Safeguarding Retirement Assets in the Age of Scams
|
In This Issue
Insight: Studies, Research, Analysis, or Papers Safeguarding Retirement Assets in the Age of Scams Every year, millions of older Americans face scams and fraud that threaten their retirement security. Common scams include impersonations of government agencies, banks, investment schemes, fake sweepstakes, tech support fraud, and romance scams, with new variants continually emerging. The financial services industry, retirement plan sponsors, and participants can take proactive steps to reduce scam risks. This includes utilizing technology for account verification and monitoring, educating employees on identifying scams, and encouraging participants to recognize fraud indicators and add trusted contacts to help oversee their financial accounts as they age. This is a 22-page paper on the issue. Source: Ssrn.com PSCA Survey Finds Good News on 401k Savings and Participation Rates In 2023, contribution rates for 401k plans saw modest increases as both employers and participants contributed more after a decrease the previous year. This information comes from the Plan Sponsor Council of America's 67th Annual Survey of Profit Sharing and 401k Plans, which analyzed the plan-year experience of 709 401k plans. While contributions are not yet back to the record highs of 2021, the uptick indicates a positive shift in participation and funding. Source: Napa-net.org Here Are the Biggest 401k Mistakes Each Generation Is Making The 401k retirement plan, established 46 years ago, remains the most prevalent savings vehicle for employees. However, many individuals fail to fully understand their plans or optimize their savings effectively. Each generation has made notable mistakes with their 401k accounts. For Baby Boomers, a common issue is the low utilization of Roth 401k accounts, which offer tax-free withdrawals in retirement. Gen Xers often carry outstanding 401k loans, impacting their savings. Millennials and Gen Zers are encouraged to increase their savings rates and assess their investment choices to enhance their financial growth. Fortunately, there are still opportunities for individuals from all generations to rectify these issues. Source: Fool.com »» Click here for More Studies, Research, and White Papers Fiduciary and Plan Governance How Johnson v. Parker-Hannifin Impacts Professional Fiduciaries and 401k Plan Sponsors This article examines the implications of the Johnson v. Parker-Hannifin case, which involves allegations of the company's failure to adequately monitor investments, resulting in the use of high-cost share classes. This case has significant relevance for professional fiduciaries and 401k plan sponsors. Initially dismissed by a lower court, the plaintiffs appealed, and the U.S. Court of Appeals for the Sixth Circuit found merit in their claims, subsequently remanding the case for further proceedings. The article also notes a few steps 401k plan sponsors can take to better protect themselves. Source: Fiduciarynews.com Things That Shouldn't Impress You From 401k Plan Providers The author reflects on a childhood experience in Brooklyn where a classmate falsely claimed to be wealthy, highlighting his insecurities despite his modest background. This anecdote serves as a metaphor for 401k plan providers who may boast about their offerings to attract plan sponsors, often emphasizing features that may not be truly valuable. The article aims to guide readers in discerning the genuine merits of 401k providers versus mere flashy claims. Source: Jdsupra.com »» Click here for more Fiduciary and Plan Governance Material 403b Plans Higher Education and 403b Plan Litigation Since 2015, universities have faced over 20 lawsuits related to DC plan fees, a shift from prior litigation focusing on for-profit 401k plans. The lawsuits typically accuse universities of offering excessive investment options, failing to replace costly underperforming investments, and imposing above-market fees for investment and recordkeeping services. Some claims also focus on issues like duplicative fees from multiple recordkeepers and misuse of forfeiture assets, as well as concerns regarding target-date fund selections. This article identifies four common claims in university lawsuits that higher education plan sponsors should pay close attention to. It then suggests actions that go beyond the basic fiduciary and governance best practices. Source: Wtwco.com The Rise of Target-Date Funds: Closer Look at 403b Plan Investments The Investment Company Institute and ISS Market Intelligence released a report titled "The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at ERISA 403b Plans, 2021." The report emphasizes the increasing adoption of target-date funds in large ERISA 403b plans. Since 2009, the percentage of these plans offering target-date funds has risen from approximately 50% to around 90% by 2021. Sarah Holden, ICI Senior Director of Retirement and Investor Research, noted that target-date funds provide a diversified investment solution that shifts from growth to income-focused strategies as the target-date approaches, making them a valuable option for retirement plan participants. Source: Ici.org »» Click here for More 403b Material Court and Legal Retirement Plan Forfeitures: A New Wave of Class Action ERISA Litigation In the past year, numerous class action lawsuits have been filed against major U.S. companies regarding the alleged misuse of retirement plan forfeitures. The trend started in September 2023 with a lawsuit against Thermo Fisher Scientific, which claimed that the company's fiduciaries violated ERISA by using plan forfeitures to offset employer-matching contributions instead of covering administrative costs. While U.S. Treasury rules have allowed this practice for years, the plaintiffs argued it breached ERISA's fiduciary duties of loyalty and prudence. This article provides an overview of plan forfeitures and their regulation, analyzes the claims and defenses presented in these lawsuits, and summarizes initial court rulings. It concludes by offering recommendations for plan fiduciaries to reduce the risk of future legal challenges. Source: Truckerhuss.com A federal court has ruled in favor of Honeywell, dismissing a lawsuit that accused the company of breaching fiduciary duties related to its 401k plan by using forfeitures to offset employer contributions. The plaintiff, Luciano Barragan, alleged that Honeywell violated ERISA by breaching fiduciary duties, abusing its authority, and engaging in prohibited transactions. However, the court agreed with Honeywell that it followed the plan guidelines and Treasury regulations, leading to the dismissal of the case without prejudice. Barragan has 30 days to amend the complaint to address the identified deficiencies. Source: Psca.org »» Click here for more Court and Other Legal Issues Compliance and Regulatory Extension of Certain Proposed RMD Regulations The IRS announced the extension of the effective date for certain provisions in the proposed required minimum distribution regulations, which were originally issued on July 19, 2024. The new effective date will apply no earlier than the 2026 distribution calendar year. The regulations include updates reflecting recent IRS guidance and changes from the Setting Every Community Up for Retirement Enhancement Act of 2019 and the SECURE 2.0 Act of 2022. These updates affect various retirement plans, including defined benefit and defined contribution plans. Source: Principal.com Retirement plans are subject to various legal requirements and terminology, making it essential for sponsors to grasp key terms and their implications for participants. To aid in this understanding, online definitions from the IRS are a useful resource, as well as definitions provided by the Department of Labor related to plans and compliance with the Employee Retirement Income Security Act. Source: Plansponsor.com How Does a Retirement Plan Provide Disaster Relief? (Part 1) The term "disaster relief" invokes the image of the Red Cross and other care organizations rushing in with food, blankets, medical care and temporary housing to those impacted by an earthquake, flood, hurricane, or fire. But when it comes to a retirement plan, what is relief for a disaster? Source: Klblawgroup.com SECURE 2.0 Compliance in 2025: Key Guidance for 401k Plan Sponsors Many 401k plan sponsors are feeling overwhelmed by recent legislative changes and the obligation to implement new options. Mercer recommends some degree of outsourcing to help manage these responsibilities. With the population aged 65 and older reaching a historical peak in the U.S., there is increasing pressure on plan sponsors to expand coverage and enhance financial flexibility, especially with SECURE 2.0 encouraging the inclusion of retirement income in plans. As SECURE 3.0 legislation is anticipated in 2025, Mercer suggests that plan sponsors focus on three key areas to optimize their limited resources in the upcoming year. Source: Benefitspro.com DOL to Use SSA Data for Lost and Found Database The DOL will enhance its Lost and Found database using information from Form 8955-SSA, which reports separated participants with vested benefits from ERISA-governed plans. This announcement was made by Lisa Gomez, head of the Employee Benefits Security Administration, during a December 13 hearing. Previously, the IRS restricted DOL's access to this information for privacy reasons, prompting DOL to seek voluntary data from the industry. Form 8955-SSA is submitted to the IRS and subsequently shared with the Social Security Administration to notify participants about their benefits when they apply for Social Security. Source: Asppa-net.org 2025 Reporting and Disclosure Requirements for Calendar-Year Qualified Plans This article outlines the reporting and disclosure requirements for calendar-year qualified plans in the United States. It includes a summary chart of the most common requirements and is intended solely for informational purposes, not as a replacement for professional legal, accounting, or actuarial advice. Source: Wtwco.com Hardship Distributions: Five Questions for Plan Sponsors This article discusses key considerations for plan sponsors regarding hardship distributions from retirement plans. It presents five essential questions that sponsors should address. Overall, the article serves as a guide for plan sponsors to ensure their hardship distribution procedures are clear, compliant, and effectively communicated to participants. Source: Ifebp.org »» Click here for more Compliance and Regulatory Material Marketplace News DOL Appoints Five to 2025 ERISA Advisory Council Walgreens Announces New Student Loan 401k Match Program Fiduciary Rule Proponent Khawar to Leave DOL Post
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. Articles are copyrighted to their publishers. If you believe that your work has been copied in a way that constitutes copyright infringement, please contact the source site immediately. Hyperlinks in this document are provided as a convenience and we disclaim any responsibility for information, services, or products found on websites linked hereto. All links were tested before this eNewsletter was e-mailed to you to ensure that they are still functional, but publishers do move or delete articles. Therefore, we can't guarantee that the links provided will remain operational. 401khelpcenter.com does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com. Opinions expressed are those of the author of the article and do not necessarily reflect the positions of 401khelpcenter.com. THIS NEWSLETTER IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE INVESTMENT, TAX, ACCOUNTING, OR LEGAL ADVICE. Copyright © 2024 by 401khelpcenter.com, LLC. All rights reserved. No reproductions without prior authorization, but you are free to email this copy (in its entirety) along to colleagues or clients. This newsletter may not be posted on any website. 401khelpcenter.com, LLC
|
