DOL Proposes Rule to Remove Barriers to ESG Funds in Retirement Plans
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Fiduciary and Plan Governance DOL Proposes Rule to Remove Barriers to ESG Funds in Retirement Plans The DOL has proposed removing barriers put in place by the prior administration that would have limited plan fiduciaries' ability to consider climate change and other environmental, social, and governance issues as risk factors affecting workers' financial security when fiduciaries select retirement plan investments and exercise shareholder proxy voting rights. Source: Shrm.org DOL Proposes Rule Encouraging ESG and Proxy Voting, Reducing Documentation Requirements The proposed rule would largely retain the basic framework of the investment duties regulation while reinstating guidance similar to the sub-regulatory framework that existed immediately before the 2020 rules. For example, the proposed rule retains two longstanding principles. First, the duties of prudence and loyalty require ERISA plan fiduciaries to focus on material risk-return factors and not subordinate the interests of participants and beneficiaries to objectives unrelated to the provision of benefits under the plan. Second, the fiduciary act of managing plan assets includes making decisions about voting proxies and exercising shareholder rights. While the framework is the same, the proposed rule would include changes that seem likely to result in greater leeway for fiduciaries to include ESG investments in plans. Source: Groom.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers Surprising Findings on 401k Participant Student Loan Debt Nearly one-in-three Baby Boomer and Gen-X 401k plan participants who have student loan debt also have outstanding 401k loans, a much higher percentage than Millennials or Gen Z participants. The research also shows Gen-Z joining the ranks of workers increasingly burdened by debt, entering adulthood with $27,900 in student debt on average. But notably, Boomers hold more than twice as much debt as these younger borrowers. Source: 401kspecialistmag.com Autoenrollment and the Importance of the Default Automatic enrollment is a powerful strategy proven to increase retirement plan participation, but the newest -- and last -- edition of Nudge, a seminal book on behavioral finance co-authored by Nobel laureate Robert H. Thaler, stresses that the benefits of the popular strategy depend largely on how it is implemented. Source: Vanguard.com Only 31% of Hispanic Workers Participate in a Workplace Retirement Plan While they're one of the fastest-growing population demographics in the country, Hispanic workers face major challenges in allocating enough money to retirement savings compared with other groups. In the report "A Closer Look Into The Finances of Hispanic American Households," behavioral researchers at Morningstar dug into the underlying causes of the lower savings rates for this group. Source: Planadviser.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers A Primer on DOL Probes for ERISA Plan Service Providers The DOL has proactively shifted its enforcement resources in recent years from the sponsors of plans covered by ERISA to the financial institutions that provide services to ERISA plans. This has allowed the agency to conduct investigations involving hundreds or thousands of plans at once rather than investigating individual plan sponsors. Given this shift, it is important to know both what to expect when the DOL decides to investigate and how to respond. Source: Groom.com Four Tech Trends Shaping the 401k Industry While the 401k industry may be somewhat slow to adapt to new technology, the results of a new survey suggest that ongoing developments are quickly transforming the retirement space. According to the resulting of a recent, outdated recordkeeping technology has led to high costs, administrative difficulties, and rigid plan designs. But that appears to be changing as large banks and private equity firms, for example, have invested nearly $1 billion into the industry over the past year alone. Source: Napa-net.org After 401k Account Growth Catapults Ahead of Curve, Vestwell CEO Scrambles Vestwell CEO Aaron Schumm just abdicated his chairmanship to Lori Hardwick as part of a senior executive team shuffle, after experiencing overwhelming growth in the workplace 401k accounts it services. Source: Riabiz.com 403b Plans 403b Plan Participants: Getting "Noticed" A reminder for public schools and 501(c)(3) organizations with 403b plans as year-end approaches, employers have an annual notice obligation to employees to meet IRS requirements. This article reviews the IRS employers' annual notice obligation to employees. Source: Voya.com Despite Pandemic, Nonprofit Workers Boost Participation in 403bs Despite COVID-19 hitting nonprofit organizations particularly hard last year, nonprofit workers participated in 403b retirement plans at the highest level since tracking began in 2008, according to an annual 403b Plan Survey from the Plan Sponsor Council of America. Overall retirement plan participation continued to climb, rising to 77.2% in 2020, up from 76.6% in 2019 and 72% in 2018. Source: Psca.org »» Click here for More 403b Material Court and Legal TIAA Faces New Managed Account Rollover Complaint A new lawsuit suggests the individual advisory program TIAA clients were rolled into was significantly more expensive and generated hundreds of millions of dollars in fees for TIAA, without providing commensurate performance benefits. Source: Planadviser.com Aon Triumphs in ERISA Suit Over Lowe's Investments A judge determined the firm didn't breach its ERISA fiduciary duties when it encouraged Lowe's to move more than a billion dollars in plan assets to one of Aon's investment funds. Source: Planadviser.com Plaintiffs Claim Deloitte Breached ERISA Prudence Duties Plaintiffs have filed a new ERISA lawsuit in the U.S. District Court for the Southern District of New York, naming as defendants Deloitte LLP, the company's board of directors, and various other related entities. The suit alleges the defendants permitted the payment of excessive administrative and recordkeeping fees in the operation of a 401k plan and a profit-sharing plan provided to Deloitte employees. Source: Planadviser.com 401k Fee Litigation: What Must a Plaintiff Allege to Survive a Motion to Dismiss? This term the Supreme Court is considering -- for the first time -- critical issues in DC plan fee litigation, in Hughes v. Northwestern. This piece discusses the recent decision by the United States District Court for the Southern District of Ohio, dismissing plaintiffs' claims in Forman v. TriHealth, Inc. 401k Retirement Savings Plan Retirement Committee. Forman illustrates an issue that is also likely to be presented in Hughes: how fact-specific must plaintiffs' complaint be to survive a motion to dismiss? Source: Octoberthree.com »» Click here for more Court and Other Legal Issues Compliance and Regulatory New IRS Snapshot Tackles Deemed Distributions A new IRS issue snapshot explains when different kinds of participant loan failures will cause a taxable deemed distribution. The snapshot also highlights the provisions of the CARES Act that gave more loan flexibility to participants affected by COVID-19. While the snapshot summarizes existing guidance rather than providing new information, it may alert plan sponsors and taxpayers to the kinds of issues IRS agents review during audits. Source: Mercer.com New 401k Adoption Agreements on the Horizon: Pitfalls for the Unwary It is important for employers to carefully review the updated documents prepared for their plans. Simply "rubber-stamping" the updated document package from the vendor is likely to result in compliance failures and could lead to costly corrections and penalties. Here are some of the issues to watch for. Source: Sgrlaw.com Scary Surprise for Some New 401k Sponsors: Plan Audit Costs You are a business owner and have just found out that as part of your Form 5500 filing obligations you need to engage the services of an independent qualified public accountant to audit plan operations and finances. The cost of these services run about $10,000. This is a scary surprise for you. Did things have to end up this way? Source: Eforerisa.com »» Click here for more Compliance and Regulatory Material Marketplace News Morningstar, PAi Partner on ESG PEP CAPTRUST Launches "MEP/PEP Alternative" for Smaller Employers
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