Is Investment Performance a Fiduciary Duty?
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In This Issue - Headlines Fiduciary and Plan Governance
Insight: Studies, Research, Analysis, or Papers
Auto 401k Plan Features Court and Legal
State-Based Private-Sector Retirement Programs Compliance and Regulatory
Marketplace News Article Summaries Fiduciary and Plan Governance Is Investment Performance a Fiduciary Duty? ERISA attorneys analyze the legal obligations of plan sponsors, particularly regarding their fiduciary duties. Marcia Wagner, founder of the Wagner Law Group, asserts that ERISA does not mandate plan sponsors to maximize investment returns for participants. Instead, Rick Pearl from the Faegre Drinker law firm notes that ERISA's general standard of fiduciary prudence is intentionally vague and not intended for micromanagement. Wagner emphasizes that fulfilling the duty of prudence involves a proper process for selecting and managing plan investments, but she points out that investment outcomes do not always correlate with the quality of the process followed. Source: Plansponsor.com Monitoring the Activities of a Plan Fiduciary Committee: Recommendations to a Board of Directors It is a fundamental principle that anyone with fiduciary responsibility for an ERISA benefit plan must continually monitor the performance of any service providers or individuals to whom they have delegated fiduciary duties. This ongoing obligation is rooted in the core "duty of prudence" outlined in ERISA, as established by both judicial interpretation and regulatory guidance. This requirement has been recognized in various forms even before the Supreme Court's explicit confirmation of it a decade ago in the well-known Tibble case. Given this context, what actions should a board of directors (or an equivalent governing body) take to effectively oversee the activities of a plan fiduciary committee to which it has delegated some or all of its fiduciary responsibilities regarding an ERISA benefit plan? Source: Verrill-law.com Should Managed Accounts Be Used as a Plan's Default? The use of professionally managed accounts in employer-sponsored retirement plans has been steadily increasing over the past decade, with improvements in technology and customization making these accounts more personal. While engaged participants can benefit from actively choosing this service, automatically enrolling unengaged participants raises fiduciary concerns. It's essential to critically evaluate defaulting unengaged participants into managed accounts. Source: Multnomahgroup.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, Analysis, or Papers A Review of Existing Measures of Retirement Well-being Research indicates that many U.S. households are unprepared for retirement, potentially falling short of maintaining their standard of living. However, despite concerns about financial readiness, most retirees express satisfaction with their lives. An analysis of various datasets reveals that objective measures like health and income are not strong predictors of personal satisfaction. This disconnect implies that traditional satisfaction surveys may not effectively inform policymakers about financial security. To better assess retirees' well-being, new metrics could focus on spending habits, responses to emergencies, and expense shocks. Source: Bc.edu To Reduce Retirement Plan Risk, Balance Stability & Security Retirement programs, whether in the public or private sector, single-employer or multiemployer, and whether defined benefit or defined contribution, represent a long-term commitment by plan sponsors to serve the interests of both recipients and the sponsors themselves. Two key components of successful retirement programs are stability and security. This article explores the significance of stability and security in retirement plans and their role in meeting these objectives. Source: Segalco.com Johns Hopkins Study: Private Equity, 401ks Do Not Mix Recent research from Johns Hopkins Carey Business School raises concerns about the push for defined contribution plans to invest in private equity, particularly leveraged buyout funds. The study suggests that private equity may be riskier than the traditionally used publicly traded funds in 401k plans. Given that private equity funds involve pooling money from a limited number of investors to buy privately held companies with minimal public reporting, the report questions whether these investments align with the safety and transparency that workers typically expect from their retirement plans. Source: Plansponsor.com »» Click here for More Studies, Research, and White Papers Auto 401k Plan Features ERISA and Auto Features: An Analysis of the Impact of Automatic Features on Retirement Security The study highlights the positive impact of automatic features, such as automatic enrollment, in defined contribution plans, which increases participant participation rates by enrolling them by default. It emphasizes the significance of effective plan design in enhancing retirement outcomes. Utilizing the Retirement Security Projection Model®, the study assesses the benefits of various automatic features, both individually and collectively, in reducing the risk of individuals running out of money during retirement. The RSPM has been a tool for evaluating retirement policies since 2003. Source: Ebri.org »» Click here for more on Automatic 401k Plan Features Court and Legal In Romano v. John Hancock Life Insurance, the Eleventh Circuit ruled that John Hancock, which provided investment and recordkeeping services for 401k plans, does not qualify as an ERISA fiduciary regarding its handling of foreign tax credits. The Romano Law Plan, established by the Romanos, made contributions to a separate account distinct from John Hancock's general funds, rather than making direct investments. The Romanos filed claims asserting that John Hancock's management of the foreign tax credits constituted a breach of fiduciary duty under ERISA and violated prohibited transaction provisions. The court, however, determined that John Hancock was not acting as a fiduciary in this context. Source: 11thcircuitbusinessblog.com Lawsuit Against Lockheed Martin Criticizes Firm for Using In-House TDFs Lockheed Martin Corporation and its subsidiary investment management company are facing a lawsuit from current and former participants in their 401k plans. The plaintiffs allege that the company breached its fiduciary duties of prudence and loyalty by utilizing an in-house service provider and affiliated target-date funds. The lawsuit criticizes Lockheed Martin for adopting a "DIY" approach to investments, resulting in the creation of ineffective private funds that charged excessive fees. It claims that the company prioritized its own benefit by using underperforming target-date funds with high fees in the retirement plans. Source: Plansponsor.com »» Click here for more Court and Other Legal Issues State-Based Private-Sector Retirement Programs Access to employer-sponsored retirement savings plans is crucial for private sector workers to save for retirement, yet nearly 47% of U.S. private sector workers over 18 lack such access. To address this, 20 states have implemented state-facilitated retirement savings programs, which aim to enhance workplace savings opportunities for approximately 20.6 million workers without access. This study aims to analyze the retirement savings landscape across all states, evaluating access to employer-sponsored retirement plans, demographic trends related to aging populations, and the potential for supplemental retirement income from modest contributions. It will also examine initial outcomes from early adopting states -- California, Illinois, and Oregon -- in increasing access and savings through both state programs and incentivizing private plan adoption. Source: Georgetown.edu »» Click here for more on Legislative and Washington Actions Compliance and Regulatory DOL Publishes New VFCP Model Participant Notice On March 18, the DOL released a model notice for applicants to the Voluntary Fiduciary Correction Program to inform plan participants about their application to the program. This model notice is specifically for applicants and is not meant for those using self-correction to address errors. The DOL’s Employee Benefits Security Administration anticipates that completing the notice will take plan administrators about one hour on average. Source: Napa-net.org Written Requests for ERISA Documents Employers are required to respond to written requests for certain ERISA documents within 30 days to avoid penalties of up to $110 per day. However, there is often ambiguity regarding which documents fall under this mandatory disclosure requirement and what specific plan materials should be provided. This can create challenges for employers in determining their obligations in response to these requests. Source: Newfront.com Don't Forget the Disclosures: What's Required to Keep Plan Participants and Beneficiaries Informed This educational fiduciary training webinar emphasizes the responsibilities needed to keep participants and beneficiaries well-informed. Tailored for committee members and fiduciaries engaged in retirement plan management, the session explores crucial elements of employee engagement, necessary disclosures, and effective fiduciary governance practices. Key topics covered include: Understanding Fiduciary Responsibilities, Required Disclosures, Optional Engagement Strategies, Digital and Paper Notices, and Selecting Service Providers. Source: Multnomahgroup.com ICI Comment Letter on the Proposal for Roth Catch-Up Contributions The Investment Company Institute has sent this comment letter to the Treasury Department and the Internal Revenue Service regarding the proposed regulations on catch-up contributions. This proposal aims to amend the regulations under section 414(v) of the Internal Revenue Code to incorporate several changes to catch-up contributions introduced by sections 109, 117, and 603 of the SECURE 2.0 Act. Source: Ici.org ERIC Comment Letter on the Proposal for Roth Catch-Up Contributions The ERISA Industry Committee has sent this comment letter to the Internal Revenue Service regarding the proposed regulations on catch-up contributions. In this letter, ERIC supports SECURE 2.0 but acknowledges the challenges in implementing certain provisions, particularly Section 603, which mandates that catch-up retirement plan contributions be made on a Roth basis. While the guidance in Notice 2023-62 and the Proposal are generally helpful, ERIC has suggested improvements as the Treasury and IRS work on finalizing the rules. Source: Eric.org SPARK Institute Comment Letter on the Proposal for Roth Catch-Up Contributions The SPARK Institute has sent this comment letter to the Internal Revenue Service regarding the proposed regulations on catch-up contributions. They say that administering the Roth catch-up mandate will be difficult, particularly in the initial years, and further simplification and clarification would be greatly beneficial. As mentioned towards the end of this letter, SPARK is also requesting that the IRS consider a postponement or offer additional good faith relief, as the final regulations will not be ready in time for implementation in 2026. Source: Sparkinstitute.org »» Click here for more Compliance and Regulatory Material Marketplace News Future Capital, Hantz Group Partnership Targets Held-Away 401k Assets Merit Financial Advisors Acquires Sanctuary Wealth Management and Fiduciary Services 2025 NAPA Top DC Advisor Teams Announced
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