DOL's Focus on Conflicts of Interest: Fred Reish, Et al (Part 2)
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Items of Special Interest to Advisers or Other Service Providers
Court and Legal
State-Based Private-Sector Retirement Programs Compliance and Regulatory
Marketplace News Summaries Fiduciary and Plan Governance The DOL's Focus on Conflicts of Interest: Fred Reish, Et al (Part 2) The article is the second part of a series addressing conflict of interest issues related to the self-dealing rule under ERISA and the Internal Revenue Code. It outlines prohibited transactions under these regulations, specifically focusing on "self-dealing" transactions. These occur when broker-dealers, registered investment advisers, and their representatives receive revenue-sharing payments from custodians in exchange for investing in specific funds. The authors aim to clarify the implications of these transactions within the context of ERISA compliance. Source: Faegredrinker.com The Risk of Prohibited Transaction Lawsuits Is Rising: What Fiduciaries Should Do A recent ruling by the U.S. Supreme Court has simplified the process for plaintiffs to file prohibited transaction lawsuits against retirement plan fiduciaries, and the consequences are already being felt. Terms like "fishing expeditions" and "cookie-cutter cases" are being used to describe the anticipated increase in litigation following the Cunningham v. Cornell University decision. Here's what plan fiduciaries need to know. Source: Cohenbuckmann.com Loyalty and Prudence Vs Forfeitures? Legal battles are intensifying as traditional 401k practices surrounding the management of plan forfeitures face increasing scrutiny in the courts. Another in the series of ERISA "forfeiture lawsuits" that have emerged in 2023 has been filed, challenging the fiduciary duties of loyalty and prudence. Read this article to understand the key issues at stake and how to safeguard yourself. Source: Colonialsurety.com Managed Accounts and Investment Advice: What Fiduciaries Should Know Recent lawsuits have targeted major recordkeepers like TIAA, Empower, and Fidelity, as well as other service providers, regarding their investment advice and managed account offerings for retirement plan participants. These cases highlight that investment advice qualifies as fiduciary advice, which plan fiduciaries are required to review and monitor, regardless of the delivery method (in-person, phone, or online). Plan sponsors that opt to provide managed account products must be able to explain and demonstrate how these products serve the best interests of participants to avoid potential breaches of their fiduciary responsibilities. Source: Kutakrock.com »» Click here for more Fiduciary and Plan Governance Material Items of Special Interest to Advisers or Other Service Providers Asset Managers Eye Growth Opportunity in the Mid-Market Retirement Plan Segment Mid-market defined contribution plans, holding over $1.2 trillion in assets (approximately 15.6% of total 401k assets), are projected to become increasingly competitive, according to The Cerulli Report--U.S. Defined Contribution Distribution 2025. More than 75% of asset managers see these plans as a significant growth opportunity over the next two years. With over 16,200 mid-market 401k plans currently, this number is expected to rise to 17,220 by 2029. Source: Cerulli.com Where Is the DOL Going With the Fiduciary Rule? In September, the DOL announced plans to revisit the definition of fiduciary adviser, intending to issue a new rule by 2026. This comes as the Retirement Security Rule, established during the Biden administration, remains under scrutiny in the 5th Circuit. The rule aimed to expand ERISA fiduciary status to one-time recommendations, such as annuity sales and rollovers. The DOL's possible actions include completely rescinding the existing rule, which would revert to the 1975 standard, or revising it (they could also continue fighting it in the courts as is, but nobody really expects that). Source: Psca.org In this podcast, asset management partners Eric Requenez and Jessica Reece, along with benefits partner Josh Lichtenstein, discuss the advantages of collective investment trusts for asset managers in raising and investing funds. They anticipate that CITs will gain significance and complexity in the future, particularly with President Trump's backing for broader access to alternative investments within 401k and defined contribution plans, potentially unlocking substantial retirement assets. Source: Ropesgray.com Court and Legal Increasing Scrutiny of "ESG-Influenced Investing" by ERISA Plans Has Implications for Stakeholders In January 2025, the Northern District of Texas ruled that 401k plan fiduciaries violated ERISA by allowing ESG factors to influence their investment decisions, despite meeting ERISA's prudence standard. The court deferred judgment on remedies until September 30, 2025, ultimately issuing the Spence Remedial Ruling, which imposes extensive and burdensome equitable remedies on the fiduciaries and their corporate sponsors, without granting monetary damages. This ruling reflects a broader trend of increasing scrutiny on ESG-influenced decision-making by various stakeholders, including benefit plan sponsors and investment managers. Stakeholders are advised to assess the potential impact of the Spence Remedial Ruling and consider appropriate remedial actions. Source: Jonesday.com Fiduciary Liability Critical in Russell Investments ERISA Case A federal judge has allowed complaints against Russell Investments Group LLC, which is accused of causing plan participants to lose over $100 million by placing them in its own target-date funds. However, the judge dismissed complaints against the plan sponsor, Caesars Holdings Inc. This ruling suggests that plan sponsors can reduce their fiduciary liability by delegating investment authority to a 3(38) fiduciary. Marcia Wagner, founder of the Wagner Law Group, emphasizes that as long as plan sponsors have a process to evaluate and select 3(38) fiduciaries reasonably, this delegation can protect them from liability related to investment performance lawsuits. Source: Plansponsor.com Duke Latest Bedeviled by Forfeiture Reallocation Suit The lawsuit argues that the plan fiduciaries acted with a conflict of interest, despite the plan document allowing for the choice between using forfeited funds for either offsetting employer contributions or covering administrative expenses. It claims that the Duke defendants failed to implement or adhere to prudent processes for allocating these forfeited funds. The suit states that the fiduciaries consistently prioritized reducing company contributions over the best interests of plan participants, asserting that the funds would have more effectively benefited participants if used to reduce or eliminate administrative expenses instead. Source: Napa-net.org »» Click here for more Court and Other Legal Issues State-Based Private-Sector Retirement Programs Can State Auto-IRA Accounts Be Rolled Over Into a 401k? In response to an inquiry from an advisor in Minnesota, the ERISA consultants at the Retirement Learning Center examine the possibility of transferring CalSavers accounts of a seller's employees to a buyer's 401k plan during a merger or acquisition. Source: Psca.org »» Click here for more on Legislative and Washington Actions Compliance and Regulatory Plan Sponsors Must Address the Roth Catch-Up Contribution Mandate by January 1, 2026 The IRS has finally released the final regulations regarding the Roth catch-up contribution mandate, a change that was introduced to the Internal Revenue Code three years ago. According to these regulations, sponsors of 401k, 403b, and governmental 457b plans must be ready to implement the new requirement starting on January 1, 2026. This article outlines the details of the new mandate and highlights the decisions that need to be made and actions that should be taken over the next three months. Source: Bsk.com When Do Retirement Plans Need a Financial Statement Audit? Renee Mrosowski from Summit Group Retirement Planners provided a thorough summary of plan audit requirement rules. Her clear and methodical approach is impressive and can be very helpful. If you're uncertain about whether your client's plan requires an audit, refer to her step-by-step summary here, which will help clarify the situation. Source: Belfint.com A 401k plan generates a large volume of documents that must be preserved under ERISA regulations. Developing a simple filing system with three file types can help plan sponsors efficiently manage their documents, ensuring they can easily review, update, maintain, and dispose of records. Having ready access to plan documentation is crucial, as it can lead to quick and cost-free dispute resolutions rather than drawn-out battles. Although civil penalties for not retaining required records are minimal, missing documents can hinder an employer's ability to defend the plan against challenges from the IRS, DOL, or participants. It's essential to understand and comply with retention rules to avoid potential issues. Some of the most common 401k plan records that must be retained to meet ERISA standards are listed here. Source: Consultrms.com Updated Regulatory Agendas Have Few New Retirement Items The spring 2025 update of the regulatory agendas for the IRS, DOL, and PBGC includes several new items concerning retirement plans. This article focuses on key highlights, particularly regulatory initiatives connected to the Setting Every Community Up for Retirement Enhancement Act of 2019 and the SECURE 2.0 Act of 2022. Source: Mercer.com The 2026 Catch-Up Rule Change Is a "Hot Mess" for 401k Plan Sponsors The author suggests that if there's a retirement plan rule that embodies the phrase "What fresh hell is this?", it's the impending 2026 catch-up contribution change for highly compensated employees. Under SECURE 2.0, high earners will be required to make their catch-up contributions as Roth, rather than pre-tax. This bureaucratic twist is enough to make one roll your eyes and reach for another martini. It's bound to be a chaotic situation, and as always in the 401k landscape, plan sponsors will be left to deal with the fallout. Source: Jdsupra.com »» Click here for more Compliance and Regulatory Material Marketplace News Blackstone Creates Business Group to Bolster 401k Strategy Creative Planning Buys SageView Advisory
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