Forfeitures and Other Unallocated Accounts Need Review
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Fiduciary and Plan Governance
Forfeitures and Other Unallocated Accounts Need Review Recent developments spotlight issues with forfeiture and other unallocated accounts in defined contribution retirement plans, such as 401k plans. This is a review of the issues and provides some key takeaways for plan sponsors. Source: Wnj.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, Analysis, and Papers
Why Are Employees Not Participating in Their 401ks? To better understand the reasons behind low participation, the Principal surveyed people eligible for their workplace retirement plans but currently not contributing. Here are three roadblocks preventing retirement plan participation and ways to boost retirement plan participation among employees. Source: Principal.com
What to Tell Participants About Tapping Into Their Retirement Savings If the worst happens, plan participants may look to their retirement plan as a source of financial relief. The ability to access retirement assets may be important for participants' peace of mind, but they must make an informed choice. While plan sponsors should review the plan's rules to help prepare their communications, the FAQs here offer a starting point for addressing participant inquiries. Source: Blackrock.com
401k Auto Features Don't Help Savings as Much as Thought, Researchers Find Two of the most widely used mechanisms to improve participation in 401k plans -- automatic enrollment and automatic escalation of contribution rates -- may be much less effective than previously thought, a recent study found. There are several reasons for that, and some have to do with turnover at the companies that sponsor 401k's, according to the paper. Source: Investmentnews.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Advisers and Other Service Providers
Plan Sponsor Satisfaction Driven by Advisor Services Beyond the 401k: Report Plan sponsors are happier with the results when partnering with a retirement plan advisor. It's an obvious point, but a new Fidelity survey puts numbers to the feeling. The Boston-based investment behemoth's annual "Plan Sponsor Attitudes Study," now in its 15th year, found that "evolving advisor expertise is meeting sponsors' expanding needs and, in turn, driving positive plan results and record satisfaction amongst plan sponsors." Source: Napa-net.org Court and Legal
How Justices Upended the Administrative Procedure Act In three cases handed down over the final three days of its last term, the U.S. Supreme Court made fundamental changes to the federal Administrative Procedure Act that undermined Congress and the executive branch by shifting power to the judiciary. By shifting decision-making from administrative agencies to the judiciary, the Loper Bright, Corner Post, and Jakesy troika create great uncertainty and unpredictability, while simultaneously limiting opportunity for clarity regarding duties and obligations. Source: Hansonbridgett.com
The High Price of Discovery in ERISA Class Action The author writes, "As a retirement plan consultant, I often get asked: 'Is ERISA class action litigation becoming more of a risk for plan advisers?' I can't predict the future, but I can address the fiduciary risks that need to be considered by ERISA advisers as existing 401k litigation continues to move through the courts, with new complaints filed just about every week. Unfortunately, even if a class action complaint seems frivolous to you, if it goes to discovery, it can mean a great deal of work and effort from you, your team and your client." Source: Planadviser.com
Eleventh Circuit Reiterates That Burden of Proving Loss Causation Stays With Plaintiffs The Eleventh Circuit Court of Appeals recently affirmed a district court's grant of summary judgment in favor of the fiduciaries of the Home Depot 401k plan, who defended against claims that they breached their fiduciary duties by permitting the plan to pay excessive financial advisor fees and retaining underperforming investments. In so ruling, the court brought back to the fore a circuit split over whether the burden of persuasion on loss causation shifts when a plaintiff establishes or raises genuine issues of fact as to breach and loss to the plan. Source: Erisapracticecenter.com
Several class action lawsuits have been filed alleging that plan fiduciaries violated their duties of prudence and loyalty under ERISA by applying forfeitures to reduce employer contributions instead of to reduce administrative expenses borne by plan participants. There is now more to report including (a) another order denying a motion to dismiss issued this week in the Intuit case, (b) an order denying a motion to reconsider or certify the issue for interlocutory appeal in the Qualcomm case, and (c) the filing of two more lawsuits against large plan sponsors alleging misconduct in the use of forfeiture amounts. Here are the details. Source: Wagnerlawgroup.com
401k Forfeiture Lawsuits Continue to Advance While the use of 401k plan forfeitures to offset employer contributions has been a longstanding practice permitted by U.S regulators, recent litigation scrutinizing plan fiduciaries' use of forfeitures under ERISA continues both to be filed and to progress in courts. In recent weeks, a new class action complaint was filed, and two existing lawsuits survived district court challenges by the defendant companies. Source: Plansponsor.com
Nordstrom Nailed With Massive Allegations in 401k Fiduciary Breach Suit The plaintiffs' bar has picked up on a new angle with a new suit combining allegations of excessive 401k fees, un-personalized (and overpriced) managed accounts, and misuse of forfeitures. More specifically, the suit alleges that the fiduciaries of the $3.4 billion, 105,000 participant Nordstrom 401k Plan "failed to fulfill their fiduciary duties to prudently and loyally ensure the Plan's total recordkeeping and other administrative expenses were reasonable and not excessive, as well as engaged in self-dealing with regard to Plan forfeitures in violation of ERISA fiduciary prohibited transaction rules." Source: Asppa.org »» Click here for more Court and Other Legal Issues State-Based Private-Sector Retirement Programs
State 401k Mandates May Cause "Crowd-In" Effect, Boosting Private Plans Small employers in states with mandates may gravitate toward private market plans for factors including plan design and the perceived cost of implementing state plans, according to NBER researchers. Source: Planadviser.com
Why Do Employers Establish Retirement Savings Plans? Evidence From State "Auto-IRA" Plans Several states have recently attempted to boost retirement savings by enacting "auto-IRA" plans that require employers not currently offering an employer-sponsored retirement plan (ESRP) to either (1) establish an ESRP or (2) enroll employees in state-facilitated Individual Retirement Accounts. This 63-page paper identifies the effect of these state retirement plan mandates on a firm's decisions to offer ESRPs, treating the gradual rollout of these policies across states and employer size categories as a series of "experiments." Source: Nber.org »» Click here for more on Legislative and Washington Actions Compliance and Regulatory
IRS Issues Guidance on Employer Matches of Qualified Student Loan Payments The IRS on August 19th issued interim guidance concerning employer matching contributions made to retirement plans related to qualified student loan payments (QSLPs) made by employees. The guidance, which is in question-and-answer format, comes in Notice 2024-63. It addresses issues that may arise in 401k, 403b, governmental 457b, or SIMPLE IRA plans in administering such matching contributions. Source: Asppa.org
IRS Issues Notice on Certain Exceptions to the 10 Percent Additional Tax Under Section 72(t) The IRS recently issued Notice 2024-55, which concerns exceptions to the 10% additional tax under section 72(t) of the Internal Revenue Code. These exceptions include emergency personal expenses and domestic abuse victim distributions from qualified retirement plans. Source: Hallbenefitslaw.com
Domestic Abuse Withdrawal Penalty Exception Can a client's 401k plan, which requires spousal consent for distributions, be amended to adopt the new domestic abuse victim distribution option? SECURE Act 2.0 provides a new exception to the 10 percent additional tax on early withdrawals for domestic abuse victim distributions. But, such distributions may not be part of defined benefit plans or defined contribution plans that are subject to the spousal consent rules. Source: Retirementlc.com »» Click here for more Compliance and Regulatory Material Marketplace News Custodia Financial Introduces Insurance Product for Retirement Loan Protection
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