Newsletter for December 13, 2021
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The 21st Edition of the 401k Averages Book is a great resource for fee benchmarking data. Use the 401k Averages Book to better understand investment, recordkeeping and revenue sharing expenses for 401k plans. Still the most recognized resource book for comparative, non-biased 401k average cost information. Click here to order your copy.
In This Issue
Fiduciary and Plan Governance
401k Annual Fiduciary Administration - A Checklist for 2022
A checklist can serve another important purpose, monitoring your 401k provider's job performance. As a 401k fiduciary, you can't simply assume your 401k provider is doing their job. You must "monitor" them to ensure they're doing a competent and timely job. A checklist can make monitoring easy.
Source: Employeefiduciary.com
The Best Way a 401k Plan Sponsor Can Avoid Headaches? Hire the Right TPA
The most important step that plan sponsors can take in avoiding needless plan errors that can cost them in the pocketbook is by hiring the right third-party administrator. Here's why.
Source: Jdsupra.com
»» Click here for more Fiduciary and Plan Governance Material
Insight: Studies, Research, and White Papers
November Another Light Month for 401k Trades
The Alight Solutions 401k Index update for November has been published, showing the month was another light one for DC retirement plan trading. In fact, there were no days of above-normal activity.
Source: Plansponsor.com
»» Click here for More Studies, Research, and White Papers
Items of Special Interest to Service Providers
Deadline to Comply With DOL Invest. Advice Exemption Fast Approaching
If recommendations are being provided to retirement investors and fiduciaries, then an exemption strategy will be warranted to receive any compensation in connection with the advice. PTE 2020-02 was built for these types of arrangements, but it contains numerous conditions go into effect early next year.
Source: Fiduciarygovernanceblog.com
Add Value by Helping Plan Sponsors Develop a Fiduciary Calendar
To manage their responsibilities, plan sponsors should develop procedures that facilitate prudent decision-making and demonstrate that the plan sponsor is disciplined about following those procedures. RPAs can add value to their retirement plan support services by helping plan sponsors develop a strategy for satisfying their fiduciary responsibilities under ERISA, including a fiduciary calendar.
Source: Newportgroup.com
Court and Legal
Final Thoughts Before the Hughes v. Northwestern Supreme Court Oral Argument
The Supreme Court will hold oral argument in the Hughes v. Northwestern case on Monday, December 6. This is the most important case in the nearly fifty-year history of ERISA, as it will decide the pleading standard for accusing plan fiduciaries of professional malpractice. Northwestern may ultimately lose this battle. But for plan sponsors, it is the war on excessive fees that matters. That starts with a more rigorous and appropriate context-based pleading standard in which many meritless cases are dismissed at the pleadings stage.
Source: Euclidspecialty.com
Supreme Court Struggles to Apply "Twiqbal" in Retirement Plan Fee Cases
The Supreme Court heard oral arguments in Hughes v. Northwestern University, No. 19-1401, just one of about 150 similar class-action suits filed around the country in the last few years. Plaintiffs appealed to the Supreme Court, which granted certiorari to address this question: "[w]hether allegations that a defined-contribution retirement plan paid or charged its participants fees that substantially exceeded fees for alternative available investment products or services are sufficient to state a claim against plan fiduciaries for breach of the duty of prudence under ERISA."
Source: Erisalitigationadvisor.com
Justices Settle Into Opposing Camps on Duties of Retirement Plan Sponsors
The arguments in Hughes v. Northwestern University displayed a case that presents a prosaic question of trust law, the fiduciary obligation of the sponsors that control the DC plan. The author writes, "The reactions of the justices to the case seemed to have less to do with a careful parsing of the statute imposing that duty and much more to do with the differing predispositions that the justices have about the propensity of class actions to present defendants with an extortionate compulsion to settle even the flimsiest of allegations."
Source: Scotusblog.com
Exelon Faced With ERISA Excessive Fee Suit
In sum, the complaint alleges that the plan's fiduciaries breached their duties of prudence and loyalty to the plan and its participants by, among other things, selecting and maintaining investment options that were materially more expensive and performed materially worse than alternatives that were available in the marketplace; causing the plan to pay excessive fees for recordkeeping and administrative services; and allowing a third-party consultant to charge the plan unreasonably high fees for participant advisory services, which the consultant kept for itself or shared with another plan service provider.
Source: Planadviser.com
Judge "Unfriends" Chamber Filing in 401k Excessive Fee Case
A federal judge has rejected a "friend of the court" filing in an excessive fee case against the American National Red Cross. In late August, noting that "converting subpar allegations into settlements has proven a lucrative endeavor--mostly for the lawyers bringing these lawsuits," the U.S. Chamber of Commerce filed an amicus brief in a suit filed last March challenging the practices of the fiduciaries of the $1.2 billion retirement plan of the American Red Cross in the U.S. District Court for the District of Columbia.
Source: Napa-net.org
Northwestern University Supreme Court Argument Analysis
Two expert attorneys who listened to this week's oral arguments in Hughes v. Northwestern University say they would "rather be in Northwestern University's shoes" than those of the plaintiffs, but the outcome of the potentially highly important case won't be known for some months.
Source: Planadviser.com
»» Click here for more Court and Other Legal Issues
Legislative and Washington DC
Bipartisan Disaster Retirement Savings Act Introduced
The bipartisan Disaster Retirement Savings Act, introduced by Reps. Mike Thompson and Mike Kelly, who both sit on the tax-writing House Ways and Means Committee, would help survivors of natural disasters by allowing them to withdraw funds from retirement accounts to cover the unexpected and emergency costs related to disasters without incurring fees or penalties.
Source: Napa-net.org
»» Click here for more on Legislative and Washington Actions
Cyber and Plan Security
Cybersecurity and Data Privacy for Benefit Plans
Failing to adequately address data privacy and security will likely result in a breach of fiduciary duty claim. Knowing there is sensitive data at risk, what should employers, plan administrators and their plans do? This article contains some helpful starting points.
Source: Clarkhill.com
»» Click here for more on Cybersecurity Issues
Compliance and Regulatory
December 31, 2021 Reminders for Retirement Plan Sponsors
Amendments implementing the 401k and 403b plan hardship distribution changes of the Bipartisan Budget Act of 2018 are the main amendments needed by December 31, 2021. This deadline applies to both calendar-year and fiscal-year plans. The amendments generally need to be retroactive to each provision's effective date.
Source: Segalco.com
IRS' 2021 Required Amendments List Doesn't Affect 401k Plans
On November 30, 2021, IRS released Notice 2021-64, its annual list of required amendments for individually designed qualified retirement plans. This year, the RA List is notable in that, for perhaps the first time, it contains no provisions directly applicable to 401k plans.
Source: Compliancedashboard.net
Which Pocket? A Guide to Paying Retirement Plan Expenses Out of Plan Assets
The retirement plan sponsor may have the option to pay for some plan-related expenses out of the assets held in trust for the plan. This may seem like a more appealing option than paying for these expenses from business assets, but how does the sponsor determine which expenses are allowed to be paid from plan assets? This guide will explain which pocket you can use.
Source: Milliman.com
»» Click here for more Compliance and Regulatory Material
Marketplace News
HUB International Announced the Acquisition of Certain Assets of Benefit Partners Group
OneAmerica Launches Adviser Managed Account Service
Sharebuilder 401k Waiving Set-Up Fees for New 401k Plans
Hub Buys $2.3 Billion 401k Consultant Fiducia Group
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