Article Summaries

Fiduciary and Plan Governance

Investment Menu Influences in Defined Contribution Plans: Considerations for Plan Fiduciaries

Designing an optimal investment menu for a defined contribution plan is challenging for fiduciaries due to the diverse demographics of participants. Decisions made at the plan level affect the investment experience for individuals. Best practices recommend that committees follow a thorough process for creating the menu and selecting managers, including maintaining a documented rationale for the choices made and ensuring diversification options. Ongoing monitoring of the investment lineup is essential, as well as consideration of external factors that may influence the DC investment menu. This paper discusses five of these influences.

Source: Dciia.org

Common Examples of Breach of Fiduciary Duty That Result in Litigation

Fiduciary relationships in the business world include those between trustees and beneficiaries, investment advisors and clients, principals and agents, corporate directors and shareholders, and attorneys and clients. Understanding fiduciary duties -- along with how to uphold them and the consequences of breaches -- is essential for fostering productive relationships and avoiding costly litigation related to breach of fiduciary duty.

Source: Scarincihollenbeck.com

»»  Click here for more Fiduciary and Plan Governance Material

Insight: Studies, Research, Analysis, or Papers

2025 Outlook for Pension Legislation, Rules and Litigation

The new administration has quickly issued several executive orders and memoranda to reverse previous orders and initiate new agency actions, including a standard directive for agencies to withdraw unpublished materials as of Inauguration Day. Meanwhile, there are expectations for a bipartisan SECURE 3.0 bill, following the SECURE Act of 2019 and SECURE 2.0 Act of 2022, although it is unlikely to be finalized before 2026. This year will focus on gathering input through hearings and discussions. While agency rules are currently frozen, litigation against government rules continues, including participant lawsuits where the previous administration supported these cases. It is anticipated that the new administration may drop appeals against rulings that overturn previous rules and may take opposing stances in future legal matters.

Source: Segalco.com

Top Retirement Plan Trends to Watch in 2025

In 2024, the evolution of retirement plans has highlighted the shared responsibility of employees and employers in retirement planning, a trend set to continue into 2025. To retain top talent and aid employee future planning, plan sponsors are increasingly eager to adopt innovative strategies. This has led companies to seek assistance from advisory firms for tailored retirement plan design, implementation, and governance. Several key retirement plan trends are expected to emerge throughout the year.

Source: Planpilot.com

»»  Click here for More Studies, Research, and White Papers

Items of Special Interest to Advisers or Other Service Providers

Most Advisers Say Bitcoin and Digital Assets Misaligned With Fiduciary Duty

A survey by CoinShares International Ltd. reveals that financial advisers are cautious about recommending digital assets to clients due to concerns about their fiduciary duty. About 62% of advisers feel that suggesting speculative assets, such as bitcoin, conflicts with their obligation to act in clients' best interests, while 79% believe their role is shifting towards risk management as clients explore cryptocurrency independently. Over half of the 250 advisers surveyed are worried that promoting digital assets might harm their relationships with colleagues. While there is a growing willingness among advisers to consider digital assets, they seek independent education on the topic.

Source: Planadviser.com

DOL Files to Pause Appeal of Fiduciary Rule

The DOL has filed a motion in the U.S. 5th Circuit Court of Appeals to pause its appeals in two cases regarding the DOL’s fiduciary rule. The DOL stated that the new administration and agency officials need time to understand the cases. The opposing parties, including the American Council of Life Insurers and the Federation of Americans for Consumer Choice, are not opposed to this motion. The DOL requested to put the appeals on hold and provide status updates every 60 days.

Source: Planadviser.com

Court and Legal

Presumed Guilty? The Cornell Decision Could Help Rein in Questionable ERISA Litigation

The U.S. Supreme Court recently heard a case involving Cunningham v. Cornell University, which addresses when a plan service agreement can be challenged. The decision could significantly influence ERISA litigation and attempts to curb speculative lawsuits. Fundamental legal concepts like standing -- requiring plaintiffs to demonstrate actual harm -0- and the need for reasonable suspicion of wrongdoing are essential to prevent frivolous lawsuits from overwhelming the courts.

Source: Cohenbuckmann.com

Judge Denies Request to Block DOGE from Accessing DOL Data

A federal judge has ruled that the plaintiffs, including the AFL-CIO, challenging the Department of Government Efficiency's access to data at the DOL do not have standing to sue. This decision allows DOGE to continue its operations for now. The plaintiffs had filed a complaint seeking to block the DOL from sharing sensitive information with DOGE, claiming violations of the Privacy Act and potential harm to employees. Judge John D. Bates acknowledged concerns about the defendants' conduct but ultimately dismissed the case due to a lack of alleged injury by the plaintiffs.

Source: Napa-net.org

Schlichter Targets Massive 401k Plan With Forfeiture Suit

A new fiduciary breach lawsuit has been filed against Charter Communications, Inc. regarding its 401k Savings Plan. The law firm Schlichter Bogard, LLC is representing participant-plaintiffs Patrick O'Donnell, Wayne Saffold, and Mark Papenfuss, who claim to represent a class of participants and beneficiaries. As of December 31, 2023, the plan had over 102,000 active participants and nearly $7.87 billion in total assets. The case, titled O'Donnell et al. v. Charter Communications Inc., is similar to numerous previous lawsuits on the same issue, but it includes unique elements or claims.

Source: Napa-net.org

Northern District of California Dismisses 401k Forfeiture Suit

In Hutchins v. HP Inc., the U.S. District Court for the Northern District of California dismissed the plaintiff's claims regarding the use of forfeited employer 401k contributions, ruling with prejudice. This case is part of a growing trend of class action lawsuits questioning whether using 401k forfeitures to offset future employer contributions violates ERISA. The court's decision underscores the need for carefully drafted plan provisions that specify the allowed uses of forfeitures and reinforces the importance for employers and plan fiduciaries to regularly review their plan documents to ensure compliance with legal standards.

Source: Hklaw.com

Amazon Faces Class Action Lawsuit for Mismanagement of $350M in Forfeited 401k Plan Contributions

Amazon is facing a class action lawsuit from its retirement plan participants regarding the handling of forfeited 401k contributions. The plaintiffs claim that Amazon misused these forfeited funds to offset the company's contributions instead of using them to benefit participants by lowering plan fees. This lawsuit alleges a violation of fiduciary duty under ERISA. Similar actions have been taken against other companies like Bank of America and Wells Fargo for comparable issues.

Source: Hallbenefitslaw.com

»»  Click here for more Court and Other Legal Issues

Cyber and Plan Security

Cybersecurity: Form a Foundation of Trust

Joshua Cook, a cybersecurity attorney at the Wagner Law Group, emphasized the importance of trust in the relationship between service providers and their clients when handling sensitive information. In a February 5 webinar, he discussed how to establish and maintain this trust through effective cybersecurity measures. Cook highlighted the prevalent nature of cybercrime, noting that nearly 900,000 complaints were filed with the FBI in 2024, and warned that the threat of cybercrime is universal, affecting everyone.

Source: Asppa-net.org

»»  Click here for more on Cybersecurity Issues

MEPs and PEPs

PEPs: A Solution for Non-integrated 401k Plans

Pooled Employer Plans present significant benefits for companies managing multiple non-integrated 401k plans, particularly as businesses expand through mergers or acquisitions. While consolidating these plans is often a goal, challenges such as costs and timing can hinder the process. This multi-part series investigates how PEPs provide a streamlined and cost-effective solution for fragmented 401k structures. This first installment covers PEPs' support during mergers and acquisitions.

Source: Wtwco.com

»»  Click here for More MEP and PEP Material

Compliance and Regulatory

Puerto Rico Announces 2025 Limits on Qualified Retirement Plans

On January 23, 2025, the Puerto Rico Department of the Treasury released Internal Revenue Circular Letter No. 25-01, which details the limits for Puerto Rico qualified retirement plans for 2025. These limits are based on Section 401(a) of the U.S. Internal Revenue Code, as required by the PR Code. The announcement includes updated figures for annual compensation, benefits, and contribution limits, which align with the IRS's published retirement plan limits.

Source: Littler.com

IRS Issues Proposed Regulations Related to Mandatory Automatic Enrollment

On January 10, 2025, the IRS issued proposed regulations concerning mandatory automatic enrollment in certain 401k and 403b plans. These regulations reflect updates under Section 101 of the SECURE 2.0 Act of 2022, including adjustments to participant notice requirements established in sections 320 and 341 of SECURE 2.0. The proposed regulations also integrate earlier guidance on these automatic enrollment requirements from IRS Notice 2024-2. This article outlines the key provisions of these proposed regulations.

Source: Milliman.com

Labor Department Updates the Voluntary Fiduciary Correction Program

On January 14, 2025, the DOL updated its Voluntary Fiduciary Correction Program for the first time since 2006. This program aims to encourage the voluntary correction of certain fiduciary violations in eligible transactions, helping to prevent potential enforcement actions and penalties from the DOL. The updated program has been simplified and expanded to facilitate less costly corrections, promoting more plans to address breaches of fiduciary duty under ERISA. A key addition is a self-correction feature, which was not available in the previous version.

Source: Milliman.com

»»  Click here for more Compliance and Regulatory Material

Marketplace News

New Digital Experience for Corebridge Retirement Plan Participants

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.