Who Is Liable for Retirement Plan Mistakes?
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In This Issue
Fiduciary and Plan Governance Who Is Liable for Retirement Plan Mistakes? When a 401k or similar defined contribution plan fails to apply the correct definition of compensation in determining benefits, fails to calculate vesting service correctly, or doesn't make distributions to participants who need to get required minimum distributions, who is responsible? Plan sponsors are often surprised to learn that they are. Here is why your recordkeeper is not responsible and what to consider. Source: Shrm.org Retirement Plan Committees and Inclusivity Experts say elevating diversity and closing inclusivity gaps are an absolute must for any successful organization. Studies show that when employees think their organization is committed to and supportive of diversity and inclusion, companies report increases in the ability to innovate, responsiveness to changing customer needs, and team collaboration. This article investigates whether the same is true for retirement plan committees. Source: Captrust.com There is frequently a difference between doing what the law requires and doing everything that you could do as a plan fiduciary. That said, there are things that plan fiduciaries must do, and things that, while not required, can keep the plan, and plan fiduciaries out of trouble. Here are five of those latter things. Source: Napa-net.org »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers Cumulative Benefits of Retirement Income Solutions in Our DC System This 13-page paper seeks to summarize the primary benefits of in-plan income solutions and will break down the benefits by participants, sponsors, and the societal benefit of enhanced retirement security achieved through the adoption of guaranteed income options within our DC system. Source: Iricouncil.org How DC Plan Defaults Can Evolve to Improve American Retirement Security From auto-enrollment to auto-escalation to auto-income. This is a 14-page paper on the evolving solutions available to sponsors, addressing fiduciary and portability concerns, and next steps for plan sponsors, recordkeepers, insurers, and consultants. Source: Iricouncil.org Addressing Racial Inequities in Retirement Savings Lower 401k contribution rates by Black employees are often overlooked. The latest survey, conducted in December 2020 among 2,104 U.S. adults with $50,000 or more in household income, found that historical disparities remain pronounced, even when excluding low-paid workers. HR leaders need to take a broad look at what they can do to help employees save, bearing in mind the challenges faced by members of historically disadvantaged communities. Source: Shrm.org »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers Consolidation, Wellness and Micro Market Top of Mind for Recordkeepers Recordkeepers expressed excitement and concern about the future of the DC industry at the third annual InvestmentNews RPA Convergence Recordkeeper Roundtable and Think Tank. The DC industry has an opportunity not only to improve retirement income security but also to address the financial needs of workers, especially those who cannot afford a traditional financial adviser. Source: Investmentnews.com (registration may be required) 403b Plans IRS Issues Important Reminder on Application of IRC Section 415(c) Limit to 403b Plans The IRS issued an important reminder of the unique application of the limit under Internal Revenue Code Section 415(c) to 403b plans on August 20, 2021. The IRS's "Issue Snapshot" highlighted a rule that has applied for decades, but with which 403b plan sponsors and administrators are often not familiar. Source: Morganlewis.com »» Click here for More 403b Material Court and Legal AT&T Win Is Road Map for Defense of 401k Fees AT&T's defeat of a massive class action challenging its retirement plan's recordkeeping fees could help other plan sponsors defend against similar disputes. The flood of class actions brought in recent years over allegedly excessive 401k plan fees isn't letting up. But with more companies choosing to fight rather than settle, defense attorneys say AT&T's case could serve as a road map for what evidence needs to be produced to prevail at trial. Source: Bloomberglaw.com Seventh Circuit Rejects Plan's Attempt to Compel Individual Arbitration Recognizing that the Plan contained an unambiguous arbitration provision, and that "ERISA claims are generally arbitrable," the Seventh Circuit Court of Appeals nonetheless found that arbitration could not be compelled where the provision prospectively barred the plaintiff from pursuing certain statutory remedies. Source: Beneficiallyyours.com The U.S. Supreme Court's decision in Sulyma and reliance on that decision by the District Court in the Bowers case have significantly weakened the three-year statute of limitations defense for fiduciary breach cases based on actual knowledge of a breach. In light of these decisions, plan fiduciaries should take actions outlined here to foreclose fiduciary breach suits and make the strongest possible case to have a fiduciary breach suit dismissed. Source: Verrill-law.com »» Click here for more Court and Other Legal Issues Legislative and Washington DC Proposed Bill Would Create Portable Retirement Accounts Representative Jim Himes and Senator Mark Warner have announced legislation to establish universal, portable retirement accounts. The Portable Retirement and Investment Account (PRIA) Act of 2021 would create such accounts for every American at birth, in conjunction with the issuance of a Social Security number. Source: Futureplan.com Department of Labor Teases Cryptocurrency Interest Hinting that the DOL is currently working on guidance related to cryptocurrency, the Acting Assistant Secretary for the DOL's Employee Benefits Security Administration recently commented that the DOL finds the prospect of cryptocurrency investments in 401k plan lineups "troubling." This may be a sign of DOL focus on the increasing frequency of ERISA plan investments in cryptocurrency vehicles, including funds with cryptocurrency exposures. Source: Morganlewis.com Bipartisan Aura Around Retirement Savings Diminishes in Reconciliation Partisan tension has surrounded most issues in Washington, D.C. over the last several years with a few notable exceptions. One of them was retirement-savings policy. For the moment, "was" is the operative word because of a massive bill that is creating brittle politics on Capitol Hill. Republicans are upset about auto-IRA and other proposals in the $3.5 trillion budget reconciliation package. Will their ire carry over to SECURE 2.0? Source: Investmentnews.com (registration may be required) »» Click here for more on Legislative and Washington Actions Compliance and Regulatory Deemed Distributions: Participant Loans - Updated Participant loans are available in many retirement plans, although plans are not required to offer participant loans. Failures may occur when participant loans exceed the maximum dollar amount, have payment schedules that do not meet the time or payment requirements or go into default when payments are not made. Each of these failures, and other issues, will cause the loan to become a deemed distribution for tax purposes. This updated IRS "Issue Snapshot" will summarize what triggers a deemed distribution and when it can occur. Source: Irs.gov Fee Disclosures Aren't Working. Here's How to Fix Them The GAO tested participant understanding of some sample fee disclosures, and the results were disappointing. Almost a decade after the DOL fee disclosure regulations became effective, it is clear that they are failing in their intended goal of demystifying retirement plan fees. Without waiting for the DOL to act, plan fiduciaries can implement the GAO recommendations and insist that their participants get disclosures that clearly provide the essential information they need to make investment decisions. Source: Rpaconvergence.com »» Click here for more Compliance and Regulatory Material Marketplace News OneDigital Picks Up Sacramento, California-Based Praxis Consulting Dynamic Wealth Advisors Announces 'Complete 401k' Vanguard to Lower Investor Costs Through Enhancements to Its Target Retirement Series Betterment Raises $160 Million in Growth Capital Empower Retirement Seeks to Bolster Expansion With New Hires The Standard Introduces New 401k Recordkeeping Solution for Small Retirement Plans
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