Newsletter for March 9, 2020
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The 20th Edition of the 401k Averages Book has just been released with all new 401k fee benchmarking data. Use the 401k Averages Book to better understand investment, recordkeeping and revenue sharing expenses for 401k plans. Still the most recognized source book for comparative, non-biased 401k average cost information. Click here for more information.
In This Issue
General Items
Coronavirus Fears Lead to Spike in 401k Trades
With the markets plummeting at the end of February over fears of the repercussions of a worldwide coronavirus outbreak, 401k investors' trades spiked in the final week of the month, marking it as one of the busiest five-day stretches in the 20 year-plus history of the Alight Solutions 401k Index.
Source: Plansponsor.com
Fiduciary and Plan Governance
Creating a Superior ERISA 3(38) Appointment Framework
There are myriad products in the marketplace that service providers to 401k plans offer to plan sponsors. These products include so-called "fiduciary warranty" services, "indemnification and hold harmless" services, "fiduciary support" services, and "third-party fiduciary" services. Scott Simon provides a blueprint for the best way to legally protect a plan sponsor when appointing a 3(38).
Source: Morningstar.com
Retirement Plan Investment Committee Checklist
The fiduciary landscape is changing and processes once seen as "good enough" no longer check all of the right boxes. Use this straightforward checklist to ensure the investment committee is covering its bases.
Source: Conradsiegel.com
Fiduciary Responsibility Unclear When Handling Participant Data?
Fiduciary responsibility has blurred-lines around the use of participant data. Can your vendors use participant data to sell participants other products and services? This practice is called cross-selling, and it became a big issue for company fiduciaries after it was raised in some 403b and 401k plan lawsuits. The new focus on this issue reflects growing worldwide concerns over data privacy, but the jury is still out on whether such cross-selling to plan participants violates ERISA.
Source: 401ktv.com
»» Click here for more Fiduciary and Plan Governance Material
Insight: Studies, Research, and White Papers
NEPC's 14th annual DC Plan and Fee Survey
In this report, NEPC continues to focus on measuring financial success for DC plans and participants. While defined contribution plans are inherently participant-directed programs, there are features that plan sponsors and fiduciaries can adopt to improve financial success for participants and retirees. This year, their report focuses on the prevalence of plan features relating to increasing savings rates, professionalizing the investment decision, and facilitating the distribution of assets at retirement.
Source: Nepc.com
Retirement Plan Participation Continues to Increase
ICI research shows that most workers who are likely to have the ability to save for retirement and to be focused primarily on saving for retirement participate in an employer-sponsored retirement plan. Among workers who have both the desire and the means to save for retirement, the vast majority -- 78 percent -- participate in a plan either directly or through a spouse.
Source: Ici.org
»» Click here for More Studies, Research, and White Papers
Items of Special Interest to Service Providers
The DOL's Fiduciary Rule: Will We Get a New Rule?
The Department of Labor has included the proposal of a new fiduciary rule on its Regulatory Agenda. The Agenda indicated that it would be issued in December of last year. But, of course, it hasn't. That raises the question of, if we get a proposed regulation in the near future, will it ever become a final rule?
Source: Fredreish.com
Guide to Retirement: 2020 Edition
Updated annually, the Guide to Retirement provides an effective framework for supporting your retirement planning conversations with clients. It includes charts and graphs to help you explain complex issues clearly and concisely. A description and audio commentary are available for every slide.
Source: Jpmorgan.com
Target-Date Funds
Vanguard Cements Its Hold on the Target-Date Marketplace
The trend toward lower costs in retirement plans has benefited products across the industry, but Vanguard gobbled up even more of the target-date fund market last year and is nearing $1 trillion managed in those products, according to a report from Sway Research.
Source: Investmentnews.com (registration may be required)
Market Plunge Tests Performance of Target-Date Funds
If the recent correction is any indication, many of the target-date funds for people close to retirement might be less risky than such products were in 2008. On average, target-date funds with a 2020 vintage had negative returns of 4.1% between Feb. 24 and Feb. 28, according to data from Morningstar Direct. Meanwhile, funds with target years of 2030 had negative returns of 6.3%, and those dated to 2050 returned -9.2%. During that time the Dow Jones Industrial Average dropped by 12%.
Source: Investmentnews.com (registration may be required)
»» Click here for more on Target-Date Funds
Court and Legal
John Hancock Sued Over "Self-Dealing" in 401k Plan Products
A former John Hancock employee is leveling class action claims against the company, alleging it broke the law by packing its 401k menu with proprietary products. The plaintiff, Jennifer Baker, was a participant in the insurance and investment provider's plan between 2014 and 2019. Ms. Baker allegedly suffered financial harm by being invested in John Hancock's products instead of comparable, lower-cost investments from third parties that produced higher returns.
Source: Investmentnews.com (registration may be required)
Oracle to Pay $12 Million to Settle 401k Lawsuit
Oracle Corp. is settling a long-running 401k lawsuit for $12 million, according to court records filed last Thursday. The settlement comes just before the trial was scheduled to begin. According to the agreement, the deal helps both parties avoid substantial risks that they faced in the process of reaching a court decision.
Source: Investmentnews.com (registration may be required)
Evonik Chemical Corp. Faces ERISA Excessive Fee Challenge
Retirement plan fiduciaries at the specialty chemical company are accused of failing to take advantage of the lowest-cost share class for many of the mutual funds offered within the plan, among other issues.
Source: Planadviser.com
Parties in 401k Account Data Breach Suit Announce Settlement
A former participant in the Estee Lauder 401k plan (who sued the plan sponsor and plan providers for failing to safeguard her retirement account), the plan's recordkeeper Alight Solutions, and Estee Lauder have filed a Notice of Settlement in the U.S. District Court for the Northern District of California. Details of the settlement in the first case of its kind to call into question the cybersecurity defenses a plan sponsor and its providers had in place for retirement account fraud have not yet been revealed.
Source: Plansponsor.com
»» Click here for more Court and Other Legal Issues
Compliance and Regulatory
The SECURE Act's Impact on Employer-Sponsored Retirement Plans, Programs, and Arrangements
These provisions of the SECURE Act collectively modify and generally liberalize the tax rules governing employer-sponsored plans and individual retirement accounts, among others. Set out here is a summary of the key provisions of the Act of interest to employers that sponsor tax-qualified retirement plans.
Source: Mintz.com
Provisions of the Secure Act Affecting Tax-Qualified Retirement Plans
The SECURE Act makes major changes to rules governing retirement savings generally, adopts accompanying administrative improvements, and includes a series of revenue-related provisions that together affect employer-sponsored retirement plans and individual retirement accounts alike. This chart summarizes the law's provisions affecting tax-qualified retirement plans; reports on regulations and other guidance implementing the law; and tracks the contents and required dates of plan amendments.
Source: Mintz.com
»» Click here for more Compliance and Regulatory Material
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