Industry Best Practice: Fraud Controls
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 In This Issue
Fiduciary and Plan Governance Industry Best Practice: Fraud Controls The protection of retirement accounts can only be fully realized with a partnership between plan sponsors, fiduciaries, recordkeepers, participants, and where applicable advisors. There must be layered controls as there is not a single solution to protect accounts. These controls should be a combination of preventative, detective, and responsive controls. This fraud control chart is intended to highlight a minimum set of controls that should be considered and set expectations for all parties involved. Source: Sparkinstitute.org Fiduciary Duty Is Coming to Privacy: Through Your Benefit Plans While all businesses have been grappling with cybersecurity challenges for years, cybersecurity has recently come into focus for retirement plans, health and welfare plans, and other ERISA plans due to a new DOL cybersecurity initiative. The DOL has quickly followed up on this guidance by incorporating privacy and cybersecurity requests into its audits of employee benefit plans. This article outlines considerations for plan fiduciaries, including employers and investment or administrative committees, to document that they have followed a prudent process to protect the plan from losses from cybersecurity events and to protect the personal data of participants and beneficiaries. Source: Kilpatricktownsend.com Excessive fee litigation has encouraged the reexamination of fiduciary best practices. Although the facts underlying these cases vary, the fundamental questions in each case pertain to the process by which the fiduciaries carried out their responsibilities. As courts have grappled with questions of fiduciary responsibility, a body of case law has been developed that provides valuable guidance on methods plan fiduciaries may use to mitigate their risk if faced with a lawsuit or government investigation. This article addresses the duty of prudence in monitoring plan investments, thereby mitigating fiduciary risk through the lens of that body of case law. Source: Truckerhuss.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers The Economics of Providing 401k Plans: Services, Fees, and Expenses, 2020 The study found that 401k plan participants investing in mutual funds tend to hold lower-cost funds, the expense ratios that 401k plan participants incur for investing in mutual funds have declined substantially since 2000, and the downward trend in the expense ratios that 401k plan participants incur for investing in hybrid and bond mutual funds continued in 2020. Source: Ici.org 2021 Defined Contribution Plan Participant Survey Findings This DC Plan Participant Survey was conducted as the COVID-19 pandemic disrupted financial markets, workplace trends, and spending patterns. Against this backdrop, participants remained broadly resilient in maintaining their retirement savings efforts, but many also continued to appear overwhelmed and unsure about the various aspects of retirement planning. Source: Jpmorgan.com New Research Finds Millennials and Gen X Increasingly Concerned About Retirement in Wake of Pandemic A national survey finds that Millennials and Generation X are more worried about retirement as compared to older generations. Sixty-four percent of Millennials and 54 percent of Generation X are more concerned about their retirement security in the wake of the COVID-19 pandemic. The level of concern is at 42 percent for Baby Boomers and 25 percent for the Silent Generation. Source: Prnewswire.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers Best Interest Standard of Care for Advisors #59 This article looks at DOL FAQ #9 that explains that Prohibited Transaction Exemption 2020-02 provides relief from the prohibition on compensation from a rollover IRA due to a fiduciary recommendation to roll over. Source: Fredreish.com Court and Legal MetLife Accused of Favoring Proprietary Index Funds in 401k Current and former participants of the MetLife 401k Plan have filed a lawsuit alleging the plan's fiduciaries violated ERISA's duties of loyalty and prudence "by applying an imprudent and disloyal preference for MetLife index fund products within the plan, despite their poor performance, high costs and lack of traction among fiduciaries of similarly sized plans." According to the complaint, the defendants' conduct has cost plan participants millions of dollars over the period defined in the lawsuit. Source: Planadviser.com »» Click here for more Court and Other Legal Issues Legislative and Washington DC Women's Retirement Protection Act Reintroduced in Congress U.S. Senator Patty Murray, who is the current chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, and Representative Lauren Underwood have reintroduced the Women’s Retirement Protection Act of 2021. According to the lawmakers, the legislation aims to address the gender-based retirement savings gap and bolster women's financial security overall. Source: Planadviser.com »» Click here for more on Legislative and Washington Actions State-Based Private-Sector Retirement Programs State Auto-IRAs are Building Momentum About half of the nation's private-sector employees do not have a retirement savings plan at work, and that hasn't changed in at least 40 years. Some states are trying to fix this coverage gap in the absence of substantial progress by the federal government in solving the problem. And the state reforms are gaining momentum. Source: Bc.edu Compliance and Regulatory IRS Updates 401k Plan Correction Program On July 16, 2021, the IRS published Revenue Procedure 2021-30, which makes significant improvements to the Employee Plans Compliance Resolution System. Recognizing that mistakes (late enrollments, missed elective deferrals, loan failures, etc.) frequently occur in the day-to-day administration of 401k plans, the EPCRS permits 401k plan sponsors to correct certain plan failures under a Self-Correction Program, a Voluntary Correction Program, or under Audit CAP for failures discovered during an IRS audit. Source: Masudafunai.com IRS Plays Musical Chairs With Voluntary Correction Programs On July 16, 2021, the IRS published the latest EPCRS upgrade in Revenue Procedure 2021-30, in which, like musical chairs, some ground is gained while some is taken away. Here is a summary of some of the key changes. Source: Eforerisa.com The Newest EPCRS: All Good News (Except When It's Not) The IRS issued the long-awaited update of its Employee Plans Compliance Resolution System. Revenue Procedure 2021-30 supersedes the previous EPCRS procedure, Rev. Proc. 2019-19. The new procedure is generally effective as of July 16, 2021, but there are two provisions with special effective dates. This piece discusses the details. Source: Ferenczylaw.com 401k Plan Restatements Required By July 2022 Every six years, the IRS requires employers with qualified, pre-approved plans to restate their plan documents to reflect changes that have occurred since the plan documents were created or last restated. For defined contribution plans, the current restatement cycle -- called Cycle 3 -- opened on Aug. 1, 2020, and will close on July 31, 2022, meaning all plan documents need to be not only restated by then, but also certified by the IRS, and adopted by employers. Missing this deadline will force plans out of compliance and may result in IRS penalties. Source: Bdo.com ERISA Record Retention: How Long Is Long Enough? ERISA record retention may not be of those sizzling retirement plan topics for some folks. But it's an important issue in today's ERISA's environment in which Plan Administrators and other fiduciaries must meet complicated compliance reporting requirements, oversight from regulatory agencies, and sometimes litigation. So here is some basic information about document retention for ERISA plans in a Q and A format. Source: Retirementplanblog.com IRS Proposes Electronic Filing Requirements for Certain Information Returns The IRS has released a pre-publication version of proposed regulations amending rules intended to increase the filing of electronic returns in accordance with the Taxpayer First Act of 2019. Additionally, the IRS has withdrawn previously proposed regulations regarding electronic filing that were published on May 31, 2018. The new proposed regulations reduce the threshold by which filers must electronically file from 250 to 100 returns for the 2022 calendar year. Source: Ascensus.com »» Click here for more Compliance and Regulatory Material Marketplace News Morgan Stanley Partners With Vestwell Empower Retirement to Acquire Retirement Business of Prudential Financial Integrated Pension Services Has Acquired Friedman LLP's Benefits 21
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