savings, college expenses, life insurance, an emergency fund and other buckets of money will vary depending on your unique financial situation. Here are a few arguments for prioritizing saving for retirement ahead of saving for your kids' college expenses.

Source: Intuit.com, May 2021

The SECURE Act Acronym Plans: PEPs, MEPs, and GoPs

The SECURE Act sought to broaden retirement plan coverage for American workers. With many of the provisions only now taking effect, the question turns to whether the newly established and expanded plan types -- pooled employer plans (PEPs), group of plans (GoPs), and multiple employer plans (MEPs) -- will live up to the hype.

Source: Captrust.com, May 2021

New Mandatory Retirement Plan Requirement for Certain New York City Employers

On May 11, 2021, the City Council of New York enacted a local law to establish a retirement savings program for certain employees of private entities. The new law creates a mandatory auto-enrollment payroll deduction IRA program for employees of private-sector employers in New York City who do not offer a retirement plan and employ five or more employees.

Source: Benefitslawadvisor.com, May 2021

Not Happy With Your 401k? Here Are Three Signs It's Time to Ditch It

One of the best things about 401ks is that they allow you to sock away much more money on an annual basis than IRAs. Currently, 401ks max out at $19,500 a year for savers under 50, and $26,000 for those 50 and over. Not only do these higher contribution limits allow you to save more for the future, but they can also land you a larger tax break immediately. But, if these three factors apply to you, it may be time to dump your company's retirement plan and look at other options instead.

Source: Usatoday.com, May 2021

As MEPs Grow, ERISA Lawsuits Rise With Them

As companies seek efficiency, lower cost, and reduced fiduciary headaches by joining a multiple-employer plan, the MEP providers are encountering the same ERISA challenges to their 401k or 403b plans as those faced by single-employer sponsors. Allegations range from excessive investment fees to poorly performing investments to inadequate monitoring of administrative costs.

Source: Pionline.com, May 2021

Maxing Out Your 401k Could Earn You This Much Money Over Your Career

The government has gradually increased the annual 401k contribution limit over the years, and it's likely that it will continue to do so. But if it stays the same, this is how much you could accumulate over time by maxing out your contributions, assuming the max individual contribution in 2021 of $19,500, to this tax-advantaged retirement account.

Source: Fool.com, May 2021

Fiduciary Investment Advice: Implications of DOL Prohibited Transaction Exception 2020-02

The Exemption regulates the conduct of "Investment Advice Fiduciaries" who provide investment and/or rollover advice. "Investment Advice Fiduciaries" are investment advisers, broker-dealers, banks, and insurance companies and their employees, agents, and representatives. The Exemption very squarely places the responsibility for compliance with its requirements on outside investment advisors. To rely on the Exemption, besides other requirements, Investment Advice Fiduciaries must provide certain disclosure and meet specified standards of conduct.

Source: Benefitslawadvisor.com, May 2021

Humana Faces Classic Prudence Claims in New ERISA Lawsuit

Plaintiffs have filed a proposed class-action lawsuit against health insurance provider Humana in the U.S. District Court for the Western District of Kentucky, alleging breaches of the fiduciary duty of prudence required by ERISA. The plaintiffs allege that, with its billions of dollars in assets, the Humana DC retirement plan has substantial bargaining power regarding the fees and expenses charged against participants' investments.

Source: Planadviser.com, May 2021*

Wells Fargo Fails to Shake 401k Suit

A lawsuit against Wells Fargo over the use of its investment products in the company's $40 billion 401k plan this week cleared a major hurdle. On Wednesday a federal judge denied a motion to dismiss the case, finding that the plaintiffs' "allegations are far more than general assertions, and that accepted as true, show that [the] defendants engaged in prohibited transactions." The development likely gives the plaintiffs more leverage for a settlement, as the class-action case has moved one step closer to a trial.

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

The Beltway Is Buzzing With Retirement Proposals

The word of the moment in Washington, D.C. when it comes to retirement activity is busy. Legislative and regulatory proposals are floating through the halls of Congress and in the offices of agencies such as the Department of Labor, said Preston Rutledge, who served as assistant secretary of labor for the Employee Benefits Security Administration under President Donald Trump.

Source: Insurancenewsnet.com, May 2021

NYC Will Require Mandatory Retirement Savings for All Private Sector Employees

On May 11, 2021, Mayor Bill de Blasio signed into law legislation that will require private-sector employers located in New York City to provide a mandatory retirement savings program for their employees. As a result, New York City employers will soon have to take action to ensure that each eligible New York City employee is properly enrolled in a retirement program.

Source: Foxrothschild.com, May 2021

Compliance Connections: Reviewing and Reprioritizing Your Retirement Plans

Recent developments for qualified retirement plans have received significant attention among plan administrators, but some may have flown beneath the radar. When you're an ERISA fiduciary, new developments occur quickly. With information coming to you from many directions, this article highlights some of the significant developments, so you can quickly connect the alignment of your existing retirement plan with the most current information, rules, and guidance.

Source: Ajg.com, May 2021

Pooled Employer Plans: Employer Considerations

This article reviews some of the considerations employers may need to address when trying to decide whether to participate in a particular PEP. There will be many PEPs available in the market from which to choose; thus, employers will need to look to a PPP's and/or a PEP's marketing or other materials for more detailed information. But, there is some essential information employers seek and consider.

Source: Actuary.org, May 2021

DOL Provides Cybersecurity Guidance

Newly released documents offer plan sponsors, plan fiduciaries, recordkeepers, and plan participants direction for avoiding cyber theft. What you should know.

Source: Pnc.com, May 2021

Record Balances: DC Plan System Continues to Thrive

Fresh data shared this week by Principal and Fidelity shows defined contribution retirement plan balances have -- yet again -- reached record highs, but the data also underscores the need to improve access for more workers.

Source: Planadviser.com, May 2021

Judge Moves Forward Wells Fargo 401k Self-Dealing Suit

A federal district court judge has moved forward a lawsuit alleging that Wells Fargo 401k plan fiduciaries should have been able to obtain superior investment products at a very low cost but instead chose proprietary products for their benefit, increasing fee revenue for the company and providing seed money to newly created Wells Fargo funds.

Source: Planadviser.com, May 2021

Bronson Healthcare Group Sued Over 403b Plan Fees

Bronson Healthcare Group and its board of directors are facing an ERISA lawsuit alleging they allowed participants of the organization's 403b Tax Sheltered Matching Plan to be subjected to excessive administrative and investment fees, resulting in lower account balances.

Source: Planadviser.com, May 2021

University Pushes Back on Excessive Fee Class Claims

The fiduciary defendants in a 403b university excessive fee suit say the plaintiffs have not only failed to make their case but that they've taken actions in their account(s) that undermine their arguments. The suit was originally filed in June 2017 by Latasha Davis and Jennifer Elliott on behalf of the plan's more than 24,000 participants and beneficiaries.

Source: Napa-net.org, May 2021

Senate Committee Hearing Explores Retirement Security Measures

The Senate Health, Education, Labor, and Pensions (HELP) Committee will hold a hearing this week to examine issues surrounding retirement security and measures Congress may consider to help more of America's workers and retirees save and plan for their golden years.

Source: Myirionline.org, May 2021

Summary of Provisions in the Securing a Strong Retirement Act of 2021

This chart summarizes the "Securing a Strong Retirement Act of 2021" as marked up by the House Ways and Means Committee on May 5, 2021.

Source: Groom.com, May 2021

A Long Time Coming: The DOL Issues Cybersecurity Guidance

Given that the majority of plan sponsors and fiduciaries likely already have existing service providers that aid in the administration of their benefit plans, plan sponsors and fiduciaries may consider amending the applicable service agreement to include some or all of the provisions recommended here to the extent there is not sufficient contractual protection under the existing agreement.

Source: Frostbrowntodd.com, May 2021

Behavior Drives Outcomes: Learn How to Enhance Plans to Drive Retirement Success

According to the Schroders 2021 Retirement Survey, 37% of DC plan participants said they are offered ESG-related investment options by their employer, while 40% said they did not know. Of those who were aware of their ESG options, 9 out of 10 said they invest in them. Further, of those who said their DC plan did not offer ESG investment options or did not know, 69% said they would or might increase their overall contribution rate if offered ESG options. Only 31% said they would not.

Source: Fiduciarydecisions.com, May 2021

ESG Options in 401k Plans Could Lead to Higher Contribution Rates According to Survey

According to the Schroders 2021 Retirement Survey, 37% of DC plan participants said they are offered ESG-related investment options by their employer, while 40% said they did not know. Of those who were aware of their ESG options, 9 out of 10 said they invest in them. Further, of those who said their DC plan did not offer ESG investment options or did not know, 69% said they would or might increase their overall contribution rate if offered ESG options. Only 31% said they would not.

Source: Businesswire.com, May 2021

Examining Leakage From Retirement Savings Accounts

Pre-retirement withdrawals -- often referred to as "leakage" from retirement accounts -- are allowed under certain circumstances, subject to certain penalties or additional taxes. The Joint Committee on Taxation recently issued a report to Congress summarizing its efforts to better understand contributions to, and distributions from, retirement accounts, with a particular emphasis on distributions from retirement accounts to pre-retirement age individuals.

Source: Asppa.org, May 2021

DOL Assessing Guidance on Private Equity in TDFs

Amid ongoing questions surrounding the use of private equity investments in professionally managed funds within 401ks, a senior DOL official confirmed that the department is conducting stakeholder outreach to assess the issue.

Source: Napa-net.org, May 2021

The Long Terms Effect of COVID on 401k Plan Providers

The COVID pandemic is probably the most challenging thing we have gone through in our lifetime. While COVID has certainly been challenging, it has also opened eyes as to where the retirement plan industry is headed and the profound long-term effect that COVID will have on the retirement business (both good and bad).

Source: Jdsupra.com, May 2021

ESG Investing for Advisors: Having Better Conversations With Clients

This article defines and clarifies sustainable investing for advisors, presents the evolving opportunities and challenges, and addresses some of the key nuances to help advisors put ESG into context within today's wealth management landscape. Additionally, it describes four ESG investor mindsets based on original Fidelity research. These behavioral archetypes can help advisors understand their clients' motivations around ESG and sustainable investing and guide them to have more productive, meaningful, and engaging client conversations.

Source: Fidelity.com, May 2021

How Employers With 51-100 Employees Can Meet Their CalSavers Deadline

Money penalties apply to employers who don't timely either establish their exempt status or participate in the program. This article is a how-to for employers in the 51+ group, who have approximately six weeks until their CalSavers deadline arrives.

Source: Eforerisa.com, May 2021

Recovering Retirement Plan Overpayments: Process Is Key

A qualified retirement plan paying more in distributions than a participant is entitled to occur frequently. While unfortunate for participants who received an overpayment, a plan sponsor must recover overpayments on behalf of the retirement plan to protect the plan's tax-qualified status and comply with the sponsor's fiduciary responsibilities under ERISA. A recent court case involving the recovery of an overpayment highlights the value of having a robust administrative process for dealing with the inevitable overpayment issues that arise.

Source: Dickinson-wright.com, May 2021

Captrust's May Fiduciary Update

In this installment of Fiduciary Update, Captrust reports on the informal cybersecurity guidance issued by the DOL in April, when plan assets can be seized by a third party, and key takeaways from the DOL's new frequently asked questions on its class exemption regarding the provision of investment advice.

Source: Captrust.com, May 2021

DOL Issues Cybersecurity Guidance for Retirement Plans

Because retirement plans hold a significant amount of money and maintain personal participant information, retirement plans are often a desirable target for cybercriminals. Due to the wealth of money and information that retirement plans hold, the DOL states that plan fiduciaries have an obligation to ensure that proper cybersecurity precautions are in place.

Source: Wnj.com, May 2021*

DOL Electronic Retirement Rule Reminders

Just shy of a year ago on May 27, 2020, the DOL provided welcomed relief to employers and plan administrators concerning required disclosures for retirement plans subject to ERISA. This article is a reminder of the e-Delivery Rule requirements that are currently in effect as we move into year two of the rule.

Source: Withum.com, May 2021

KeyCorp Succeeds in Getting Some Claims Dismissed in Excessive Fee Suit

A court dismissed claims regarding KeyCorp plan's stable value fund option but moved forward some claims regarding excessive administrative and managed account fees.

Source: Planadviser.com, May 2021

Congressional Leaders Call for GAO Review of TDFs

The Chairpersons of two of the leading retirement plan committees in Congress are calling for a review of target-date funds. Sen. Patty Murray, Chair of the Senate Committee on Health, Education, Labor & Pensions, and Rep. Robert Scott, Chairman of the House Committee on Education & Labor, have written to the head of the Government Accountability Office, asking them to conduct a review of target-date funds.

Source: Napa-net.org, May 2021

CalSavers Upheld in Us Court of Appeals Case

A three-judge panel in the U.S. Court of Appeals for the Ninth Circuit affirmed a district court's dismissal of the case. The savings system is not a plan under the ERISA and is therefore not preempted by the law, the panel wrote in the opinion published yesterday.

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

BlackRock Signs Deal to End ERISA Class Action Claim

Following almost four years of litigation, a $9.65 million settlement has been reached in a complex ERISA class action brought by investors in the BlackRock Retirement Savings Plan that included allegations of self-dealing and excessive fees.

Source: Hallbenefitslaw.com, May 2021

American Rescue Plan Act Brings Retirement Plan Relief

The Act, which is largely focused on COVID-19 relief, brings with it a few notable retirement plan relief provisions (and one executive compensation change to help foot the bill). These provisions can be broken down into (1) single-employer pension funding relief, (2) expansion of Code Sec. 162(m) that limits deductions on executive compensation, (3) multiemployer pension funding relief, and (4) increase in PBGC premiums for multiemployer plans.

Source: Groom.com, May 2021

Department of Labor Issues Cybersecurity Guidance

The DOL addressed cybersecurity issues, not in the form of an advisory opinion, information letter, or a field advice bulletin, but rather in the form of three documents describing best practices for plan sponsors and plan fiduciaries, service providers to plans, and plan participants. There is no discussion of whether a participant's plan data is a plan asset under ERISA or the relative level of responsibility of a plan sponsor/plan fiduciary and a plan&'s service provider.

Source: Wagnerlawgroup.com, May 2021

Data Security Concerns Force the DC Industry to Cooperate

The defined contribution industry is at a crossroads. Recordkeepers, advisers, and money managers often compete in winner-takes-all battles, but to serve and protect clients, they must cooperate on cybersecurity and data access. Will that lead to sharing participant data?

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

Springtime DOL Updates

As we await even more fiduciary-related rules and guidance from the U.S. Department of Labor over the coming months, there are some lower-profile spring updates worth noting. This article begins with the DOL's recent cybersecurity guidance, the first of its kind, as cybersecurity becomes an increasingly important issue for plan sponsors and service providers. It concludes with some new DOL guidance related to locating missing plan participants.

Source: Fiduciarygovernanceblog.com, May 2021

Designing Your 401k Plan for Combined Testing

Thousands of 401k plans are designed each year to promote savings in the most cost-effective manner. Most are established as stand-alone plans and will remain that way for their entire existence. Some, however, are initially set up as stand-alone, only to be paired with a cash balance plan down the road. Since most cash balance plans are designed to provide owners with the majority of the benefits, they cannot pass the nondiscrimination tests, so combining the cash balance plan with the 401k plan creates a cost-effective method to pass testing.

Source: Dwc401k.com, May 2021

IRS Releases Updated Operational Compliance List, Includes Secure Act Changes

The IRS posted on its website its most recent updated operational compliance list for qualified retirement plans, including 401k plans. Revisions made to the newly updated list that are effective in 2021 include changes in the 401k plan participation standards that are part of the Setting Every Community Up for Retirement Enhancement Act. There is also a change effective in 2022.

Source: Compliancedashboard.net, May 2021

What's in the New SECURE Act 2.0?

Most of the provisions that were contained in the earlier version are retained in the new one. But the "SECURE Act 2.0" legislation that the House Ways & Means Committee will mark up includes several new provisions as well as changes to some of the existing provisions. This is a summary of some of the additional changes and new provisions in the SSRA.

Source: Asppa.org, May 2021

Securing a Strong Retirement Act Re-Introduced

This legislation is the first comprehensive bipartisan retirement legislation introduced in 2021. Securing a Strong Retirement Act of 2021 expands upon and includes additional provisions from the SSRA of 2020. While this bill (and others) have been coined by many as "SECURE 2.0," it is prudent to follow retirement legislation developments by bill name for clarity and think of "SECURE 2.0" in the context of retirement reform generally.

Source: Ascensus.com, May 2021

Develop Your Fiduciary Toolkit

A fiduciary toolkit equips finance and human resources executives with knowledge, procedures, and performance measurements to drive operations, strategy, and compliance. This 5-page article examines the categories of best practices and how to evidence conformance to them.

Source: Rolandcriss.com, May 2021

Compliance Newsletter May 2021

This compliance newsletter covers four topics: additional DOL fiduciary guidance, DOL cybersecurity guidance, partial plan term relief guidance, and disaster relief for impacted Kentucky and Alabama individuals.

Source: Principal.com, May 2021

Refining the Language of Retirement

Though the use of confusing jargon remains prevalent, new Invesco survey data suggests the financial services industry has made progress in improving understanding of the defined contribution plan system.

Source: Planadviser.com, May 2021

Lawsuit Says Changes to University of Tampa 403b Plan Made Too Late

A participant in the University of Tampa's 403b plan has filed a lawsuit claiming that over the past six years, plan participants have paid at least $3 million in administrative fees, which it says is more than 10 times what they should be. The complaint says the plan's recordkeeper, TIAA, has been able to extract "such grossly excessive fees" because the fees are based not on services it provides to the plan but on a percentage of assets in the plan.

Source: Planadviser.com, May 2021

Ways & Means to Mark Up SECURE Act 2.0

The U.S. House Ways & Means Committee will be focusing on a markup of what's been called SECURE 2.0, legislation that includes several key provisions championed by the American Retirement Association. Chairman Neal and the Committee's ranking Republican, Rep. Kevin Brady, first introduced the Securing a Strong Retirement Act last October as a sequel to the 2019 SECURE Act. While they have yet to formally introduce the legislation in the new Congress, that bill is expected to form the basis of the May 5 markup.

Source: Napa-net.org, May 2021

Plan Sponsors Mostly Prefer Retirees Stay in Plan

A plurality of plan sponsors prefer that participants keep their DC plan balances in the plan after they retire, according to a new report by T. Rowe Price. Nearly 4 in 10 plan sponsors (39%) prefer that participants keep their DC assets in the plan after retirement, while only 17.8% prefer that participants exit the plan upon retirement.

Source: Napa-net.org, May 2021

Curtain Falls on IBM Stock-Drop Case

After more than five years of litigation and a trip to the Supreme Court, the ERISA stock-drop litigation against fiduciaries for IBM's employee stock ownership plan has ended with a modest $4.75 million settlement. The opinion of the 2nd US Circuit Court of Appeals in the case -- which found plaintiffs' pleadings sufficient to survive a motion to dismiss -- still stands, possibly leaving a narrow path for future stock-drop litigation.

Source: Mercer.com, May 2021

The Problems of 401k Plan Provider Contracts

While plan sponsors now know the price of plan administration, one problem remains. The problem is the plan provider contract, and so many disputes surround the contract. Without some guidance, 401k plan sponsors may be forced to turn over plan assets or money from their pocket needlessly to a soon-to-be former plan provider because they don't have the knowledge to contest. The problem with paying plan assets needlessly to a former plan provider is that it is a breach of fiduciary duty. This article is all about plan provider contracts and what you need to know to avoid a mess.

Source: Jdsupra.com, May 2021

DOL Issues New Cybersecurity Guidance: A Step Towards Minimum Expectations

The new guidance is intended to complement the DOL's May 2020 regulations on electronic records and disclosures to plan participants and beneficiaries. While the 2020 e-delivery regulations allowed retirement plans to rely on communications of retirement plan updates, benefit statements, and notices to participants and beneficiaries by electronic delivery, there was a recognition that such delivery created an increased risk of cybersecurity attacks. As a result, the DOL provided three sets of recommendations for the different parties involved in sharing sensitive retirement plan information.

Source: Icemiller.com, May 2021

IRS Clarifies Partial Plan Termination Relief Under 2020 Legislation

On April 27, the Internal Revenue Service issued informal guidance on partial plan terminations as part of the COVID-related tax relief provided under The Taxpayer Certainty and Disaster Tax Relief Act of 2020, part of the Consolidated Appropriations Act of 2021. The Relief Act was intended to provide a measure of relief for qualified plan sponsors that experienced layoffs due to COVID-19.

Source: Groom.com, May 2021

Securing a Strong Retirement Act of 2021

House Ways and Means Committee Chairman Richard Neal and ranking Republican member Kevin Brady on May 3 reintroduced the Securing a Strong Retirement Act of 2021. The bill follows the bipartisan model of success that led to the enactment of the SECURE Act in December 2019, balancing provisions sought by consumer groups with changes sought by providers of retirement plan services, and drawing together legislative proposals that have been introduced by members of Ways and Means.

Source: Americanbenefitscouncil.org, May 2021

You're Notified of a Pending DOL Investigation -- Here's What to Expect

What are the chances of getting your plan investigated by the DOL? It's not common, but it happens, and for various reasons such as a participant complaint that escalates to a case opening, information in Form 5500, bankruptcy or extreme financial distress, and other targeting that the DOL regional offices do. This article summarizes the process.

Source: 401kspecialistmag.com, May 2021

DOL Issues New Cybersecurity Guidance: What Plans and Service Providers Need to Know

The DOL issued its first cybersecurity guidance for plan sponsors, plan fiduciaries, recordkeepers, and plan participants. As the guidance may be considered a "safe harbor" for fiduciaries to show compliance with their obligations under ERISA, plans should take steps now to review the way plan data is protected and revisit contracts with service providers to incorporate the DOL's recommendations accordingly.

Source: Truckerhuss.com, May 2021*

Participant Data: Plan Asset or Fair Game for Recordkeepers to Use to Market Non-Plan Products?

In an emerging theory of liability, plan fiduciaries' treatment of participants' data is coming under scrutiny. Over the last five years, we have seen how the collection of many individuals' data can become a valuable asset in the right hands, whether it's used to influence an election, design a marketing plan that targets individuals based on their specific preferences and needs, or just to compile large troves of information to analyze trends.

Source: Truckerhuss.com, May 2021

Tougher DOL Fiduciary Rule Is on the Way. But When?

Attorneys warned this week that Labor is setting up "regulatory whiplash" and huge compliance costs by requiring retirement advisors to comply with a new fiduciary prohibited transaction exemption that it plans to eventually amend.

Source: Thinkadvisor.com, May 2021

Ascensus Sells for $3 Billion After Failing to Draw Buyers for One-Third Less in 2018

Genstar and Aquiline just sold Ascensus at a reported $3 billion valuation after a $2 billion asking price failed to draw buyers three years ago. Stone Point Capital LLC and GIC, Singapore's sovereign wealth fund, rewarded the two private equity investors for their faith and patience with a $1 billion or 50% premium for the Dresher, PA, recordkeeper.

Source: Riabiz.com, May 2021

WakeMed Quickly Settles 403b Fee Lawsuit

A settlement has been reached in an ERISA fiduciary breach lawsuit filed against WakeMed, an emergency and urgent care operator located in North Carolina. The ERISA lawsuit suggested it failed to meet its fiduciary duties of prudence and loyalty in the operation of a staff retirement plan.

Source: Planadviser.com, May 2021

Senate Bill Would Allow 401k Match for Student Loan Payments

Student loan payments would be entitled to earn "matching" 401k retirement contributions from employers under a bill introduced by Senate Finance Chairman Ron Wyden. The proposal would enable Americans to build retirement savings while repaying their student debt even if they can't afford to make their own contributions to a 401k plan.

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

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