Newsletter for March 15, 2021
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In This Issue
Fiduciary and Plan Governance
DOL Announces Non-Enforcement Policy for Trump-Era ESG and Proxy Voting Rules
The statement from the DOL does not offer any clear indications of how they will modify these rules; however, it notes how commenters have raised the possibility that the rules may have been "rushed" and have had a "chilling effect" on investment activity, both of which may indicate that the DOL will engage in a substantive rewrite or modification of the rules.
Source: Ropesgray.com
DOL Won't Enforce the New Rule on Financial Factors in Selecting Plan Investments
The DOL has released a short statement announcing that it will not enforce the final rule on "Financial Factors in Selecting Plan Investments" that it published on November 13, 2020. The statement also notes that the DOL will not enforce the final rule on "Fiduciary Duties Regarding Proxy Voting and Shareholder Rights" that it published on December 16, 2020. As reasoning for its change of heart, the DOL noted concerns brought by a variety of stakeholders as to whether the two final rules properly reflected the scope of fiduciaries' duties of prudence and loyalty under ERISA.
Source: Bradley.com
DOL Announces Non-Enforcement Policy and Intent to Revisit ESG, Proxy Rules
On March 10, 2021, the DOL announced that it will not enforce or otherwise pursue enforcement actions on two recently issued final rules amending the "investment duties" regulation under Title I of ERISA. It further announced plans to revisit these rulemakings. Plan sponsors should be aware that the Department's non-enforcement policy has no impact on a plan participant's ability to bring a private cause of action under these final and effective rules. Plan sponsors should additionally be on the lookout for further updates to the Department's policies in this area.
Source: Littler.com
»» Click here for more Fiduciary and Plan Governance Material
Insight: Studies, Research, and White Papers
401k Plan Fees Continued to Decline in 2020
The average total plan cost for a small retirement plan declined to 1.20% from 1.23% over the past year, according to the latest 401k Averages Book. The average total plan cost for a large retirement plan also declined, to 0.90% from 0.91%, Joseph Valletta, the author of the book, said in a release. Valletta defines small plans as those with fewer than 100 participants and up to $5 million in assets and large plans as those with more than 1,000 participants and more than $50 million in assets.
Source: Investmentnews.com (registration may be required)
Is Auto-Enrollment "Not Optimal"?
A recent industry trade article questions the efficacy of saving early for retirement and notes that there "may even be such a thing as saving too much." What launches that premise is a research paper titled "Is Automatic Enrollment Consistent with a Life Cycle Model?" That turns out to be a relatively fancy academic title for a simple concept: Does automatic enrollment make sense for younger adults?
Source: Asppa.org
Over Half of Americans Surveyed Falsely Believe They Pay Low or No Fees to Manage their Retirement Accounts
Nearly three-quarters of Americans surveyed do not know how much they are required to pay in fees to manage their retirement accounts, according to a recent survey commissioned by investment management firm Rebalance. Over half of Americans surveyed (57%) falsely believe that they pay either no fees, or very low fees, to maintain their retirement investment accounts. Also, nearly one-quarter don't even know how much they pay in fees.
Source: Prnewswire.com
Sponsors' Retirement Plan Priorities Shift Due to Pandemic
Callan surveyed plan sponsors and found that their priorities for their DC plans shifted considerably due to the pandemic. Sixty-nine percent of sponsors said they are now most interested in supporting their employees' immediate financial needs. In years past, employers' overriding priority has always been "aspirational goals for their total benefits or total rewards."
Source: Plansponsor.com
Retirement Ages Geared to Life Expectancy
For most of the 20th century, life expectancy was on the rise. Yet older Americans were retiring at younger and younger ages. That changed in the 1990s. Life expectancy continued to rise, but retirement ages started increasing too. Given the change, Urban Institute researchers wondered whether the dramatic longevity gains experienced by the people who make it to their 50s and 60s could be counted as another reason for the delayed retirement trend. Their evidence suggests that growing lifespans are keeping men over age 55 in the labor force longer and postponing their retirement, particularly in areas with strong job markets and more opportunity.
Source: Bc.edu
»» Click here for More Studies, Research, and White Papers
Items of Special Interest to Service Providers
What Advisers Should Know About RMD Rule Changes
A new research report out of the Wharton School suggests changes to required minimum distribution rules might not have as big an impact in practice as many might expect, though one subset of clients seems likely to benefit the most from an older RMD age.
Source: Planadviser.com
Court and Legal
Fidelity Fends Off FundsNetwork Fiduciary Appeal
A federal appellate court has again rejected claims that Fidelity's relationship with those fund companies in its FundsNetwork made it a fiduciary. Ultimately, while the appellate court acknowledged that Fidelity does have some fiduciary duties vis-à-vis the plans and their participants, it pointed out that "Fidelity's actions in a fiduciary capacity are not the subject of plaintiffs' complaint."
Source: Asppa.org
Cybertheft Lawsuit: Court Dismisses Fiduciary Breach Claims Against Plan Sponsor for a Second Time
On February 8, 2021, in the latest turn in the saga of a closely-watched ERISA cybersecurity lawsuit, the Northern District of Illinois again dismissed fiduciary breach claims against Abbott Laboratories relating to the cyber theft of $245,000 from a participant’s account in Abbott Laboratories Stock Retirement Plan. The decision marks the second time the court has dismissed claims against Abbott Labs.
Source: Groom.com
Johnson & Johnson Prevails in Fiduciary-Breach Suit
A U.S. District Court in Newark, N.J., dismissed a complaint by participants in three Johnson & Johnson 401k plans, who alleged that plan fiduciaries failed to protect their investments in company stock offered as a plan investment option. The participants argued that Johnson & Johnson fiduciaries should have acted following allegations that talc and asbestos had been found in some company products. The resulting controversy depressed Johnson & Johnson's stock price.
Source: Pionline.com
$40 Million Excessive Fee Settlement Okayed
One of the largest 401k excessive suit settlements has been approved. The settlement arose in a case involving Reliance Trust and its role regarding the Insperity 401k Plan, in which the plaintiffs were enrolled. The plaintiffs are four participants in this plan for Insperity clients. However, the settlement did not actually involve Insperity but was an agreement between Reliance Trust and the plaintiffs.
Source: Napa-net.org
»» Click here for more Court and Other Legal Issues
Legislative and Washington DC
Important Benefit Plan Provisions of the American Rescue Plan Act of 2021
Although not the primary focus of the American Rescue Plan Act of 2021 and, at least with respect to the multiemployer relief measure, having little direct relationship with the pandemic, there are some benefit plan provisions that will affect plan sponsors and contributing employers.
Source: Wagnerlawgroup.com
»» Click here for more on Legislative and Washington Actions
Compliance and Regulatory
Quick Reference Guide to the Taxation of Retirement Plan Distributions
A major benefit to employees who are participating in a qualified retirement plan is the deferral of taxes. Pre-tax deferrals, employer contributions, and the related earnings grow tax-free until the amounts are distributed from the plan. Unfortunately, when a participant takes a distribution upon retirement or an early distribution that is not rolled over, the federal government expects to receive its fair share. The taxation of retirement plan distributions is complex, so the article provides a chart to help keep them straight.
Source: Belfint.com
DOL Issues Missing Participant Guidance After Years-Long Enforcement Initiative
On January 12, 2021, the DOL issued sub-regulatory guidance detailing what steps plan sponsors should take to locate and distribute retirement benefits to missing or non-responsive participants (missing participants). While this guidance has been a priority request for retirement plan sponsors, service providers, and trade associations, there are mixed opinions as to its impact.
Source: Groom.com
»» Click here for more Compliance and Regulatory Material
Marketplace News
401k Averages Book Finds 401k Plan Fees Continue to Decline
Registration for the 2021 NAPA 401k Summit Is Now Open
Unison Risk Advisors Launches New Pooled Employer Plan
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