Modernization of DC Plan Investments
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Insight: Studies, Research, Analysis, or Papers
Items of Interest to Advisers or Other Service Providers
Court and Legal
Cyber and Plan Security Compliance and Regulatory
Marketplace News Summaries Fiduciary and Plan Governance Modernization of DC Plan Investments There is increasing interest in modernizing 401k and other defined contribution plans by including alternative asset classes and lifetime income features. Despite concerns about litigation risks, a recent ruling in the Ninth Circuit suggests that fiduciaries can invest in alternatives without violating ERISA, provided they maintain proper risk disclosures and a prudent process. Coupled with anticipated regulatory initiatives from the Trump Administration, this creates momentum for diversifying and modernizing defined contribution plan investments. Source: Groom.com Alternative Investments and 401k Plans: How Fiduciaries Can Navigate ERISA's Waters Investment professionals often suggest private wealth clients include alternative investments -- such as real estate, private equity, cryptocurrency, and commodities -- in their portfolios due to their potential to reduce volatility and increase returns by up to 5%. However, when contemplating the inclusion of alternative investments in 401k plans, it is crucial to adhere to ERISA fiduciary responsibilities and ensure that participants are protected from potential losses caused by uninformed decisions. The article outlines steps to safeguard both fiduciaries and participants in this process. Source: Cohenbuckmann.com DOL Plans to Replace ESG Rule for Retirement Plan Fiduciaries The DOL plans to initiate rulemaking to replace a prior rule that allowed 401k plan fiduciaries to consider environmental, social, and governance factors when selecting investment options. The rulemaking process will involve several months, including a proposed rule and a comment period before finalization. In the interim, fiduciaries can still use prudent investment selection factors as defined in their investment policy statements for monitoring plan investments. While the new rule is expected to restrict the consideration of ESG factors, it is unclear if fiduciaries will be limited to only financial criteria such as revenue and fees, or if other nonquantitative factors will still be permissible. Source: Ogletree.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, Analysis, or Papers Could Managed Accounts Replace TDFs as Plan QDIAs? Retirement plan sponsors and advisers face the crucial decision of selecting an appropriate qualified default investment alternative for participants. Authorized by the Pension Protection Act of 2006, QDIAs offer fiduciaries a safe harbor for defaulting participants into approved investments. Target-date funds are the predominant choice, with 94% of plans currently using them as the default option, according to a 2024 report from the Plan Sponsor Council of America. However, industry experts question the effectiveness of the one-size-fits-all model of TDFs and suggest considering alternatives like managed accounts. Despite these discussions, any potential transition to different QDIAs appears to be in very early stages. Source: Planadviser.com 25th 401k Averages Book: Plan Fees Still Declining The 25th Edition of the 401k Averages Book reveals a continued decline in investment and recordkeeping fees in the 401k industry, contributing to lower total plan costs for employers and participants. Average investment-related fees fell by 0.02% to 0.12% across all plan sizes, while some scenarios saw recordkeeping fees decrease by up to 0.03%. Source: 401kspecialistmag.com »» Click here for More Studies, Research, and White Papers Items of Interest to Advisers or Other Service Providers Fisher Investments has elevated its fiduciary status by launching an educational website, Fiduciary.com, after purchasing the domain in 2024. The firm, based in Plano, Texas, manages $298.7 billion in assets and aims to provide valuable information. However, some leaders in the fiduciary movement criticize the move, suggesting it represents a monetization of the fiduciary standard that distinguishes independent registered investment advisers from brokers. Source: Riabiz.com 401k Participants Want Advice and Are Relying on Recordkeepers to Provide It According to The Cerulli Report -- U.S. Retirement End-Investor 2025, most active 401k participants are planning for retirement without an advisor, presenting an opportunity for recordkeepers to provide guidance, especially to unadvised participants. The report indicates that 63% of these participants, many from the mass-affluent demographic, lack financial advisors but express interest in hiring one in the future. Additionally, 52% of mass-affluent participants rely on their retirement savings account providers as their main source of retirement planning advice. Source: Cerulli.com Court and Legal Second Lawsuit Filed Against Cigna Over 401k Plan Forfeitures Three former employees of the Cigna Group have filed a lawsuit against the company, alleging the misuse of over $17 million in forfeited funds from its 401k plan in violation of ERISA. This marks the second legal action against Cigna within two months. The plaintiffs claim that Cigna and its retirement plan committee improperly used these funds to offset company costs. While the IRS has stated that 401k plan forfeitures can be used for certain expenses, many cases disputing the use of such funds have been filed in recent years, leading to several dismissals and ongoing litigation. Source: Planadviser.com Supreme Court Makes It Easier to Sue for "Excessive Fees" On April 17, 2025, the U.S. Supreme Court reached a unanimous ruling in the significant case of Cunningham v. Cornell University, resolving a long-debated legal issue. The central question was: Who is responsible for the burden of proof at the outset of an ERISA lawsuit involving "prohibited transactions" or "excessive fees"? The Court's decision has clarified that the burden lies with the defendant. Source: Francisway.com Sixth Circuit Affirms Dismissal of Excessive Fee Case Against DENSO International The Sixth Circuit upheld the dismissal of a class action lawsuit against DENSO International America, Inc. regarding alleged excessive fees under ERISA. The plaintiffs, consisting of current and former employees, claimed that DENSO breached its fiduciary duties by failing to adequately monitor the Plan's recordkeeping fees, asserting that these fees were excessive compared to the quality of services provided. However, the court found that the complaint lacked sufficient factual detail to demonstrate that lower-cost, comparable recordkeeping services were available. Consequently, the court affirmed DENSO's motion to dismiss the case, reaffirming the standards for establishing claims of excessive fees under ERISA. Source: Erisalitigationadvisor.com »» Click here for more Court and Other Legal Issues Cyber and Plan Security Third-Party Cyber Risk: Looking at Vendors' Cybersecurity The article emphasizes the importance of extending cybersecurity measures beyond your systems to include third-party vendors. Since vendors play a crucial role in business operations, particularly in services like payroll and investing, their cybersecurity practices can significantly impact your organization's risk profile. Effective management of these vendors is essential for maintaining strong cybersecurity, as they could inadvertently introduce vulnerabilities. Consequently, regulatory bodies are increasingly focusing on third-party risk management during audits, highlighting the need to ensure that vendors do not become weak links in your security strategy. Source: Ncpers.org ERISA Cybersecurity Obligations? Businesses sponsoring retirement plans, such as 401ks, must be vigilant against cybercrime, as they face legal obligations to protect against incidents and minimize damages from breaches. While fiduciary risks exist, including personal liability for losses, these can be mitigated. Experts at Savant Wealth emphasize that 401k plans are attractive targets for cybercriminals and advise sponsors to follow the guidance provided by the Department of Labor to enhance security measures. Source: Colonialsurety.com »» Click here for more on Cybersecurity Issues Compliance and Regulatory Navigating the Limits of DOL Guidance on Uncashed Participant Checks In today's increasingly mobile society, where employees commonly change jobs and residences, retirement plans must be equipped to diligently search for and locate missing participants (and their beneficiaries) to disburse promised benefits and meet the requirements set by the DOL. Since even absent participants retain their rights to benefits under ERISA, plan fiduciaries are required to take appropriate measures to ensure these individuals receive their full benefits when they become due. But what if these efforts to locate and contact the missing participant fail? Source: Reinhartlaw.com Don't Forget About the IRS When Correcting Delinquent Plan Contributions Employers who fail to promptly deposit participant deferrals and loan contributions into their employer-sponsored retirement plans may face penalties from the DOL for violating their fiduciary responsibilities. Beyond DOL penalties, delays in deferring contributions can lead to prohibited transactions, subjecting employers to an excise tax under Section 4975 of the Internal Revenue Code. While relief from this excise tax is available, it necessitates proactive measures from plan sponsors. Source: Brickergraydon.com New DOL/EBSA Opinion Letter Program Offers a Path to Clarity for Plan Sponsors On June 2, 2025, the DOL introduced an Opinion Letter Program to enhance compliance assistance across five key enforcement agencies, including the Employee Benefits Security Administration. This initiative aims to offer employers and stakeholders clear guidance on complex employee benefit plan issues. Deputy Secretary of Labor Keith Sonderling highlighted the program's significance, noting that opinion letters provide essential, practical guidance for both workers and businesses. Source: Benefitslawadvisor.com QACA and EACA: Considerations for Plan Sponsors When considering a Qualified Automatic Contribution Arrangement or an Eligible Automatic Enrollment Arrangement for a plan, plan sponsors need to be aware of several factors. While these arrangements offer benefits, they are complex and involve specific timing requirements, which may necessitate additional administration. Plan sponsors need to understand these complexities during the evaluation process before committing to an arrangement. Source: Fidelity.com »» Click here for more Compliance and Regulatory Material Marketplace News New Equity Solo 401k Integrated Platform Simplifies DIY Retirement Investing Transamerica Teams with SWBC on Pooled Plan Exchange Alliance for Lifetime Income Becoming Part of LIMRA and LOMA Nationwide Unveils RetireAssist for Small Businesses
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