June 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.

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Novel 401k Plan Lawsuits Over the Use of Forfeitures: Swinging for the Fences or Plausible Claims?

This article summarizes the factual similarities in the two lawsuits over the use of plan forfeitures to offset employer contributions, highlights and contrasts key aspects of each court's claims analysis, and offers some commentary. It also provides steps for plan sponsors to consider taking in light of what may be a growing trend in ERISA litigation.

Source: Verrill-law.com, June 2024

2024 Recordkeeping Survey

Significant levels of change in federal law regarding employer-provided retirement plans, including a variety of new optional and mandatory provisions enacted since 2019, have put tremendous pressure on plan recordkeepers after years of fee compression. The 2024 PLANSPONSOR survey found that recordkeepers are juggling competing priorities of new mandatory and optional plan features alongside demands for their platforms to support retirement income, personalization, financial wellness programs, and more.

Source: Plansponsor.com, June 2024

Fidelity Reveals Top Five Optional Provisions Plan Sponsors Are Most Likely to Adopt

The increase in catch-up contribution cap for participants aged 60 to 63 and the expanded in-service distribution choices made possible by the SECURE 2.0 Act were among the top-ranked optional provisions that advisers might see plan sponsors wanting to adopt, according to respondents from a June survey by Fidelity Investments titled "SECURE 2.0 Optional Provisions Survey Insight."

Source: Planadviser.com, June 2024

Judge Dismisses 401k Excessive-Fee Lawsuit Against PNC Financial

PNC Financial Services Group Inc. has had a lawsuit dropped from workers accusing the company of paying excessive recordkeeping fees for their incentive savings plan. Judge Christy Criswell Wiegand decided that an expert witness for the plaintiffs was unreliable, leading to a dismissal of the allegations.

Source: Planadviser.com, June 2024

Can a TPA's Exploitation of a Plan Sponsor's Breach of ERISA Duty Make the TPA a Fiduciary?

The new theory of liability is that TIAA knew of the plan sponsors' failure to exercise oversight of TIAA's sales tactics, a clear breach of fiduciary duty by the plan sponsors. TIAA allegedly knowingly exploited this failure for its benefit. Therefore, even though the company was a service provider and arguably not a fiduciary under ERISA, this knowing collaboration in the sponsor's breach brought it within the ambit of the law. It is a creative argument, it is convoluted, and it is one to watch for the future.

Source: Lawyersandsettlements.com, June 2024

SECURE 2.0 Optional Provisions Survey Insights From Plan Sponsors

Fidelity recently invited over 2,000 clients to participate in an optional provision survey to obtain insight into client intentions. Top-ranked optional provisions reported by respondents include features such as the increased catch-up contribution limit for participants ages 60 to 63, as well as the new in-service distribution options made available under SECURE 2.0. Read this 5-page report to learn more about the emerging trends and considerations for plan sponsors as you evaluate SECURE 2.0 optional provisions.

Source: Fidelityworkplace.com, June 2024

Retirement Income Solutions: Recordkeeper Study

In Q1 2024, the DCIIA RRC fielded two surveys to better understand retirement income and distribution capabilities offered by major recordkeepers. These surveys examined multiple elements, including priorities in retirement income strategy, influences in solution development, technological challenges, annuity offerings, frequencies of distribution types, and fee tiers. By analyzing the strategies and frameworks employed by major recordkeepers, the report aims to provide an aggregated, clearer perspective on capabilities to support retirement income solutions.

Source: Dciia.org, June 2024

Vermont Saves Joins Interstate Retirement Plan Partnership

Vermont Saves on June 27 announced that it has become a member of the Partnership for a Dignified Retirement, an interstate consortium whose other members are Colorado, Delaware, and Maine.

Source: Asppa.org, June 2024

Improving Retirement Outcomes: Demographic Considerations

This 34-page policy paper discusses retirement inequities and how current retirement plan design elements and policies may inadvertently disadvantage certain cohorts of individuals. It offers potential changes and actions for consideration by policymakers, think tanks, actuaries, and employers/plan sponsors to improve retirement outcomes for groups facing inadequate retirement security under common designs. The paper concludes with considerations for further effort, research, and studies.

Source: Actuary.org, June 2024

Five Key Findings from Alight's 2024 Universe Benchmarks Report

The report provides a comprehensive look at the savings and investment behaviors of participants in DC plans. Drawing on data from almost 100 plans with three million eligible participants, this year's report sheds light on key trends in plan participation, savings rates, plan balances, and more, offering actionable insights for employers and participants alike.

Source: 401kspecialistmag.com, June 2024

IRS Provides Guidance on Emergency Personal Expense and Domestic Abuse Victim Distributions Under SECURE 2.0

The SECURE 2.0 Act of 2022 added new exceptions to the 10% additional tax for emergency personal expense distributions and domestic abuse victim distributions. These new distributions became effective January 1, 2024. On June 20, 2024, the IRS issued Notice 2024-55 which provides new guidance regarding these distributions and is reviewed here.

Source: Ktslaw.com, June 2024

How America Saves 2024

Here is a report on the current state of defined contribution plans in America. How does your plan stack up? The comprehensive plan data in "How America Saves 2024" puts the trends of the retirement industry right at your fingertips so you can stay current, create stronger plans, and provide better participant outcomes.

Source: Vanguard.com, June 2024

Exceptions to Penalty on Early Retirement Plan Distributions Outlined

The IRS issued guidance on exceptions to the Sec. 72(t)(1) additional 10% tax on early distributions from retirement plans for emergency personal expense distributions and for domestic abuse victim distributions, which were added by the SECURE 2.0 Act. The provisions of the act became effective Jan. 1. However, Notice 2024-55, issued Thursday, notes it is optional for a plan to permit emergency personal expense distributions and domestic abuse victim distributions.

Source: Thetaxadviser.com, June 2024

Automatic, Not Autopilot: Managing 401k Plans in the Auto-Enrollment Era

Auto-enroll features have been a net good for participants who need to save for retirement and build long-term wealth. However, plan sponsors should still be aware of potential issues that can arise as 401k plan participation becomes more automated. These issues occur primarily when plan participants are not fully engaged with the plan because they don't need to take action to participate. The good news is that it is well within the plan sponsor's power to minimize these issues.

Source: Shrm.org, June 2024

2024 Pulse of the American Retiree Survey

As a record number of Americans reach the traditional 65-year retirement age in 2024, a younger demographic of critically underprepared pre-retirees begins a 10-year countdown to protect retirement outcomes, according to Prudential Financial's "2024 Pulse of the American Retiree Survey."

Source: Prudential.com, June 2024

Vanguard: Roth 401k Savings Show Steady Growth

Vanguard's annual "How America Saves" report shows an uptick in Roth 401k both in terms of availability and participant use. According to the recordkeeper and asset manager's deep dive into more than 1,500 qualified retirement plans and nearly 5 million participants, Roth was offered by 82% of plans at year-end 2023, and by 95% of plans with over 5,000 participants.

Source: Planadviser.com, June 2024

55-Year-Olds Twice as Likely to Rely on 401k Compared to Predecessors

Fifty-five-year-olds are almost twice as likely as 65- and 75-year-olds to rely on "do-it-yourself" employer-sponsored plans like 401ks to fund their retirement amid the broader decline of defined benefit pension plans that supported previous generations, according to Prudential Financial Inc.'s "2024 Pulse of the American Retiree Survey."

Source: Planadviser.com, June 2024

Capital Group Names the Top Focus Areas for DC Investment Consultants

Defined contribution investment plan consultants are focused on three areas (evaluating plan needs and offerings for retirement income, TDFs, and participant outcomes) that touch on the need to solve for the decumulation of assets by workplace retirement plan participants, according to recent research from Capital Group.

Source: Planadviser.com, June 2024

Plaintiff Lawyers Can Now Use AI to Identify Potential Plan Issues

Tech and legal firm Darrow uses AI as a tool for ERISA lawsuit allegations such as underperforming plans and excessive fees. Attorney Levine, who often represents fiduciary defendants, says that the use of AI in this field of law is relatively new, but its use is "very much a data processing tool," and little else. Fiduciaries should generally follow the same principles as before, he says, but since AI models tend to focus on data procured from Form 5500s, sponsors should consider evaluating their Form 5500 reporting to be sure everything is accurate.

Source: Planadviser.com, June 2024

HOOPP and Abacus Data Release the 2024 Canadian Retirement Survey

When people talk about their retirement, it often focuses on freedom from work, spending time with friends and family, and perhaps traveling the world on luxury cruises. But the retirement dream may never be realized for millions of Canadians who are woefully unprepared for their post-work years, according to new research from the Healthcare of Ontario Pension Plan and Abacus Data which suggests a bleaker future could be ahead, especially for women.

Source: Pensionpulse.blogspot.com, June 2024

Top Five Differences Between a 401k Plan and a Pension Plan: With a Fashion Twist

This article takes a tongue-in-cheek look at the five major differences between a DB and a DC plan as if they were fashion movements. It's a fun way to discuss what style (plan design) might fit an employer best based on their preferences and circumstances.

Source: Penchecks.com, June 2024

CFP Board Backs DOL Fiduciary Rule in Federal Court

Writing in an amicus, the CFP Board cautions that "If the Court accepts Plaintiffs' arguments, then this will leave open significant regulatory gaps that allow advisors to recommend financial products, including insurance products, that are not in the best interests of retirement investors, in contravention of [ERISA's] mandate to provide a high level of protection for retirement assets."

Source: Napa-net.org, June 2024

What Plan Sponsors Should Know About DOL's Final Fiduciary Rule

While the direct effect of the DOL's final fiduciary rule on plan sponsors appears modest, plan vendors may decide to modify their service models -- including associated fees -- and sales practices. This is a comprehensive review of the rule including implications for plan sponsors.

Source: Mercer.com, June 2024

Salesforce Settles ERISA Class Action With 50k Workers

Just a week before a bench trial was scheduled to begin, Salesforce reached a settlement with as many as 50,000 of its employees in a class action lawsuit over its 401k plan. The San Francisco-based software company faced claims of breach of its fiduciary duties under ERISA for failing to replace costly and underperforming investment options in the 401k plan. The workers had sought over $5 million in damages, plus prejudgment interest, to be divided among the plan participants in proportion to their account losses.

Source: Hallbenefitslaw.com, June 2024

The Growing Trend of Collective Investment Trusts

Many plan fiduciaries express surprise when learning that Collective Investment Trusts have existed longer than their 40 Act Mutual Fund counterparts. Collective trusts are similar to mutual funds given investors in both pool assets with others and own a portion of the fund. Both vehicles are daily valued and provide investors with a Net Asset Value. Additionally, both vehicles are professionally managed, audited annually, and provide investors with periodically produced "fact sheets." However, there are several key differences between mutual funds and CITs.

Source: Fiducientadvisors.com, June 2024

401k Plan Sponsor Fiduciary Best Practices For Lost Or Missing Plan Participants

When plan sponsors have lost contact with 401k plan participants, they must address several key questions. The DOL has recently asked for input on its proposal to deal with lost or missing plan participants. But the idea of a participant being missing or lost is less black and white than it seems.

Source: Fiduciarynews.com, June 2024

Milliman Was Falsely Accused of Fiduciary Breaches: Conservative Investment Strategies on Trial -- Opinion

Is it fiduciary malpractice to offer conservative investment strategies in a company-sponsored defined contribution plan? That was the key question in the fiduciary imprudence case that went to trial against Milliman and will be the same question in the upcoming trial against UnitedHealth. Milliman was accused of imprudence for hedging market volatility in target-risk funds. UnitedHealth is accused of selecting underperforming Wells Fargo target-date funds that were conservatively invested to avoid volatile technology stocks.

Source: Encorefiduciary.com, June 2024

New Research Finds Substantial Growth in Individual Account Retirement Plan Assets

A new research report published today by the Employee Benefit Research Institute found that after modest growth and declines in individual account retirement plan ownership and assets from 2016 to 2019, there was substantial growth from 2019 to 2022.

Source: Ebri.org, June 2024

Financial Incentives for Employee Participation in 401k

Employers who sponsor 401k and 403b plans without auto enrollment provisions have traditionally been challenged with increasing participation rates. Most employers were interested in different options to encourage more employees to affirmatively make elective deferral contributions into their retirement plans. Thanks to SECURE 2.0, for plan years beginning after December 29, 2022, employers that sponsor 401k or 403b plans may offer employees a "de minimis" financial incentive.

Source: Consultrms.com, June 2024

Form 5500 Participant Count: Cash or Accrual Basis? To Audit or Not to Audit?

The number of participants as of the beginning of the year determines whether the plan's financial statements must be audited. Starting in 2023, eligible participants who do not have an account balance on the first day of the plan year are no longer included in the participant count used to determine whether the plan must be audited. The literal application of this rule seems quite simple. No money, no account, right? Maybe not!

Source: Belfint.com, June 2024

How America Saves? At a Record Pace in 401k, Vanguard Finds

The report found that the average participant deferral rate matched the historic high of 7.4% in 2023 (the median deferral rate was 6.2%). When combined with employer contributions, the average participant total savings rate kept pace with the all-time high of 11.7% (median 11%), reached the prior year.

Source: 401kspecialistmag.com, June 2024

DOL Files Counter-Brief to Retirement Security Rule Challenge

The DOL answered one of two open lawsuits in the federal courts challenging the Retirement Security Rule on June 14. The regulator's first response in court argued that the new rule is compliant with existing case law and is substantially different from a 2016 regulation that was vacated by the U.S. 5th Circuit Court of Appeals.

Source: Planadviser.com, June 2024*

Dueling Decisions Spur Employer Confusion on 401k Forfeitures

Employers tasked with reallocating 401k assets forfeited by former employees are encountering a wave of litigation alleging the misuse of plan funds, as well as an emerging disagreement between judges on these suits' viability.

Source: Bloomberglaw.com, June 2024

IRS Clarifies 10% Additional Tax for Certain Emergency Distributions

The IRS issued guidance on June 20 on the application of exceptions to the 10% additional tax under Internal Revenue Code (IRC) Section 72(t)(1) for emergency personal expense distributions and domestic abuse victim distributions. The guidance comes in Notice 2024-55. More specifically, Notice 2024-55 provides guidance on the portions of the SECURE 2.0 Act that added exceptions to the 10% additional tax.

Source: Asppa.org, June 2024

Business Owners Delay Retirement Due to Savings Fears

While most business owners say they're on track for retirement, recent findings from Nationwide show that just over a third (36%) have postponed their retirement in the past year. This concern is even more prominent for small business owners, with 57% who say they have pushed back their retirement timelines.

Source: 401kspecialistmag.com, June 2024

Group Says DOL Overreaches with "Lost and Found" Database

The ERISA Industry Committee wants the DOL to back off from requiring retirement plans to provide what it calls excessive amounts of participant information for its SECURE 2.0-mandated "Retirement Savings Lost and Found" database.

Source: 401kspecialistmag.com, June 2024

Breaking Up is Hard to Do: Exiting a Retirement Plan MEP or PEP

There are many reasons that plan sponsors may decide to join a MEP, a PEO plan or a PEP, all of which are a type of Multiple Employer Plans. There are an equal number of reasons why a plan sponsor may decide it is time to exit the MEP. Perhaps the company has grown and the employer desires more flexibility, the company is purchased and needs to spin-off to merge into the buyer's plan, the level of service desired is not being met, or the plan sponsor wants to terminate the plan. No matter the reason, breaking up (with a MEP) is hard to do.

Source: Newfront.com, June 2024

HP Prevails in "Novel" 401k Forfeiture Reallocation Suit

The third of the forfeiture reallocation suits to come before a federal judge was described as a "swing for the fences" and dismissed, with a "catch." Judge Freeman commented that the plaintiff "advances a novel legal theory under which it is a breach of fiduciary duty to allocate forfeited amounts to reduce employer contributions rather than to pay administrative costs." She went on to note that "to date, there is no binding authority that addresses this theory...."

Source: Napa-net.org, June 2024

How Much Could 401k Contribution Limits Rise in 2025?

How much will the maximum 401k, 403b, and 457 deferrals for defined contribution plans rise in 2025? More than this year, if one firm's forecast is any indication. Milliman researchers Nina Lantz and Abby Kendig believe it will increase by $1,000, going from $23,000 in 2024 to $24,000 in 2025.

Source: Napa-net.org, June 2024

Milliman Manages a Win in TDF Fiduciary Breach Suit

This suit was filed in January 2022 and made several allegations regarding practices by the fiduciaries of the Milliman, Inc. Profit Sharing and Retirement Plan. At issue was a suite of target risk funds. Those funds were put in the plan menu in 2013, but the suit comments that "having only been launched in November 2012, the Unified Funds were brand new, had no investment track record, and were untested."

Source: Napa-net.org, June 2024

Upcoming Appellate Arguments for Benefits Attorneys to Watch

Several important benefits cases are pending before various U.S. Courts of Appeals. Benefits attorneys should look out for the upcoming appellate arguments in these cases including Tanika Parker et al. v. Tenneco Inc. et al., case number 23-1857, U.S. Court of Appeals for the Sixth Circuit. In this class action lawsuit, workers allege that their automotive company employers mismanaged their 401k plan by charging excessive recordkeeping fees and maintaining high-cost investment offerings.

Source: Hallbenefitslaw.com, June 2024

US Retirement Accounts are Flush for Millions of Older Americans

The bull market in U.S. stocks has fattened retirement accounts for millions of older Americans, with many at the top of the income ladder having built up savings that far exceed their expected spending needs.

Source: Financial-Planning.com, June 2024

Form 5500 Deadline Fast Approaching

The deadline for filing the Form 5500 Series for 2023 calendar year plans is fast approaching. Employers and plan sponsors with a calendar-year plan must submit the Form 5500 Series by July 31, the last day of the 7th month after the end of the plan year about which they are to report. So they must submit the Form 5500 series for reporting about the 2023 plan year by July 31, 2024.

Source: Asppa.org, June 2024

Retirement Plan Data Accuracy

Offering a retirement plan carries with it responsibilities, but also benefits. So making the most of a plan maximizes its worth to all the stakeholders. This is the first in a series concerning the practical tips for making the most of a retirement plan. This installment focuses on the importance of making sure data is accurate.

Source: Asppa.org, June 2024

DOL Argues That Class Action Waivers in Plan Agreements Are Unenforceable

The Department of Labor filed an amicus brief to the U.S. 6th Circuit Court of Appeals in May which argued that a mandatory arbitration provision in a 401k plan document is unenforceable if it is tied to a class-action waiver. Most appeals courts have so far agreed with them.

Source: Plansponsor.com, June 2024

Many Workers Don't Realize They Are Not Contributing to Workplace Plans

Many nonparticipating employees, 59%, thought they were saving for retirement through their workplace plans, according to a recent study by Principal Financial Group. Among the respondents who believed they were saving for retirement in workplace plans but weren't, 49% thought they were automatically enrolled, 41% assumed they signed up themselves and 77% said they started saving as soon as they were eligible for the plan.

Source: Planadviser.com, June 2024

2025 IRS Retirement Plan Limits Forecast -- May

This is an update to the Milliman 2025 IRS Limits Forecast using the U.S. Bureau of Labor Statistics report published June 12, 2024. This article includes information about the limits for qualified retirement plans, how these limits are calculated, how they are affected by SECURE 2.0, and why they may be relevant for certain plan sponsors.

Source: Milliman.com, June 2024

First Lawsuit Filed Against DOL Over New ERISA Investment Advice Regulations

Texas-based insurance industry plaintiffs, including a nonprofit trade group, have filed the first lawsuit to challenge the DOL's recently issued final regulations that broaden the definition of fiduciary under ERISA. The plaintiffs allege that the regulations exceed DOL's authority under ERISA, the Internal Revenue Code, and the Administrative Procedure Act. They also claim that the rule and transaction amendments violate the APA because they are arbitrary, capricious, and incompatible with ERISA and the IRC.

Source: Hallbenefitslaw.com, June 2024

The New Fiduciary Rule: Confusion About Annual Retrospective Reviews

The DOL's new fiduciary regulation will be effective on September 23, 2024. Parts of the PTEs will be effective on that date also, but other parts will not be effective until a year later -- September 23, 2025. Unfortunately, this split of the effective dates has created a considerable amount of confusion about what needs to be done and when it needs to be done. This article discusses one of those issues, the annual retrospective review and report.

Source: Fredreish.com, June 2024

CITs Assert Greater Dominance in DC Plans

The growing adoption of collective investment trusts in the DC market has raised questions about whether mutual funds are heading toward obsolescence. Factors such as pricing, fee transparency, and investment minimums are just a few variables that shape whether mutual funds will remain a competitive investment vehicle, according to the latest Cerulli Edge--U.S. Retirement Edition.

Source: Cerulli.com, June 2024

The Future of Mutual Funds Amidst CIT Growth

While mutual funds have largely dominated 401k plans in the past, increases in CIT usage have led some experts to question whether the funds are slowly phasing out of the U.S. retirement system. A recent report from Morningstar found that CITs are currently on pace to overtake mutual funds as the most popular target-date vehicle in 2024, as they now represent 49% of the 401k market. New research by Cerulli Associates questions the future state of mutual funds.

Source: 401kspecialistmag.com, June 2024

2025 401k Contribution Limit Forecast: $1,000 Increase on Tap?

The Milliman 2025 IRS Limits Forecast was updated recently using the U.S. Bureau of Labor Statistics report published June 12, 2024. The update forecasts a $1,000 boost to this year's 401k elective deferral limit of $23,000, which would bring the 2025 limit to $24,000. For 2024, the elective deferral limit increased by $500 compared to 2023.

Source: 401kspecialistmag.com, June 2024

Institutional Plan Consultants: Nearly 90% of Clients Want Income Solutions

Institutional DC consultants are getting this message from nearly 90% of clients: We want retirement income solutions to offer our participants, according to PIMCO's 2024 DC Consulting Study. In a study capturing data, trends and opinions from 28 consulting and advisory firms working with more than 15,000 clients representing more than $7.9 trillion, respondents said 90% of large institutional clients put retirement income solutions of both guaranteed and non-guaranteed options as a top priority, a 21% increase over 2023.

Source: Planadviser.com, June 2024*

Strong Plan Committees Have Documentation, Flexibility

When it comes to running strong retirement plan committees, organization, documentation and flexibility are some of the key strategies for plan sponsors and their advisers to follow. Success comes not from following a set list of procedures, but creating the process that will best meet the plan sponsors goals and sticking to it.

Source: Planadviser.com, June 2024

DOL Releases New ERISA Fiduciary Rule

The DOL on April 23, 2024, issued the Retirement Security Rule, which expands who qualifies as an investment advice fiduciary for purposes of ERISA. Under the ERISA fiduciary rules currently in effect, there is a plethora of investment professionals who are not subject to ERISA's fiduciary safeguards. The DOL indicated that the new rule and amended PTEs will close the loopholes that permitted certain investment professionals to avoid ERISA's fiduciary standards.

Source: Hklaw.com, June 2024

Anticipating and Overcoming Retirement Plan Disclosure Challenges

As plan fiduciaries, employers often bear significant responsibilities and must comply with a wide variety of specific and recurring disclosure obligations imposed by law. Consistently meeting these obligations can be challenging, especially with the growing number of required disclosures and increased scrutiny by both the DOL and the IRS. As such, employers need to identify strategies and tactics to help anticipate and overcome these challenges.

Source: Bloomberglaw.com, June 2024

Are You a Fiduciary? The New Definition of an Investment Advice Fiduciary

This article addresses the definition of an "investment advice fiduciary" under ERISA, the DOL's official interpretation of the definition from 1975 through 2024, the policies underlying the DOL's transition to the new Retirement Security Rule, the requirements of the rule, and the impact thereof on businesses, investors, and plan sponsors. The article also examines the Retirement Security Rule's chance of survival in the face of current legal challenges.

Source: Bsk.com, June 2024

Use of Plan Forfeitures Not the Slam Dunk It Used to Be

A recent rash of class action lawsuits in California claims that using forfeitures to reduce future employer contributions to tax-qualified retirement plans runs afoul of ERISA. These cases have continued to advance despite their central claim seeming to contradict long-standing IRS guidance for the permitted use of plan forfeitures. Considering these developments, this article reviews how an employer can best use the forfeiture dollars without risking exposure to litigation.

Source: Benefitslawadvisor.com, June 2024

The Truth About Old-School Automatic Rollovers

Tom Hawkins explains why new-school automatic rollovers incorporating auto-portability are the future and why old-school rollovers need to go away. He writes, " While I am all-in for plan optimization, old-school automatic rollovers put employee benefits at risk by generating massive amounts of cashout leakage, stranding millions of participants' balances in safe harbor IRAs that charge excessive fees and earn paltry returns, while disproportionately impacting minorities, women, low-income and younger workers."

Source: 401kspecialistmag.com, June 2024

When Does a Corporate Transaction Trigger a 401k Participant's Right to a Distribution?

To accurately answer that question and to avoid potentially costly operation errors, sponsors of 401k plans who intend to participate in corporate transactions should be well-versed in the applicable distribution rules under the Internal Revenue Code and how they apply to various transaction scenarios. This article focuses on the rules applicable to 401k plans.

Source: Reinhartlaw.com, June 2024

Vetting of QDIAs Is Crucial as Options Proliferate

The qualified default investment alternative that a plan fiduciary chooses can shape participant outcomes for decades. As if that is not important enough, all the relatively new, compelling QDIA options for employees are making the evaluation and selection process even harder. Fiduciaries must have a strong process to determine the best-qualified default investment alternative for their plan's participants, said a panel at the PLANSPONSOR National Conference.

Source: Planadviser.com, June 2024

Rhode Island Latest State to Pass Auto-IRA Bill for Uncovered Workers

Ocean State lawmakers passed the Rhode Island Secure Choice Retirement Savings Program Act (H.B. 7127) on June 11 to create an automated individual retirement account for uncovered workers.

Source: Ntsa-net.org, June 2024

Nuts and Bolts of 403b Plan Terminations

What are the rules for terminating a 403b plan? In general, the rules for defined contribution plan terminations apply to 403bs. In this article, John Iekel writes about a recent presentation by Kelsey Mayo J.D., Partner, Poyner Spruill, and Director of Regulatory Affairs at the American Retirement Association, on the subject.

Source: Ntsa-net.org, June 2024

Another Employer Targeted With Forfeiture Fiduciary Breach, With a New Twist

Another national employer's 401k plan has been sued for a fiduciary breach in its use of plan forfeitures to reduce employer contributions with the plaintiff represented by a law firm new to this arena. The plan is the Wells Fargo & Company 401k Plan.

Source: Napa-net.org, June 2024

DOL Fiduciary Rule Challenge Gains More Support

The Hispanic Leadership Fund has filed an amicus brief in support of a suit brought by the Federation of Americans for Consumer Choice and others that "seeks to grant the motion to stay the Rule's effective date and to issue a preliminary injunction." It follows another amicus brief filed last week by the U.S. Chamber of Commerce in support of the legal challenge.

Source: Napa-net.org, June 2024

Participant-Plaintiffs Shift Argument, Outcome in TIAA Rollover Suit

A suit that challenged a program designed to "drive members from their ERISA plans and into TIAA-sponsored offerings, with little upside to those participants," has moved past a motion to dismiss. The suit, filed in September 2022 by plaintiffs against Teachers Insurance Annuity Association of America (TIAA) and TIAA-CREF, had asserted "...a variety of claims under the Employee Retirement Income Security Act of 1974."

Source: Napa-net.org, June 2024

The Positive Impact of 401k Automated Features Explained

The positive auto-feature impact (enrollment, deferral, escalation) is by now widely known, even resulting in a Nobel Prize. Yet, a new study from Principal puts specific numbers to the results, reinforcing the link between "nudges" and the successful outcomes they produce.

Source: Napa-net.org, June 2024

ERISA Bond: What Is It and do I Need One?

Almost every sponsor of every tax-qualified retirement plan must obtain a fidelity bond under section 412 of ERISA. Despite the broad application of this requirement, a surprising number of plan sponsors are unaware of this requirement and do not have a bond at all or do not have a bond in the proper amount. This article will help explain the requirements.

Source: Legacyrsllc.com, June 2024

Most Workers are Unknowingly Skimping on Their 401ks

A large chunk of US employees are not making contributions to their workplace retirement plans, and they don't even know it. A new poll from Principal sheds light on employee confusion around workplace retirement plans, and how good plan design could help solve the problem.

Source: Investmentnews.com, June 2024

401k Versus 403b: Guiding Clients Through Retirement Plan Choices

For building their retirement savings, investors have many options. There are many employer-sponsored retirement accounts, and the 401k plans and 403b plans are just two examples. Of the two, the 401k is the more popular and more familiar. Meanwhile, the 403b, even if lesser known, has its merits. So, what's the difference between 401k and 403b plans? In this article, InvestmentNews provides some insight into the question.

Source: Investmentnews.com, June 2024

Employees Mistakenly Believe They're Contributing to Retirement

Over half of employees who say they're contributing to their retirement are not, reports new findings from Principal's Retirement Security Survey. According to the report, which fielded responses from 2,050 workers, 59% of employees who are not contributing to their 401k or other workplace plan believe they are. Another 77% think they began saving after becoming eligible to contribute, showing a serious lack of retirement planning education and communications among workforces and their employees.

Source: 401kspecialistmag.com, June 2024

Jerry Schlichter Preps Advisors for Fiduciary Rule Changes: Podcast

Jerry Schlichter, founding and managing partner of Schlichter Bogard LLC and a well-known pioneer of retirement plan excessive fee litigation, visits the 401k Specialist Podcast to share some important insights on the upcoming changes, legal challenges and what advisors need to be doing to prepare for compliance.

Source: 401kspecialistmag.com, June 2024

Plan Sponsors Focusing on Retirement Income Solutions

A greater number of DC plan sponsors are prioritizing retirement income solutions, according to a recent report by PIMCO. The firm's latest study found that nearly 90% of large institutional consultants say the top priority for clients is to find solutions for generating income in retirement, a 21% increase over the previous year.

Source: 401kspecialistmag.com, June 2024

District Court Denies Motion to Dismiss Forfeiture Complaint

The United States District Court for the Southern District of California found that the Plaintiff had made a plausible complaint for a violation of ERISA § 404(a)(1). In particular, the Court described the exact nature of the harm alleged by Plaintiff as well as its basis for concluding that Plaintiff's claim of disloyalty was plausible.

Source: Wagnerlawgroup.com, June 2024*

TIAA Retirement Suit Foreshadows Future 401k Rule Litigation

A New York federal district court ruling tying TIAA to the alleged misconduct of its clients offers a rare glimpse at the upturned legal landscape awaiting pension servicers when a new 401k advice rule takes effect.

Source: Wagnerlawgroup.com, June 2024

What Keeps Employees From Contributing to Their Workplace Retirement Plan?

Nearly six-in-10 employees (59%) who are not contributing to their 401k or other workplace retirement plan think they are, according to the latest Principal Retirement Security Survey. Three out of every four of those employees (77%) believed they started saving upon becoming eligible to contribute. This misperception, compounded by persistent inflation and elevated interest rates, makes it harder for Americans to reach their retirement goals, according to Principal.

Source: Principal.com, June 2024

Use of 401k Plan Forfeitures Continues to be Scrutinized in Litigation

Forfeitures typically occur when an employee leaves a company before fully vesting in the 401k plan, thus leaving the employer with excess contributions. In a handful of recent lawsuits, plan sponsors have been questioned about their use of forfeitures assets to reduce employer contributions in 401k plans.

Source: Plansponsor.com, June 2024

Lawsuit Against TIAA Over Managed Account Service Moves Forward

TIAA's request to dismiss an amended lawsuit filed against it regarding a managed account service for participants was denied by a federal district judge in New York, with an order for the firm to provide an answer by June 21. The plaintiffs alleged that TIAA breached its fiduciary duties to participants under ERISA for allegedly cross-selling the firm's adviser-managed account service known as Portfolio Advisor, which comes at a higher cost than remaining in the plan.

Source: Planadviser.com, June 2024

The Rothification of Retirement

This PLANADVISER special coverage series considers the push toward increased Roth use in defined contribution plans and the implications for plan advisers, sponsors, and participants.

Source: Planadviser.com, June 2024

Major Differences Between DOL's Proposed and Final ERISA Investment Advice Regulations

The DOL's final regulations broaden the definition of fiduciary under ERISA to include more investment advisors. However, the eight hundred pages of final regulations, which consist of a final rule and three sets of amendments to ERISA prohibited transaction exemptions, contain crucial differences from the proposed regulations. Therefore, despite the significant expansion contained in the rule, the DOL did retreat from some of its original proposals.

Source: Hallbenefitslaw.com, June 2024

A Pop Culture Guide to the New Final Amendments to the QPAM Exemption

The DOL recently finalized amendments to the QPAM exemption that will considerably alter the exemption's conditions effective as of June 17, 2024. There are several immediate action items for investment managers and ERISA plan fiduciaries under the revised exemption. Here is a "Pop Culture" guide.

Source: Erisapracticecenter.com, June 2024

New Report Analyzing 20 Years of 401k Managed Account Data, Innovation, and Trends

Edelman Financial Engines released a report that features data and insights gained from 20 years of helping employees save for retirement through its managed account program. It finds that managed accounts are helping employees of all ages with optimal benefits and uptake closer to retirement age.

Source: Edelmanfinancialengines.com, June 2024

The Missing Link: Adding Emergency Savings Solutions to Retirement Plans

The passage of SECURE 2.0 brought new in-plan emergency savings solutions. What have the past five years of research taught us about the connection between short-term and long-term financial security? And how can 401k plans benefit from lessons learned?

Source: Blackrock.com, June 2024

What Can Canadian DC Plans Learn From U.S. Pension Legislation?

Features such as automatic enrolment in 401k savings plans are helping U.S. employees become retirement-ready, said Mark Iwry, a non-resident senior fellow at the Brookings Institution. As a result of auto-enrolment legislation, millions of workers who wouldn't be saving for retirement are now participating in a workplace retirement plan, he said. Adding the expansion of auto features in the Canadian retirement landscape would likely have a similar impact.

Source: Benefitscanada.com, June 2024

Disclaimer of Opinion Removal Analysis

Fifteen years have passed since 403b plans became subject to the same financial reporting and disclosure requirements as 401k audits. Auditors have been disclaiming their audit opinion on account of the financial statements potentially missing permissibly excluded contracts. Is it time to consider whether there is a continuing risk that the financial statements are potentially missing assets?

Source: Belfint.com, June 2024

SECURE 2.0: IRS Issues Fact Sheet on Disaster Relief Distributions and Plan Loans

The IRS recently issued Fact Sheet 2024-19, which addresses the special rules for distributions and plan loans for certain individuals impacted by major federally declared disasters under the SECURE 2.0 Act. Though not breaking much new ground, the fact sheet provides clear and helpful guidance to plan sponsors choosing to extend all or some of the distribution and/or loan relief to their employees in the wake of disasters.

Source: Morganlewis.com, June 2024

401k Lawsuits Over "Forfeited" Money Get a Lifeline

A new type of 401k lawsuit recently survived its first big challenge. Since one law firm began filing plan forfeiture cases last year, observers said they did not expect them to go very far. However, there are reportedly at least nine such lawsuits now pending, and the recent development in the Qualcomm case represents a tailwind for the plaintiffs.

Source: Investmentnews.com, June 2024

Expanded Abandoned Plan Program Gives Certain Bankruptcy Trustees QTA Eligibility

A new DOL interim final rule expands eligibility to serve as a "qualified termination administrator" to include Chapter 7 bankruptcy trustees and certain parties appointed by such trustees. Beyond expanding QTA eligibility, the interim final rule also makes several technical changes that may impact the administration of abandoned plans. Here is the background and a review of the interim final rule.

Source: Groom.com, June 2024

The New Fiduciary Rule: The Education Exception

Not every communication with retirement investors is a recommendation. There are three notable exceptions in the new fiduciary rule, two of which are discussed in the preamble to the regulation: education and "hire me." This article by Fred Reish discusses the DOL's position on investment and retirement education.

Source: Fredreish.com, June 2024

Understanding the Department of Labor Final Fiduciary Rule

The final fiduciary rule expands the definition of who is an investment advice fiduciary to provide investment advice to a plan or an IRA under ERISA and the Internal Revenue Code. The DOL also made changes to several prohibited transaction exemptions available to investment advice fiduciaries, including the Prohibited Transaction Exemption 2020-02, which the DOL intends to be the primary source of relief for investment advice fiduciaries going forward.

Source: Fidelity.com, June 2024

The DOL Fiduciary Rule Is Here: Are You an Investment Advice Fiduciary?

Where for decades there was a five-part test that made a distinction between sales activity and ongoing, individualized investment advice that was relied upon by an investor as a primary basis for investment, the new definition now tries to cover all persons who interact with an investor and make a recommendation for an investment in a way that a reasonable investor might think they are acting as a fiduciary. The regulation now encompasses both individual retirement accounts and single rollover transactions.

Source: Carltonfields.com, June 2024

The New Fiduciary Rule and Amended PTE 2020-02: Effective Date Considerations

With the DOL's new fiduciary advice rule, many advisors will need the protection provided by Prohibited Transaction Exemption 2020-02 to receive the conflicted compensation resulting from the fiduciary advice. The DOL amended PTE 2020-02 at the same time as the new fiduciary rule; however, the effective date for some of the PTE's conditions is delayed. This article describes the effective dates that apply to PTE 2020-02.

Source: Brokerdealerlawblog.com, June 2024

Three Considerations for Navigating Participants Through Uncertainty

Volatility is a fact of investing life, but market turmoil on a large scale can raise concerns among even the most battle-hardened investors about long-term market trends and impacts. Here is what plan sponsors can do to help participants combat fear and stay invested during market volatility.

Source: Blackrock.com, June 2024

Best Practices for a Self-Audit of Your Retirement Plan

For small plans that have no audit oversight, it behooves plan sponsors to trust, but verify that their plan officials are operating the plan by its terms. In addition to maintaining sound internal control policies and procedures, plan sponsors can add a layer of verification through a self-audit or an agreed-upon-procedures engagement performed by an independent accountant or specialized professional. Here is a menu of contribution-related procedures that plan sponsors could consider when designing a self-audit program.

Source: Belfint.com, June 2024

How Does Inflation Impact Near Retirees and Retirees?

Because inflation has been so low for so long, the risks of inflation have been generally overlooked and recent history does not offer much practical insight on its impact. This article, which is the first of two based on a new study, illustrates the financial consequences of high inflation by using economic theory and hypothetical households to trace possible paths of consumption and wealth under different macroeconomic scenarios.

Source: Bc.edu, June 2024

Fiduciary Fee Study

When fees are taken from 401k participant accounts, they directly decrease returns, resulting in less money available to grow over time. These fees can ultimately reduce a worker's retirement savings by hundreds of thousands of dollars and mitigate the success of offering a workplace plan. Fiduciary-grade investment advice can reduce the expenses of administering a 401k plan, including those of small businesses, according to a data deep-dive by Employee Fiduciary, LLC.

Source: Planadviser.com, June 2024*

Chamber of Commerce, ERIC Plead for Fewer Retirement Plan Disclosures

Industry groups have asked the Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation to simplify and improve retirement plan disclosures with specific recommendations in response to a request for information issued by the DOL in January. The interest groups agree that most participants do not read nor understand many disclosures related to their retirement benefits.

Source: Planadviser.com, June 2024

Bechtel Faces 401k Suit Over Default Managed Accounts

Engineering and construction firm Bechtel, its board, and its trust and thrift plan committee have been sued for allegedly defaulting plan participants into managed accounts that were not justified for the fees. The plaintiffs are seeking payment including "all profits which participants would have made if the defendants had fulfilled their fiduciary obligations."

Source: Planadviser.com, June 2024

TDF Fiduciary Hygiene: An Appropriate IPS, Customized Benchmarks, and Thorough Committee Minutes

On May 20, 2024, the United States District Court for the Northern District of California dismissed the plaintiffs' complaint in Bracalente v. Cisco Systems, Inc., holding that defendant Cisco did not violate ERISA's prudence requirement in selecting (and retaining) a suite of BlackRock target-date funds as the Cisco 401k plan's qualified default investment alternative. This article reviews the court's decision, highlighting three issues of practical significance for sponsor fiduciaries.

Source: Octoberthree.com, June 2024

DOL's Retirement Security Rule: Six Things Advisors Should Know

In April 2024, the DOL issued the final version of its Retirement Security Rule which imposes an ERISA fiduciary standard. Staying informed about and compliant with the new Rule is crucial for financial professionals to uphold ethical standards, maintain client trust, and operate successfully within the industry. Here are some questions and answers to help break down some of the key changes as well as a checklist to aid in complying with the new rule.

Source: Manning-Napier.com, June 2024

The Bumps in the Road of Being a 401k Plan Provider

Every business has a few bumps along the way, especially those in the retirement plan business. A third-party administrator the author once knew started from a desk at an accountant's office and also had bumps along the way. This article is about being a retirement plan provider and bumps along the way and how to navigate them.

Source: Jdsupra.com, June 2024

A Guide to 401k Withdrawal Strategies

Not all employees have the same financial or personal circumstances. There may be times when they may need to make partial or total early withdrawals from their 401k account. What are the 401k withdrawal rules? Is there a penalty for an early 401k withdrawal? How can you withdraw money from a 401k before retirement? InvestmentNews provides answers to these and more in this article.

Source: Investmentnews.com, June 2024

Merrill Data Bungle Hits Walmart 401k Plan

Merrill Lynch is the latest broker-dealer to report a snafu in handling client private data, with the Maine Attorney General's office last week disclosing that Merrill, as the recordkeeper for Walmart's 401k plan, revealed private client information to an "unauthorized recipient" having nothing to do with the plan.

Source: Investmentnews.com, June 2024

Excessive Fees or Incessant Litigation: Time for Legislative and Employer Action on Retirement Plans

Commonly referred to as "excessive fee" litigation, class actions that allege retirement plan investments charge too much and earn too little have increased over the past two decades. Plan sponsors continue to be exposed to these "excessive fee" class action lawsuits. Here's what Congress and employers can do about them.

Source: Dwt.com, June 2024

Recent Developments in 401k Forfeiture Cases: Key Updates for Plan Sponsors

This article reviews two significant developments in the arena of 401k forfeiture cases that could have far-reaching implications for employers and plan sponsors. These recent legal decisions underscore the need for vigilance and proactive management of plan documents and forfeiture practices.

Source: Boutwellfay.com, June 2024

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