Fiduciary and Plan Governance

401k Advice Rule Puts Fiduciaries in Litigation Crosshairs

A newly finalized rule from the DOL is poised to spur a new crop of suits under federal employee benefits law over alleged fiduciary breaches by defendants who previously weren't held to the strictest standard of care in handling retirement savers' funds. Lawsuits focusing on the extent to which an insurance agent, broker-dealer, or another party becomes a fiduciary by giving investment advice for a fee, a matter that hasn't been litigated frequently in federal courts, could emerge from the new fiduciary standard, according to benefits lawyers.

Source: Wagnerlawgroup.com

DOL Expands Investment Advice Subject to Fiduciary Liability

Following previous failed attempts to expand the fiduciary liability of financial services providers, the DOL released a new rule that broadens the definition of fiduciary under ERISA. Plan sponsors should review their service agreements and reach out to their financial services providers to ensure that they come into compliance with the new rule, including full disclosure of any potential conflicts of interest.

Source: Pillsburylaw.com

Six Steps to a Strong Missing Participant Policy

Missing participants, defined as individuals who have become disconnected from their retirement savings are a significant challenge that has long plagued defined contribution plans. The responsibility for locating these persons falls squarely on the shoulders of plan sponsors. Retirement Clearinghouse's Tom Hawkins shares keys to building a policy that will fulfill a plan sponsor's fiduciary duty.

Source: 401kspecialistmag.com

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Insight: Studies, Research, Analysis, and Papers

Nearly Half of Americans Expect Slow Transition Into Retirement

Americans' view of retirement is shifting as nearly half of Americans think about retirement as a slow transition away from full-time work rather than a distinct day in the future to leave the workforce, according to the 2024 Annual Retirement Study from Allianz Life. While 47% of Americans say they think about retirement as a slow transition away from full-time work, only 38% now say they think about it as a distinct date in the future to stop working and start drawing down on retirement assets. At the same time, 15% say they don't see themselves ever slowing down or retiring.

Source: Allianzlife.com

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Items of Special Interest to Advisers and Other Service Providers

What the New DOL Fiduciary Rule Means for Your Clients

With more and more baby boomers retiring, there has been a huge flow of 401k rollovers into IRAs. This has presented a tremendous opportunity for advisors but has also opened the door for nonfiduciary advisors to generate unreasonable commissions. New regulations from the DOL extend fiduciary protections to IRAs, effective Sept. 23. This means even advisors who are not registered investment advisors must put their client's interests first when it comes to IRAs.

Source: Morningstar.com

What the Fiduciary Rule Means for Investment Menu Advisement

The Retirement Security Rule, finalized in April by the DOL, will require that investment menu designs and sales must follow the obligations of loyalty and prudence under ERISA. Previously, transactions of this kind were often considered one-time transactions and therefore not a fiduciary act. Jason Roberts, the CEO of the Pension Resource Institute, says that this element of the final rule should be an "easy lift from a compliance perspective" and "less disruptive operationally" for retirement plan advisers and providers.

Source: Planadviser.com

First Challenge of the DOL Investment Advice Fiduciary Final Rule

The fiduciary rule regulations are already being challenged by an advocacy group for independent insurance professionals claiming that the final rule creates heavy compliance burdens and hurts their ability to make commissions by unlawfully turning insurance agents into ERISA fiduciaries. The DOL responded to these and other numerous comments during the regulatory process and made certain changes and clarifications discussed in this article that narrow the contexts in which a covered recommendation will constitute ERISA fiduciary investment advice.

Source: Cohenbuckmann.com

Recordkeeping in the Electronic Age

Recordkeeping today is not your grandfather's recordkeeping. So guidance and education from the DOL would be helpful in adjusting to the changes that have taken place, concludes the Advisory Council on Employee Welfare and Pension Benefit Plans in a recently released report. In "Recordkeeping in the Electronic Age," a report to Acting Secretary of Labor Julie Su from the Advisory Council on Employee Welfare and Pension Benefit Plans, the council says that guidance and education from the DOL guidance and education are needed on a variety of issues.

Source: Ntsa-net.org

Court and Legal

Fifth Circuit Reverses Dismissal of 401k Fees Claims

The Fifth Circuit recently reversed a district court's dismissal of claims that the fiduciaries of a 401k plan breached the duty of prudence under ERISA by offering participants retail share classes instead of cheaper institutional share classes and causing the plan to pay allegedly excessive recordkeeping fees. The decision is notable for articulating the level of detail that may be sufficient in the Fifth Circuit for these kinds of claims to survive a motion to dismiss.

Source: Proskauer.com

Settlements Struck in Several Excessive Fee Suits

The settlements are lining up in several so-called excessive fee suits -- including one at the 11th hour -- all with plaintiffs represented by Capozzi Adler PC. A considerable amount of time and energy has been spent in legal proceedings and the terms of any of these settlements are not yet known.

Source: Napa-net.org

J.P. Morgan Sued for Data Exposure

A participant in a retirement plan managed by J.P. Morgan Chase & Co. has initiated legal action against the company following recent reports of a data breach where over 451,000 plan participants' details were exposed. According to the lawsuit filed in the U.S. District Court for the Southern District of New York on May 3, former Long Island Railroad employee Benjamin Valentine's personal information -- which he entrusted with J.P. Morgan on the mutual understanding that the firm would protect it against disclosure -- was "targeted, compromised and unlawfully accessed due to the data breach."

Source: Planadviser.com

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Cyber and Plan Security

A Cybersecurity Audit Survival Kit: What Plan Sponsors Must Do to Pass

Since issuing its first cybersecurity guidance in 2021, the DOL has laid out what it expects plan sponsors to do. The work requirement to follow all the DOL's cybersecurity guidance is substantial. Many organizations don't have the resources to comply fully, or they don't feel an urgency to put their resources toward it, but it appears that cybersecurity will be part of all DOL retirement plan audits. Six experts spoke with NAPA Net about what they think the DOL will expect from plan sponsors with their cybersecurity policies and procedures.

Source: Napa-net.org

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Compliance and Regulatory

2024 DOL ERISA Investigation Update: Recent Publications Offer Insight Into Possible Areas of Focus

The DOL maintains a robust investigatory program for auditing employee benefit plans for potential ERISA violations. ERISA plan fiduciaries and service providers can expect the DOL to continue its ever-evolving enforcement program targeting both fiduciaries and nonfiduciary service providers. Recent reporting by the DOL provides insight into its current official and unofficial enforcement priorities and may help plan fiduciaries and in-house counsel seeking to track the DOL's enforcement activities.

Source: Morganlewis.com

Retirement Topics - Plan Notices

Plan administrators must give employees certain written information about their retirement plans. Some of this information must be provided regularly and automatically. Other kinds of disclosures are available upon written request, free of charge, or for copying fees. Plan administrators can give notices to participants electronically if they meet certain conditions. This is a review of plan notices.

Source: Irs.gov

Sample IRS Plan Amendment Language (via LRMs) Is Here

The IRS recently issued updated LRMs for defined contribution plans that address several plan changes under recent laws. Importantly, this language can be used by both pre-approved and individually designed plans. Due to the complexities of the Internal Revenue Code, and wanting to be sure that the plan document complies with the law, this document is a good starting point. Set forth here is a summary of the key provisions that were updated to reflect recent law.

Source: Groom.com

Defining an Employee vs. Independent Contractor: New DOL Guidelines

Do the final DOL regulations defining employee vs. independent contractor affect who can participate in retirement plans? Determining whether a worker is an employee or an independent contractor, particularly for retirement plan coverage purposes can be tricky. The DOL has a new FLSA employee standard. There's also the IRS definition of employee for tax purposes and Supreme Court rulings. All three of these standards may impact whether a worker is an employee who should be covered under an employer-sponsored retirement plan.

Source: Retirementlc.com

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Marketplace News

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This eNewsletter is a digest of information published by a variety of web-based sources on 401k and related issues and is published as a service to our users. 401khelpcenter.com, LLC is not the author of the material unless specifically noted.