Does the Recently Amended Investment Duties Regulation Change How Fiduciaries Are Expected to Make Investment Decisions
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Fiduciary and Plan Governance The final rule on investment decision-making that emerged from the filter of constituent comments does not prohibit fiduciaries of ERISA employee benefit plans from selecting investments that have ESG or other collateral objectives or benefits and does not create different standards for consideration of such investment options. Rather, the amended regulation requires that fiduciaries make investment choices based on consideration of pecuniary factors, which is consistent with the DOL's existing guidance. The final rule does, however, shift focus from considering investment options under the totality of the facts and circumstances to considering only defined pecuniary factors to the exclusion of non-pecuniary factors. This could be a distinction without a difference, however, given the expanded interpretation in the preamble and the flexibility incorporated into the final regulatory language. Source: Wagnerlawgroup.com ERISA Fiduciary Obligations Expanded to Include Mitigation of Cybersecurity Risks The clouds have been forming on the horizon for years now: from the courts, we have seen emerging lines of ERISA litigation asserting fiduciary obligations to protect the privacy rights of participants, and from the regulatory agencies we have heard an acknowledgment of the need for guidance regarding fiduciary responsibility for cybersecurity risks. A call to action for plan fiduciaries came last week from the DOL in the form of new cybersecurity guidance for plan sponsors, plan fiduciaries, recordkeepers, plan participants. Source: Benefitsbclp.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers Confidence in Retirement Security Resilient in Face of Pandemic Despite a global pandemic that created uncertainty in the employment and financial markets, the 2021 Retirement Confidence Survey found eight-in-ten retirees are confident in their ability to live comfortably throughout retirement, similar to the 76 percent of retirees who were confident when the survey was last fielded in March 2020. Workers also remain optimistic, with 72 percent of workers expressing confidence in their ability to retire comfortably, up three percentage points from last year. Source: Ebri.org 2021 Retirement Confidence Survey The RCS is the longest-running survey of its kind, measuring worker and retiree confidence about retirement, and is conducted by the Employee Benefit Research Institute and Greenwald Research. The 2021 survey of 3,017 Americans was conducted online January 5 through January 25, 2021. All respondents were ages 25 or older. The survey included 1,507 workers and 1,510 retirees, which includes an oversample of roughly 500 completed surveys among Black Americans (252 workers and 253 retirees) and roughly 500 completed surveys among Hispanic Americans (253 workers and 249 retirees). Source: Ebri.org »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers DOL Issues Interpretative Guidance on Investment Advice Prohibited Transaction Exemption The DOL issued a set of previously promised FAQs addressing its new prohibited transaction exemption. PTE 2020-02 allows "investment advice fiduciaries" to employee benefit plans and individual retirement accounts to receive certain otherwise prohibited compensation, including commissions, 12b-1 fees, revenue sharing, and mark-ups and mark-downs in certain principal transactions. The exemption expressly covers prohibited transactions resulting from rollover advice, advice on how to invest assets within a plan or IRA, and advice on whether to engage in certain principal transactions. Source: Ropesgray.com Plan Communications Demand Rising for Virtual and Self-Service 401k Education The popularity of virtual and self-service 401k educational sessions has grown since the start of the pandemic, but apparently that trend was accelerating even before then. Source: Asppa.org Higher Education Plan Sponsors Seeing More Demand for Participant Investment Help A study on higher education retirement plans from Voya found 43% of plan sponsors say motivating employees to save adequately and invest wisely are top challenges to helping their employees prepare for retirement. Interestingly, a separate study from Transamerica found more than half (59%) of higher education institutions view motivating faculty and staff to save adequately for retirement as their greatest challenge in managing their retirement plan. Forty-seven percent said it was helping participants invest wisely. Source: Plansponsor.com »» Click here for more on Plan Education and Communications Court and Legal Emerging Case Law Supports Forum-Selection Clauses in ERISA Plans A recent decision by the Ninth Circuit upholds the enforceability of forum-selection clauses in ERISA plans. The case, In re Becker v. United States Dist. Court, is in line with evolving case law trending towards the enforceability of forum-selection clauses in ERISA plan documents. The Ninth Circuit joins the Sixth and Seventh Circuits in this regard, and district courts in other circuits such as the Third and Fourth Circuits have also followed suit, although their respective circuit courts have yet to decide the issue. This article reviews the Becker case and identifies reasons why plan sponsors should consider amending their plans to include forum-selection clauses below. Source: Groom.com Lawsuit Challenges Fees in Kimberly-Clark's 401k Plan Participants in the Kimberly-Clark Corp. 401k and Profit Sharing Plan have filed a proposed class-action ERISA lawsuit against consumer products manufacturer Kimberly-Clark, its board of directors, and its benefits administrative committee. They allege that the defendants breached their fiduciary duties by authorizing the plan to pay unreasonably high fees for retirement plan services. Source: Planadviser.com The Key to Avoiding Retirement Plan Excessive Fee Litigation The recent increase in litigation over retirement plans and, specifically, the fees those plans are being charged for administration and management, has many companies concerned about what they need to do to protect the plans they manage. Two recent federal district court rulings illustrate the necessity for plan sponsors to have a prudent decision-making process in place to successfully defend against excessive fee litigation. Source: Hallbenefitslaw.com Ninth Circuit Affirms Dismissal of ERISA Stock-Drop Suit The plaintiff in Wilson v. Craver, a participant in the Edison 401k Savings Plan -- which included the Edison Company Stock Fund as an investment option -- alleged that the Plan's fiduciaries breached their fiduciary duty of prudence under ERISA by allowing the company's ESOP to remain invested in company stock while the price of the stock was artificially inflated. On April 19, 2021, the U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of an ERISA stock-drop lawsuit brought against fiduciaries of Edison International's employee stock ownership plan, holding that the plaintiff failed to meet the "more harm than good" pleading standard. Source: Faegredrinker.com »» Click here for more Court and Other Legal Issues Legislative and Washington DC Senators Collins, Warner Introduce Bill to Boost Retirement Savings Plans Senators Susan Collins and Mark Warner have introduced the SIMPLE Plan Modernization Act to provide greater flexibility and access to small businesses and their employees seeking to use the SIMPLE (Savings Incentive Match Plan for Employees) plans as a retirement savings option. Source: Planadviser.com »» Click here for more on Legislative and Washington Actions Cyber and Plan Security DOL Issues New Cybersecurity Guidance for Retirement Plan Sponsors The DOL issued new cybersecurity guidance to help retirement plan fiduciaries protect $9.3 trillion in assets held by employer-sponsored retirement plans. The DOL guidance confirms that fiduciaries have an obligation to evaluate the cybersecurity procedures of plan record keepers and other service providers. Source: Ballardspahr.com New Cybersecurity Guidance Applicable to Employee Benefit Plan Contracting Most plan fiduciaries rely on service providers to perform the many tasks necessary for establishing and maintaining compliant benefit plans. When engaging new service providers, or monitoring existing service providers and confirming they remain the prudent choice, most plan fiduciaries will conduct a request for proposal. Service providers who are interested in performing the requested services will participate in that RFP. Among other important requirements and obligations, a plan fiduciary should include in the RFP cybersecurity questions and representations that a service provider must respond to/agree to make to be considered for the engagement. Source: Winston.com »» Click here for more on Cybersecurity Issues Compliance and Regulatory Update to Employee Plans Compliance Resolution System The EPCRS is a system of IRS-approved corrections that allow sponsors of retirement plans to resolve various types of failures and continue to maintain the plan’s tax-favored status. The most recent EPCRS update was released in April 2019 and expanded self-corrections to include certain plan document failures, correction options, and possible relief from deemed distributions associated with certain failures involving plan loans made to participants, and created additional opportunities for correcting certain operational failures by plan amendment. Source: Consultrms.com CAA Expanded 401k Loan and Withdrawal Provisions Differ From CARES Act The Consolidated Appropriations Act of 2021 HAS provisions that impact 401k plans. This article is intended to clarify the differences between that legislation and similar provisions included in the earlier CARES Act. Source: Asppa.org »» Click here for more Compliance and Regulatory Material Marketplace News OneDigital Scoops Up Westminster Consulting to Expand Retirement Plan Business Ubiquity Retirement Introduces ESG Funds to Small Business 401ks TRA Completes Acquisition of Rosenfeld/Tortu Retirement Planning Pentegra and The 401k Plan Company Launch PEP Pentegra, EPIC Launch New 3(16) Fiduciary Solution
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