Insight: Studies, Research, and White Papers

2021 Best in Class DC Providers

From an annual survey of approximately 3,000 defined contribution plan sponsors, DC plan providers are measured and evaluated according to feedback from their clients. Major DC plan providers are rated in the various client categories they serve, and benchmark information is collected for plan sponsors to gauge their plans against their peers.

Source: Plansponsor.com

Survey Finds 40% of Canadians Maintaining Retirement Savings Despite Pandemic

Despite the financial challenges experienced by Canadians throughout the coronavirus pandemic, 40 percent said they've continued to save for retirement, according to a new survey by life insurance provider PolicyMe Corp. More than half (54 percent) of survey respondents said they're adding to their emergency funds, while 48 percent are paying down debt and 45 percent are making regular contributions to their savings.

Source: Benefitscanada.com

401k Trading Activity in 2021 Lowest on Record

A bull market extension in 2021 meant better behavior on the part of retirement plan participants. 401k investors were infrequent traders and mostly content to watch their balances grow, according to the Alight Solutions 401k Index. The Illinois-based Alight found net trading activity for the year was 0.53% of balances, the lowest on record for the 401k Index, which started in 1997 and well below 2020's value of 3.51%. There were 3 days of above-normal1 activity, a stark contrast to the 47 seen in 2020 when the market was much more volatile.

Source: 401kspecialistmag.com

401k Nondiscrimination Testing Study: What Percentage of Plans Fail?

401k plans must pass certain IRS-mandated nondiscrimination tests annually to confirm Highly-Compensated Employees do not disproportionately benefit and that no plan participant exceeded certain contribution limits. Often, these tests are completed as soon as possible following a year-end so correction and deduction deadlines are not missed. For calendar-based 401k plans, that means now. What percentage of 401k plans fail these tests? This study looked at 3,217 small business plans to find out. Results from the study of 2020 data -- including key findings -- can be found here.

Source: Employeefiduciary.com

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Fiduciary and Plan Governance

401k Compliance Check: Who Makes the Decisions for Your 401k Plan?

For most employers, January kicks off a brand new 401k plan year. Now that all of the year-end plan amendments, participant notices, and new deferral elections are behind you, this is a great time to take a step back and look at the big picture for your 401k plan's governance and decision-making process and make sure your 401k plan decision-makers are properly authorized to make those decisions.

Source: Foley.com

DOL Refines Its Position Regarding Private Equity in 401k Plans

The door is not closed to plan fiduciaries who are considering adding designated investment alternatives with private equity exposure to their 401k or other DC plans, but it is less open than it was before the issuance of the DOL's Supplemental Statement. Only plan fiduciaries of large 401k or other defined contributions plans who also have experience evaluating private equity in a defined benefit context should conclude that they have the necessary expertise to consider such an option. Even then, they would be well-advised to use a qualified investment adviser in making such a determination. Any decision to offer such a fund should be made through a rigorous and prudent process that should be fully documented.

Source: Frostbrowntodd.com

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Court and Legal

$10 Billion 403b Smacked With Excessive Fee Suit

This time the defendants are the fiduciaries (and those who appointed them) of the Consolidated 403b Program of Mass General Brigham and Member Organizations, A plan that "at all times during the Class Period, the Plan had at least 6.4 billion dollars in assets under management." The suit notes that at the Plan's fiscal year-end in 2020 and 2019, the Plan had over $10.2 billion and $9.2 billion, respectively.

Source: Napa-net.org

New Decision Sends Excessive Fee Suit to Arbitration

In the absence of Supreme Court guidance, federal courts dealing with motions to compel arbitration of these disputes have issued inconsistent decisions on the requirements to force arbitration of ERISA fiduciary breach claims and class action waivers. A decision just issued by a federal district court judge in Florida has upheld a plan's mandatory arbitration policy and highlights the importance of adding plan language setting out a plan's mandatory arbitration policy in a plan amendment.

Source: Cohenbuckmann.com

401k Plan Trustees Sue John Hancock Over Retention of Foreign Tax Credits

A federal court has certified a class of trustees, sponsors, and administrators of employee benefit plans that purchased a group variable annuity contract from John Hancock Life Insurance Co. via its Signature platform, which is run by John Hancock's Retirement Plan Services division. Last year, trustees of the Romano Law, PL 401k Plan sued John Hancock over tax credits related to investments they chose for their plan. The plaintiffs allege John Hancock breached their ERISA fiduciary duty of loyalty by receiving and retaining foreign tax credits for the international investment options, resulting in an alleged reduction in the value of the plan's assets.

Source: Plansponsor.com

What Plan Documents Must You Surrender if You Are Sued Under ERISA?

When a retirement plan participant files a lawsuit to recover damages from harm due to the plan sponsor's alleged breach of fiduciary duty, employers and plan administrators must furnish certain plan documents on demand. While ERISA requires the production of relevant materials, employers and plan administrators are not required to undertake any extensive searches for irrelevant documents. A recent court case, Theriot v. Building Trades United Pension Trust Fund, offers guidance on the extent to which employers and plans must go to meet their duties and where to draw the line.

Source: Hallbenefitslaw.com

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State-Based Private-Sector Retirement Programs

January Sees Flurry of State Plan Legislation

In the first six days of 2022, measures were introduced in three state legislatures that would establish retirement plans run by the state, or by third parties with which the state establishes a contract. Shortly after, a fourth measure was introduced to bolster a recently established state plan.

Source: Asppa.org

Compliance and Regulatory

Puerto Rico Announces 2022 Limits on Qualified Retirement Plans

On January 14, 2022, the Puerto Rico Department of the Treasury issued Internal Revenue Circular Letter No. 22-01 announcing the applicable 2022 limits for Puerto Rico qualified retirement plans. According to Section 1081.01(h) of the Puerto Rico Internal Revenue Code of 2011, as amended, the Secretary of the Treasury is required to publish the applicable limits under Section 401(a) of the Internal Revenue Code of 1986, which are incorporated by reference into the PR Code limits, once the IRS publishes its retirement plan limits under the US Code.

Source: Littler.com

New Retirement Payment Withholding Procedure Is Final

The IRS released a new withholding form on January 4, 2022: Form W-4R, Withholding Certificate for Nonperiodic Payments, and Eligible Rollover Distributions. The IRS also issued a revised Form W-4P, Withholding Certificate for Pension or Annuity Payments. As a result, payers and individuals will have a new process for calculating and electing federal income tax withholding on retirement distributions. Although the IRS will not require payers to use the new and revised forms until January 1, 2023, payers may start using them in 2022.

Source: Ascensus.com

2022 Penalty Amounts for ERISA Health & Welfare and 401k Plans

On January 14, 2022, the DOL published its annual announcement of civil monetary penalties for various employee benefits-related violations under ERISA, as in effect for the calendar year 2022. To encourage compliance with the law, ERISA imposes various sanctions, including fines, which are subject to adjustment each year for inflation.

Source: Compliancedashboard.net

New Audit Responsibilities for Plan Sponsors Take Effect

Under a new auditing standard, benefit plan sponsors have added responsibilities when preparing for plan audits and face greater liability risks if they fail to meet these new requirements. In general ERISA requires employers that sponsor plans with 100 or more participants to engage a qualified accountant to audit the plan's financial statements. SAS 136 requires plan sponsors to provide additional information and documentation to the auditor in a number of areas.

Source: Shrm.org

July 31, 2022 Restatement Deadline for 401k Plans Approaches

The July 31, 2022 deadline for defined contribution plans such as 401k, Profit Sharing, ESOPs, and Money Purchase Plans to be restated is not that far away. If you miss the deadline to restate your qualified retirement plan, the IRS can disqualify it, and take away all its tax benefits. This means contributions might not be deductible or employees will have them immediately included in income. Therefore, restating your document should be a high priority.

Source: Retirementplanblog.com

New Guidance for Substantially Equal Periodic Payments

The IRS has released Notice 2022-6, which provides updated life expectancy tables used to calculate substantially equal periodic payments from qualified and non-qualified retirement plans as well as Individual Retirement Accounts and Individual Retirement Annuities. The updated tables follow the required minimum distribution tables that were released under final regulations in November 2020.

Source: Principal.com

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Marketplace News

TriNet Teams with Empower on the TriNet 401k Plan

TIAA Offers Lifetime Income for Corporate Retirement Market

This eNewsletter is a digest of information published by a variety of web-based sources on 401k and related issues and is published as a service to our users. 401khelpcenter.com, LLC is not the author of the material unless specifically noted.