Fiduciary and Plan Governance

How to Prevent a Lawsuit Over Retirement Plan Forfeitures

There has been a rash of lawsuits recently challenging how forfeitures are used in retirement plans. The novel theory in these suits -- a purported misuse of discretion in the application of forfeitures -- has recently gained some steam and legitimacy after surviving a motion to dismiss in Perez-Cruet v. Qualcomm. Employers with retirement plans that provide discretion over the use of forfeitures should consider making a simple plan design change to avoid being a litigation target.

Source: Bradley.com

The Plan Sponsor Guide to Setting Up a 401k Plan Committee

Being a retirement plan sponsor can be a bit overwhelming and one of the major reasons that retirement plans are mismanaged is a lack of management. Retirement plan committees, regardless of the size of the plan sponsor, can be an effective method of managing a retirement plan. Like any tool, a plan committee must be used correctly or it ends up becoming more of a problem than it's worth. This article is about how to properly set one up.

Source: Jdsupra.com

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Insight: Studies, Research, Analysis, and Papers

Redefining Retirement: What Does It Mean?

The term "retirement" seems straightforward enough, but it may not be as simple as it seems at first blush. The concept of retirement itself is relatively new and the meaning of the word "retirement" is evolving beyond the traditional definition, and that has implications for retirement plans, plan sponsors, and the retirement industry.

Source: Asppa.org

More 401k Investors "Very Likely" to Reach Retirement Goals, Says Schwab

American workers investing in a 401k are more confident in reaching their retirement goals than they were last year, according to new research. The Charles Schwab survey conducted by Logica by users of plans from around 25 providers reveals that 43% are very likely to achieve their goals, up from 37% in 2023. The boost in sentiment comes as inflation and stock market volatility are less of a concern for respondents.

Source: Investmentnews.com

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Items of Special Interest to Advisers and Other Service Providers

The New Fiduciary Rule: Rollovers and the Insurance License Issue

The definition of investment advice in the regulation includes recommendations about "securities or other investment property" which includes life insurance with an investment component and annuities. Under both PTE 84-24 and PTE 2020-02, a compliant rollover recommendation generally requires the consideration of the investments, services, and expenses in the retirement plan. As a result, the question has been raised about whether an insurance-licensed only insurance agent can legally "consider" a plan's investments, as is required by the PTEs.

Source: Fredreish.com

Small Business "Bullishness" Helping to Drive 401k Growth

ADP Inc., Guideline Inc., and Human Interest were among the top recordkeepers in adding defined contribution retirement plans in 2023, with all three pointing toward continued growth in 2024, according to the 2024 PLANSPONSOR Recordkeeper Survey and executive interviews. Recordkeepers overall showed a strong year of DC plan additions in 2023, as compared with the prior year. Tailwinds including employer talent attraction and retention needs, SECURE 2.0 Act of 2022 tax incentives, and state mandates are all driving new plan growth, according to firm executives, with signs they may outdo themselves again by the end of 2024.

Source: Planadviser.com

Federal Judge Slams Brakes on Fiduciary Rule

A federal judge put a hold on the effective date of the DOL's new fiduciary rule. In ordering the stay, United States District Judge Jeremy D. Kernodle explained that "the 2024 Fiduciary Rule suffers from many of the same problems" that were found in the version vacated by the Fifth Circuit back in 2018.

Source: Asppa.org

Court and Legal

TIAA's "Cross-Selling" Amended ERISA Complaint Survives Dismissal

A New York federal district court judge has ruled that an amended ERISA complaint based on a breach of fiduciary duty against the TIAA may proceed after it was originally dismissed in 2022. The judge agreed that the complaint contained sufficient evidence of TIAA systematically cross-selling its adviser-managed account service, Portfolio Advisor, which came with higher fees for participants who chose this option rather than remaining invested in the plan.

Source: Hallbenefitslaw.com

Qualcomm Bid for Dismissal of 401k Forfeiture Suit Denied

A federal district court judge denied Qualcomm's motion to dismiss a lawsuit filed by a former employee and current company 401k retirement plan participant. Antonio Perez-Cruet alleges in his ERISA suit that Qualcomm violated its duty of prudence when it used forfeited retirement funds to reduce its plan contributions rather than decrease administrative expenses borne by plan participants. The judge ruled that Perez-Cruet met his burden of alleging a plausible cause of action.

Source: Hallbenefitslaw.com

Fifth Circuit Appeals Court Sends DOL ESG Case Back to Texas Court

A Texas district court will rehear a challenge to the Department of Labor's environmental, social, and governance rule for investing in defined contribution retirement plans after the U.S. 5th Circuit Court of Appeals remanded the case due to a recent Supreme Court decision. In his ruling, U.S. Circuit Judge Don R. Willett cited the Supreme Court overturning of the longstanding Chevron standard, claiming that in initially upholding the DOL's rule, the district court had relied upon the decades-old Chevron deference doctrine.

Source: Planadviser.com

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MEPs and PEPs

Getting Out of a MEP/PEO/PEP Is Not as Easy as You Think

Plan sponsors need to understand the requirements and costs to cease participation in a MEP/PEO/PEP. The key to a successful exit from a MEP/PEO/PEP is having an experienced provider who knows the complexities of moving from a MEP/PEO/PEP to a single employer plan.

Source: Consultrms.com

Where MEPs and PEPs Can Fall Short

It's only been a few years since pooled employer plans (PEPs) became available as an alternative to single-employer 401ks, but a new report from the Center for Retirement Research casts an uncertain future for them. Their research shows that despite the fiduciary benefits of multiple employer plans, small-business owners are often unaware of them, but it may be too soon to judge the plans.

Source: Investmentnews.com

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Compliance and Regulatory

Are the Floodgates About to Open After the Demise of Chevron Deference?

In 2021, the DOL adopted a new rule that interpreted ERISA to allow retirement plan managers to consider the ESG factors. The new rule was immediately challenged by a group of states, companies, and trade associations. The district court, following the mandate of Chevron, deferred to the interpretation of the current DOL and rejected the challenge. Plaintiffs appealed. And then SCOTUS overruled Chevron. In a new decision, a three-judge panel of the Fifth Circuit has elected not to answer that weighty question on appeal "Given the upended legal landscape, and our status as a court of review, not first view, we vacate and remand so that the district court can reassess the merits." Are we about to see a slew of these types of decisions revisiting agency regulations after the demise of Chevron?

Source: Cooleypubco.com

How to Navigate Late 401k Deposits After Receiving Letter From the DOL

Managing a 401k plan involves careful oversight and adherence to regulations set forth by the DOL. One critical aspect is ensuring timely deposits of employee deferrals into their retirement accounts. However, despite best intentions, mistakes can happen, leading to late deposits. The consequences of such errors can be significant. This article delves into understanding late 401k deposits and how to rectify them.

Source: Belfint.com

What Is the Rule of 55 and How Does It Work?

The rule of 55 can benefit workers who have an employer-sponsored retirement account such as a 401k and are looking to retire early or need access to the funds if they've lost their job near the end of their career. It can be a lifeline for workers who need cash flow and don't have other good alternatives. Here's how the rule of 55 works and whether you should consider using it.

Source: Bankrate.com

IRS Finalizes (and Proposes More) Required Minimum Distribution Rules

The Treasury Department and the IRS issued final (and newly proposed) regulations that address the major changes to Code section 401(a)(9) under the SECURE Act 1.0 and SECURE 2.0 and make other conforming changes to the eligible rollover rules. These regulations impact the calculation of required minimum distributions from qualified plans, IRAs, 403b, and 457b plans. This is a summary that highlights the key provisions of the 2022 proposed regulations, noting changes made in the final regulations and the new 2024 proposed regulations.

Source: Groom.com

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Marketplace News

PensionPro Partners With Payroll Integrations to Simplify 401k Compliance Testing

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.