Annuity Group Sues DOL Over Fiduciary Rule
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 In This Issue
Items of Special Interest to Service Providers Annuity Group Sues DOL Over Fiduciary Rule The Federation of Americans for Consumer Choice has gone to court to try to block a DOL revival of an Obama-era definition of the term fiduciary. FACC contends that the department made the interpretation change in the preamble, or official introduction, to a "prohibited transaction exemption" revision, rather than in the actual text of the revised exemption. Source: Thinkadvisor.com Once More Unto the (Fiduciary) Breach: FACC Suit Against the DOL If the FACC's complaint is ultimately successful some potential positive outcomes include: overturning some of the more controversial elements of the preamble to PTE 2020-02 including the DOL's relatively new views on the regular basis prong and the mutual agreement prongs of the five-part test and overturning the DOL's position that the advice to take a rollover is likely to be fiduciary advice. For now, however, the resolution of the case is a long way off. It is anticipated that the DOL will move to dismiss the lawsuit, and even if the lawsuit survives dismissal, the DOL is expected to vigorously defend against it. Source: Groom.com Adviser Industry Fee Pressures in Focus Fee compression has impacted adviser revenue models for several years now, thanks to such forces as increasing automation, stiffer competition, and ongoing industry consolidation. Experts say these trends are set to continue throughout 2022, leaving forward-thinking advisers focused on protecting existing revenue and adding new revenue streams. Source: Planadviser.com Fiduciary and Plan Governance Supreme Court Ruling Puts 401k Fiduciaries on Guard Following the U.S. Supreme Court's 8-0 ruling in Hughes v. Northwestern University, employers that sponsor defined contribution retirement plans should step up efforts to ensure that their plans' mutual fund offerings are still prudent investments, retirement plan advisors said. Source: Shrm.org DOL Cautions DC Plan Fiduciaries About Private Equity Offerings A recent DOL statement cautions fiduciaries of typical DC plans about private equity investments as components of investment options, such as target-date or balanced funds. The statement supplements, but doesn't withdraw, DOL's 2020 information letter detailing factors for DC plan fiduciaries to consider when evaluating a professionally managed asset allocation fund with a PE component as a potential investment option. Source: Mercer.com Expert Q&A on Cryptocurrency and Retirement Plans In this Thomson Reuters Practical Law article, Groom principals and co-chairs of the firm's Plan Sponsor Practice Allison Itami and David Levine addressed trending questions regarding legal and practical issues surrounding cryptocurrency that retirement plan sponsors should be familiar with when considering cryptocurrency as a potential investment option. Source: Groom.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers A Practical Guide for Selecting DC Plan Lifetime Income Options This 19-page paper is intended to provide plan sponsors and other fiduciaries with a practical guide to help in the selection of lifetime income investments. It first explains what it means to be a fiduciary and then discusses the fiduciary duties in the context of providing lifetime income options within DC plans. Although this paper primarily refers to ERISA and 401k plans, the general concepts and considerations apply equally to non-ERISA DC plans, including church, 457, and 403b plans. Source: Groom.com »» Click here for More Studies, Research, and White Papers 403b Plans District Court Enforces 403b Plan Arbitration Clause A federal district court in Florida sent a proposed ERISA breach of fiduciary duty class action to individual arbitration based on a plan arbitration clause that allowed for individual relief and plan-wide injunctive relief. The case is Holmes v. Baptist Health South Florida. Source: Erisapracticecenter.com »» Click here for More 403b Material Court and Legal District Court Declines to Dismiss 401k Fee Litigation Case in First Decision Post-Hughes In declining to dismiss plaintiffs' investment management fee claims, the district court relied heavily on Hughes. The court expressed its view that Hughes "suggested" that a defined contribution plan participant may state a prudence claim by merely alleging that the plan offered higher-priced retail class mutual funds instead of available identical lower-cost institutional class funds. The district court also rejected the defendant's argument that plaintiffs' claims should be dismissed in part because the plan offered a variety of investment options that participants could select, including lower-cost passive investment options. Source: Erisapracticecenter.com What the Supreme Court's Hughes Decision Means to Plan Sponsors In a unanimous decision by Justice Sonia Sotomayor in Hughes v. Northwestern University, the Supreme Court addressed a narrow issue on the standard of pleading an ERISA fiduciary breach: Whether, if plaintiffs can allege the existence of overpriced or otherwise imprudent investment options or recordkeeping arrangements, their complaint will survive a motion to dismiss, and may proceed to trial, even if participants could have chosen from among other investments that were not similarly flawed. The Supreme Court answered this question yes. Source: Eforerisa.com More is Not Always Better: Supreme Court Reexamines Fiduciary Duty of Prudence The Court remanded the case back to the Seventh Circuit to determine whether the fiduciaries breached their fiduciary duties to monitor plan investments and to remove investments with excessive fees and poor performance based on the standard set out in Tibble v. Edison Int'l. The case makes it clear that having some good investments in a plan will not absolve fiduciaries from liability for bad investment options. Beyond that, the case leaves plan fiduciaries with several questions since the Court did not define a plan fiduciary's duty of prudence in the context of selecting and monitoring ERISA plan investments. Source: Swlaw.com Hughes v. Northwestern University: Key Takeaways for 401k and 403b Plan Sponsors and Fiduciaries The Court issued a narrow, unanimous opinion that vacated the Seventh Circuit's decision and remanded for further proceedings so that the participants' allegations may be reevaluated as a whole. Despite the high level of industry attention focused on this case, the Court passed on the opportunity to elaborate on what the applicable pleading standard should be for bringing a claim of fiduciary imprudence in violation of ERISA in connection with the management of a defined contribution plan. Source: Ropesgray.com NYC Courier Faces ERISA Breach Lawsuit The DOL has accused the plan sponsor and plan administrator of failing to operate the employer-sponsored 401k plan in the best interests of participants and instead allowing plan assets to benefit the company. Source: Planadviser.com »» Click here for more Court and Other Legal Issues Compliance and Regulatory DOL Issues Final 5500 Rules for MEPs and PEPs, but Defers Finalizing Broader Changes On December 29, 2021, the DOL released a final form revision modifying the Form 5500 Annual Return/Report of Employee Benefit Plan for benefit plans. The final revisions primarily address issues related to multiple employer plans and pooled employer plans and leave other proposed changes affecting most plans -- including reporting of detailed expenses and IRS compliance issues -- for future rulemaking. Source: Groom.com Required Minimum Distributions and Missing Plan Participants The IRS Form 5500 Examination Procedures make it clear that the failure of a qualified retirement plan to make timely RMDs to participants is a qualification failure. A retirement plan must commence RMDs to plan participants by their required beginning dates regardless of whether the participants have made elections to commence their benefits under the plan or have failed to respond to notices regarding their RMD commencement dates. A plan will be treated as failing to satisfy Code Section 401(a)(9) unless the only reason for the plan's failure to make a timely RMD is that the participant or beneficiary is missing. A participant or beneficiary is treated as missing only after a diligent search. Source: Verrill-law.com DOL Announces Enforcement Actions for Abandoned Plan and Missed Contributions A pair of investigations by the Department of Labor's Employee Benefits Security Administration has led courts to order plan sponsors to restore retirement contributions for workers at a Michigan electronics repair store and a now-defunct California construction company. Source: Plansponsor.com »» Click here for more Compliance and Regulatory Material Marketplace News DCALTA Partners with PivotalPath to Launch Hedge Fund Benchmarks for 401k Plan Sponsors iJoin, American Trust Team Up on Personalization Tool Empower Unveiled Initial Steps Toward a Fresh Brand Identity
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