401k Fiduciary Litigation: "Underperformance"
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In This Issue
Fiduciary and Plan Governance 401k Fiduciary Litigation: "Underperformance" On November 16, 2021, the United States District Court for the Northern District of California rendered its decision in In Re Linkedin ERISA Litigation, granting in part/denying in part defendants' motion to dismiss. Among other issues, Linkedin involves a claim that Linkedin plan fiduciaries breached their duty of prudence by selecting/retaining an "underperforming" target-date fund. This sort of claim is being brought more frequently by plaintiffs' lawyers in 401k breach-of-duty-of-prudence litigation. This article discusses the court's decision on this issue. Source: Octoberthree.com Another Swing in DOL Investment Position Reminiscent of the DOL's about-face on ESG investing by ERISA fiduciaries, on December 21st the DOL issued a "supplemental statement" on its view of the use of private equity investments in participant-directed retirement plans, such as 401k plans. Source: Beneficiallyyours.com DOL Clarifies Its Prior Guidance on Private Equity Investments in 401k Plans The DOL issued the Supplementary Statement in response to concerns from unidentified stakeholders that the Information Letter could be viewed -- particularly by sponsoring employers and other plan-level fiduciaries in typical 401k-type plans -- as endorsing or recommending PE investments and not sufficiently emphasizing the risks that accompany such investments. Source: Debevoise.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers The Impact of Employer Defaults and Match Rates on Retirement Saving This study evaluates the interaction between employer match and default rates on savings outcomes among new employees. Selecting a higher default rate has the largest impact on employee savings rates. Plans with low default rates that match a high percentage of employee earnings induce higher-income participants to actively move away from the low default savings rate, resulting in a wider savings gap between higher- and lower-income employees. When default savings rates are set higher, fewer employees move away from the default resulting in higher and more equal savings rates. Additionally, there is evidence that higher default savings rates increase usage of plan default investments. Source: Ssrn.com COVID Hasn't Pushed Boomers Into Retiring Traditionally, older workers who left a job tended to retire. But there was little indication that the people who stopped working during the pandemic saw retirement as their best fallback option. This conclusion by the researchers is consistent with the pre-COVID trend of boomers working longer to put themselves in a better financial position when they eventually do retire. Many older workers have returned to the labor force as the economy has rebounded and vaccines have become widely available. Source: Bc.edu »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers DOL Rolls Over Relief for Investment Fiduciaries Into 2022 The DOL recently issued year-end relief to invest. advice fiduciaries with its release of Field Assistance Bulletin No. 2021-02 on October 25, 2021. Previously, the DOL adopted Prohibited Transaction Exemption 2020-02 on December 18, 2020, which set forth several requirements that financial institutions and investment professionals must satisfy when providing fiduciary invest. advice, including advice to roll over a retirement plan account into an Individual Retirement Account. Although PTE 2020-02 became effective February 16, 2021, interim transitional relief delayed its effective date through December 20, 2021. The Notice further extended transitional relief to as late as June 30, 2022. Source: Olshanlaw.com 403b Plans Podcast: How Small School Districts Can Offer a Great 403b Small school districts can offer top-notch 403b programs. Here are five options available to small school districts that want to offer a great 403b plan. Source: Libsyn.com »» Click here for More 403b Material Court and Legal Dismissal Motion Fails in Natixis ERISA Lawsuit The U.S. District Court for the District of Massachusetts has denied a motion to dismiss a lawsuit filed against Natixis Investment Managers and its retirement committee. The lawsuit, which can now proceed to discovery, claims the defendants breached their fiduciary duties to the company's 401k Savings and Retirement Plan, in violation of ERISA. Source: Plansponsor.com Plaintiffs Refile ERISA Complaint Against Prudential The plaintiffs in an ERISA lawsuit filed against Prudential -- which was subsequently dismissed -- have submitted a second amended complaint to the U.S. District Court for the District of New Jersey. The original lawsuit was dismissed in September "without prejudice," meaning the plaintiffs were given time to file an amended complaint. Source: Planadviser.com »» Click here for more Court and Other Legal Issues Legislative and Washington DC House Introduces Retirement Reform Bill The Retirement Improvement and Savings Enhancement (RISE) Act (H.R. 5891) has been introduced in the House. Most all the provisions in the bill are also contained within the SECURE Act 2.0. This article reviews the RISE Act changes. Source: Hallbenefitslaw.com Latest Regulatory Agenda Offers Few Surprises for Retirement Plans This article highlights some of the retirement plan items on the updated agendas for the DOL's Employee Benefits Security Administration, the Internal Revenue Service, and the Pension Benefit Guaranty Corp., but omits some routine items. While the agendas often specify anticipated completion dates within the next year, those dates are generally aspirational. Source: Mercer.com Is Biden's EBSA Nominee Doomed? Despite advancing through the Senate committee process in early December, President Biden's nominee to lead the EBSA may be in jeopardy. The Senate Health, Education, Labor, and Pensions Committee approved the nomination of Lisa Gomez to serve as Assistant Secretary for EBSA at the Department of Labor on Dec. 2, on a near party-line vote of 12-10. But the full Senate has not acted on her nomination, and before adjourning the first session of the 117th Congress for the holiday break, Gomez was among several nominees whose nominations will not be allowed to carry over into the second session. Source: Napa-net.org »» Click here for more on Legislative and Washington Actions Cyber and Plan Security Why Plan Sponsors Must Address Cybersecurity Now With cybersecurity threats getting increasingly sophisticated and costly, plan sponsors can no longer afford to wait to address the threats to their retirement plans. In a Dec. 16 webinar by the Plan Sponsor Council of America, Daniel Aronowitz, Managing Principal with Euclid Fiduciary, and David Levine, Principal at the Groom Law Group, walked webinar participants through the different types of cyberattacks, as well as recent regulatory, legal and industry developments and how plan sponsors can protect themselves. Source: Asppa.org »» Click here for more on Cybersecurity Issues State-Based Private-Sector Retirement Programs Keystone State Lays Foundation for State-Run IRA Program Another state-run IRA program for private-sector workers is in the making. Pennsylvania's Keystone Saves program will be phased in over four years; the first two years are set aside for Treasury to set up the program, including an RFP process, and to implement a voluntary pilot. Source: Asppa.org Compliance and Regulatory Sponsors of defined benefit and defined contribution plans should keep deadlines and other important dates in mind as they work toward ensuring compliance with their plans in 2022. Dates assume a calendar year plan. Some deadlines may not apply or may have dates shifted based on your organization's fiscal year. Source: Bdo.com Routine Errors 401k Plan Sponsors Can Avoid Plan errors happen, but they can easily be avoided through a little diligence on your part. Routine mistakes are more frequent than catastrophic ones but plan sponsors should make every effort to avoid them. This article is about the routine errors you should avoid making. Source: Jdsupra.com »» Click here for more Compliance and Regulatory Material
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