Fiduciary Duty in the Digital Age
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In This Issue - Headlines Fiduciary and Plan Governance Insight: Studies, Research, Analysis, or Papers
Court and Legal
Legislative or Washington DC Compliance and Regulatory
Marketplace News Article Summaries Fiduciary and Plan Governance Fiduciary Duty in the Digital Age Cybercriminals target ERISA retirement plans due to their vulnerabilities in access and opportunity. They exploit weaknesses in systems, software, and human behavior, such as compromised credentials, to steal information. The digital nature of plan administration and reliance on third-party services create a wide attack surface for cyber threats. A breach of fiduciary duty occurs when plan fiduciaries, like administrators or trustees, fail to protect plan assets or participant data from these threats. This responsibility includes implementing adequate cybersecurity measures, addressing data breaches, and managing cybersecurity risks effectively. This article offers an in-depth analysis of these issues. Source: Woodruffsawyer.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, Analysis, or Papers 2025 PLANADVISER Adviser Value Survey The 2025 PLANADVISER Adviser Value Survey reveals that 46.3% of plan sponsors using an adviser value "evaluation and monitoring of investment lineup" the most. This finding highlights the key influence advisers have on retirement plan outcomes. The survey analyzes responses from the PLANSPONSOR Defined Contribution Survey, focusing on aspects like investment lineups, plan governance, fiduciary guidance, and plan design. Source: Planadviser.com Extending Retirement by Five Years Skyrockets Chance of Depleting Retirement Savings New research from Nationwide and The American College of Financial Services highlights a significant risk associated with extending retirement by just five years: it increases the likelihood of depleting savings by 41%, especially among healthy, higher-income retirees. This concern is further emphasized by Allianz Life's 2025 Annual Retirement Study, which found that 64% of Americans are more afraid of running out of money than dying. The study reveals a disconnect between rising lifespans, which now often exceed 90 years, and inadequate financial planning, leading many to face an increasing risk of outliving their savings. Source: 401kspecialistmag.com Emergency Savings Linked to Less 401k Loan Use, Stronger Retirement Outcomes A February survey by National Debt Relief reveals that substantial debt is affecting Generation X and Baby Boomers, leading some to postpone retirement. Among 1,000 surveyed individuals, 45% reported carrying an average credit card balance of nearly $9,000, with monthly payments of around $418. Additionally, T. Rowe Price's annual Reference Point report highlights trends in retirement planning, showing a 4% increase in average loan sizes in 2024, slightly outpacing inflation, across all age groups. While loan usage among 401k participants grew by two percentage points from 2023, it remains lower than the peaks seen between 2015 and 2019. Source: Planadviser.com »» Click here for More Studies, Research, and White Papers Court and Legal Trends in ERISA Litigation: What Plan Sponsors Should Consider Now This article focuses on five trends in ERISA litigation that plan sponsors should consider in their risk mitigation efforts: Forfeiture Accounts, Health Plan Fee Litigation, SECURE 3.0?, Health Plan Cost and Fee Transparency, and Health Plan Regulation. Source: Barran.com Judge Finds in Favor of Knight-Swift in 401k Forfeiture Case A federal judge in Arizona has dismissed a class action lawsuit against Knight-Swift Transportation Holdings, which was accused of improperly using forfeited assets from its 401k retirement plan. The lawsuit claimed that the company violated ERISA by using these funds to offset company contributions instead of covering plan expenses. A key point of contention was whether Knight-Swift was obligated by its annual Form 5500 filings to the DOL, which stated that forfeited assets "shall be used" for plan expenses. Source: Planadviser.com Kaiser Prevails in Motion to Dismiss 401k Forfeiture Reallocation Suit A fiduciary defendant, Kaiser Foundation Health Plan, along with related entities, has successfully dismissed a lawsuit filed by Stacey M. Madrigal. The suit claimed a fiduciary breach concerning the use of plan forfeitures to offset employer contributions, alleging violations of ERISA. Source: Napa-net.org On January 10, 2025, the Texas federal district court ruled in Spence v. American Airlines that both American Airlines and the committee managing its 401k plans violated their fiduciary duty under ERISA. This breach was primarily related to proxy voting of securities within specific investment funds in the 401k plans. The decision is noteworthy as it may pave the way for new types of ERISA fiduciary litigation targeting 401k plans, emphasizing proxy voting rather than traditional concerns like investment performance or administrative costs. This article discusses the court's findings, legal implications, and key considerations for 401k plan sponsors and fiduciaries in light of this ruling. Source: Troutman.com Schlichter Bogard Files Second 401k Forfeiture Reallocation Suit The law firm Schlichter Bogard LLC has filed a lawsuit against Northrop Grumman, focusing on a fiduciary breach related to the reallocation of plan forfeitures. The lawsuit claims that the defendants unlawfully charged plan administrative expenses to participants' retirement accounts, violating ERISA. The suit includes a demand for a jury trial, addressing a growing area of litigation in this context. Source: Napa-net.org Empower Escapes Swiss Re 401k Fiduciary Suit A recent ERISA fiduciary breach lawsuit against the fiduciaries of the $1.45 billion Swiss Re Group U.S. Employees' Savings Plan and service provider Empower has ended quickly in favor of the recordkeeper. The lawsuit, filed just weeks ago, included multiple allegations of fiduciary breaches. The likely reason for its abrupt conclusion is that recordkeepers, like Empower, are generally not considered fiduciaries, which weakens the chances of success for such lawsuits. Source: Napa-net.org Intuit Reaches Settlement in Forfeiture Case Intuit has chosen to settle a lawsuit related to a fiduciary breach concerning the use of plan forfeitures after unsuccessful attempts to dismiss the case. Filed in October 2023 in the Northern District of California, the lawsuit highlighted that the Plan allowed forfeited nonvested accounts to be used for administrative expenses or to lower future Company matching contributions. Eighteen months later, following a failed motion to dismiss, Intuit and the plaintiff, Deborah Rodriguez, reached a settlement with the help of mediator Hon. Morton Denlow (Ret.) and are seeking court approval for their agreement. Source: Psca.org »» Click here for more Court and Other Legal Issues Legislative or Washington DC Universal Savings Account Proposal Reintroduced U.S. Sen. Ted Cruz has introduced the Universal Savings Account Act, which aims to create tax-advantaged savings accounts that allow American families to save without the usual restrictions and penalties of traditional accounts. Rep. Diana Harshbarger has introduced companion legislation in the House. USAs would enable participants to save, invest, and withdraw funds freely for any purpose. Source: Senate.gov »» Click here for more on Legislative and Washington Actions Compliance and Regulatory ERISA Fidelity Bonds: Myth Busting Five Common Misconceptions Fidelity bonds are essential for protecting employee benefit plans against financial wrongdoing, as they cover first-dollar losses without a deductible. ERISA mandates that most retirement plans maintain such coverage, regardless of participant count or asset value. However, misconceptions about these bonds can create compliance challenges for plan sponsors. This article seeks to clarify common myths about ERISA fidelity bonds and guide sponsors toward ensuring compliance. Source: Bdo.com Controlled Group or Affiliated Service Group? What That Means for Your 401k Plan Compliance If your business is part of a Controlled Group or an Affiliated Service Group, it may face compliance issues concerning its 401k plan. Misunderstandings about these affiliations can lead to severe consequences, including plan disqualification, costly corrections, IRS penalties, and employee dissatisfaction. The positive aspect is that many of these issues can be resolved if addressed promptly. The article outlines the potential consequences, corrective actions, and strategies to safeguard your plan against audit risks. Source: Employeebenefitslawgroup.com DOL Issues Temporary Enforcement Policy for Small Amount Transfers to State Unclaimed Property Funds The DOL recently released Field Assistance Bulletin 2025-01, which offers a temporary enforcement policy concerning the transfer of small retirement plan benefits to state unclaimed property funds. This guidance aims to assist fiduciaries in meeting their ERISA obligations to locate participants and ensure they receive their retirement benefits, especially regarding uncashed checks and amounts that have been involuntarily distributed. However, plan fiduciaries are advised to carefully consider and consult legal counsel on the appropriateness of escheatment in different situations. Source: Morganlewis.com Prepare Now for Mandatory Roth Catch-Up In January 2025, proposed Treasury regulations regarding catch-up contributions were released, offering guidance on the mandatory Roth catch-up requirement introduced by section 603 of Division T of the SECURE 2.0 Act of 2022. Under this rule, individuals aged 50 and older must make catch-up contributions to eligible plans on a Roth basis if their prior year's wages exceeded $145,000 (adjusted for inflation). This requirement applies to 401k, 403b, and governmental 457b plans. This article specifically discusses the implications of the mandatory Roth catch-up rule for 401k plans. Source: Bclplaw.com »» Click here for more Compliance and Regulatory Material Marketplace News Vestwell Partnership Allows Savvy Wealth Advisors to Manage Client 401k Plans Empower Launches Zero-Fee Index Fund for Retirement Investors
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