Newsletter for July 6, 2021
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In This Issue
Fiduciary and Plan Governance
Incorporating ESG in DC Plans: A Resource for Plan Sponsors
Increasingly, retirement plan sponsors are considering whether sustainable investments and investment options could enhance their DC plan retirement offerings. Heightened public awareness, evolving regulatory guidance, strides in data reporting, and investment product innovation have led plan sponsors to ask for more tactical guidance on applying strategies that integrate environmental, social, and governance criteria into plan design. This 11-page paper provides tips for plan fiduciaries considering how to incorporate sustainable investing into a plan.
Source: Dciia.org
Best Practices to Reduce Excessive Fee Risk
The role of retirement plan governance has become increasingly important as employers face increased scrutiny of how they operate their 401k plans in the current legal and regulatory environment. CFOs and human resource managers administering 401k plans and serving on 401k plan committees have increasingly been held responsible for fiduciary breaches. Plan fiduciaries should conduct due diligence to reprice services and replace underperforming funds given asset-based fees and significant growth in plan size, due to rising markets and recurring contributions.
Source: Cpajournal.com
Plan Sponsors Should Prudently Manage ERISA Accounts
ERISA accounts are created by revenue sharing from funds in a DC plan, and many participant lawsuits have questioned the prudent and fair management of revenue sharing.
Source: Plansponsor.com
»» Click here for more Fiduciary and Plan Governance Material
Insight: Studies, Research, and White Papers
Could Plan Design Features Increase Abandoned Accounts?
A new research paper suggests that policies that promote retirement saving, such as auto-enrollment, may unintentionally lead to an increase in abandoned retirement savings accounts.
Source: Asppa.org
Is There Demand for Cryptocurrency in Retirement Portfolios?
Most people remain hesitant to invest in cryptocurrency in their DC plans, but a recent survey finds that there's a small "crypto-curious" contingent. With the increased attention of cryptocurrency, Stan Treger, a behavioral scientist at Morningstar, notes that analysts at the firm began to wonder if investors would welcome this asset into their retirement portfolios. As such, they posed this question as part of a larger, nationally representative survey of about 1,400 people conducted in May 2021.
Source: Napa-net.org
New Study Reveals the Impact Lay Fiduciaries Have on the Country's Fiscal Health
There are 17.5 million men and women who have the legal responsibility for managing the assets of pension plans, foundations, endowments, health and welfare plans, and personal trusts. These "lay fiduciaries" generally come from outside the financial services industry, usually don’t get paid for their fiduciary jobs, and have little, if any, training on what the law requires of them in managing more than $26.6 trillion of our investments.
Source: Businesswire.com
»» Click here for More Studies, Research, and White Papers
Items of Special Interest to Service Providers
How the 401k World Will Adapt as It Wakes Up After Long Pandemic
There will be vast differences, but the fundamentals of the business will be the same, as will the importance of strong relationships and brands.
Source: Investmentnews.com (registration may be required)
Tech-Forward Recordkeepers Enter the Micro 401k Market
New tech-forward recordkeepers offering low-cost, easy-to-onboard startup plans for small businesses are penetrating the micro 401k provider market, according to the latest Cerulli Edge - U.S. Retirement Edition. As more providers vie for market share, Cerulli expects competition within the micro-market will intensify.
Source: Cerulli.com
403b Plans
Master Custodial Accounts and the 403b Self Directed Brokerage Account
Today's 403b plans investment structures can actually be a bit misleading. We have designed these arrangements to "look and act" like investment structures for 401k plans. In fact, the 403b arrangements are actually substantially different than their 401k counterparts. There is a bit of history which helps explain these unique arrangements.
Source: Businessofbenefits.com
»» Click here for More 403b Material
Plan Communications
Context and Clarity Key in Communicating With Participants
Communicating with participants is, well, required. But more than that, it's central to helping participants make the most of their participation in a plan. An industry insider argues that an approach that is clear and presents information in a way that makes it real and actionable is best.
Source: Asppa.org
»» Click here for more on Plan Education and Communications
Court and Legal
SCOTUS Agrees to Hear ERISA "Excessive Fee" Case
The Supreme Court granted a petition for a writ of certiorari to review the Seventh Circuit's decision in Divane v. Northwestern University. Hughes is one of the numerous "excessive fees" class action cases that have come to dominate the ERISA fiduciary litigation landscape in recent years.
Source: Steptoe.com
»» Click here for more Court and Other Legal Issues
Legislative and Washington DC
Graff: Current Legislative Environment Is 'Challenging'
There is plenty of activity on Capitol Hill, but it comes amid a climate that creates challenges for the retirement industry, American Retirement Association CEO Brian Graff noted on June 29. The environment now is very different, remarked Graff. There is a lot of discussion, he said, "but not a lot of agreement." He added that it is challenging to "keep retirement policy out of the fray."
Source: Asppa.org
»» Click here for more on Legislative and Washington Actions
Cyber and Plan Security
Cybersecurity Enforcement Trends: A Fraught New Reality for Victims of Cyberattacks
The article discusses how regulators have shifted their focus from data breach notifications to overall cybersecurity preparedness. Authors highlight that where regulators previously focused on how companies responded to cyberattacks, they are now focusing more on whether and to what extent victimized businesses were adequately prepared to defend against attacks. They add that if the policies, procedures, and defenses businesses had in place were inadequate, regulators are increasingly pursuing enforcement actions, even in situations where a data breach did not occur or where individual consumers' personal identifying information was not improperly accessed or acquired.
Source: Faegredrinker.com
»» Click here for more on Cybersecurity Issues
State-Based Private-Sector Retirement Programs
Availability of State Auto-IRAs Appears to Complement Private Market for Retirement Plans
As more states enact retirement savings programs for private-sector workers who can't save through their jobs, policymakers and analysts have speculated about the potential impact on employers: Would these state programs "crowd out" the private market for plans such that businesses would not adopt their own 401ks or comparable alternatives? Preliminary data from DOL annual filings by employer-sponsored plans suggests that in states that have created what is known as an auto-IRA, employers with plans continue to offer them, and businesses without plans are still adopting new ones at similar or higher rates than before the state options were available.
Source: Pewtrusts.org
Maine Governor Signs State-Run IRA Plan Into Law
Add the Pine Tree State to the growing list of states offering a program to provide coverage to those whose employers do not offer a plan. Gov. Janet Mills signed the "Act To Promote Individual Retirement Savings through a Public-Private Partnership" (LD 1622) into law on June 24.
Source: Napa-net.org
Compliance and Regulatory
IRS Now Requires an Employer Discretionary Match to Be "Definitely Determinable"
"Definitely Determinable" is one of those pre-ERISA concepts that are still applicable. It means that for a retirement plan to be considered "qualified," a participant's retirement benefit had to be determined following a stipulated formula that is not subject to the discretion of the employer. The purpose of which is, of course, to eliminate the possibility of benefits favoring the higher paid employees. It's long been required for defined benefit pension plans in which it's a straightforward matter. But what about those 401k plans?
Source: Retirementplanblog.com
»» Click here for more Compliance and Regulatory Material
Marketplace News
Sageview Advisory Group Grows in the West With Acquisition of MJM401k
HUB Buys Another 401k Plan Practice
Pooled Employer Plans Available on the Benetic Marketplace
Riskalyze Introduces New Best Interest Proposal Assessment
Equitable Adds Managed Accounts and Cash Balance Solution to Retirement Plans
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