The Investment Policy Audit
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Fiduciary and Plan Governance Not to be confused with a financial audit performed by a Certified Public Accountant, an audit of an IPS examines the execution of the process defined in the IPS but does not address investment or financial outcomes. While the extent of the controls over the investment decision-making practices of fiduciary committees differs somewhat among ERISA plan sponsors, the tests applied to each evaluation focus on standard criteria in an audit. Those criteria include due diligence concerning the selection of money managers, adherence to the IPS specifications, and documentation of the monitoring activities. Source: Rolandcriss.com Is It Time for a Collective Investment Trust? Collective investment trusts are winning the hearts, minds, and dollars of growing numbers of defined contribution plans. If you are not aware of the trend, it might be time to learn what CITs are and how they have evolved since the days when they were standard fixtures of DC plans. Source: Orba.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers Council Recommends More Research About "Brokerage Window Only" Plans The ERISA Advisory Council has revisited the topic of brokerage windows in self-directed retirement plans in a recent report to Department of Labor Secretary Marty Walsh. But the Council also declined to recommend additional regulations for brokerage windows in general, saying the costs outweigh the benefits. Source: Planadviser.com The Impact of Adding an Automatically Enrolled Loan Protection Program to 401k Plans A key contributor to the existing U.S. retirement deficit is leakage from 401k plans upon job change. While overall, U.S. Department of Labor data indicate that loan amounts tend to be a negligible portion of total plan assets, EBRI research has shown that defaulting on retirement plan loans can produce significant reductions in retirement balances. One approach to reducing such leakage is to add some type of automatically enrolled 401k loan insurance that prevents defaults. Source: Ebri.org Retirees With Pensions Slower to Spend 401k A new study quantifies the impact of this transformation in the U.S. retirement system, where traditional pensions are now found almost exclusively in the public sector. The conclusion, by the Center for Retirement Research, is that retired boomer households lacking a pension seem more likely to rapidly deplete the 401k savings they rely on, "leaving them with more risk that they will outlive their savings." Source: Bc.edu »» Click here for More Studies, Research, and White Papers Employee Education and Communications How Simple Reframing Can Boost Retirement Savings "Pennies" over "percent"? A new study finds that a simple change in information architecture, such as how the savings rate is framed, can lead to a significant boost in savings behavior among lower-income employees. Source: Napa-net.org »» Click here for More on Employee Education and Communications Court and Legal Attorney-Client Privilege in ERISA Matters Although the concept of the attorney-client privilege is recognized in ERISA matters, it is modified by the fiduciary exception. Most communications between fund counsel and a fund are directed to a plan administrator with rarely any communication directed to participants and/or beneficiaries. However, it is those participants and the beneficiaries who are the clients. The fiduciaries and administrators are not the "client" personally but only in their representative roles. Source: Erisalitigationadvisor.com Addressing Excessive Fee Litigation Risk in the Wake of Hughes v. Northwestern The Supreme Court's January 24, 2022 decision in Hughes v. Northwestern University, has caused alarm in some corners, with panicked predictions of a proliferation of ERISA suits alleging that defined contribution plans provided imprudent investment options. However, Hughes should be more properly understood as rejecting an attempt by the U.S. Court of Appeals for the Seventh Circuit to impose a novel limit on excessive fee suits. The Supreme Court instead emphasized the application of its existing precedent in Tibble v. Edison International. Source: Workforcebulletin.com Coca-Cola Consolidated Settles ERISA Fiduciary Lawsuit for $3.5M Coca-Cola Consolidated has agreed to settle an ERISA lawsuit filed against the company and its board of directors in the U.S. District Court for the Western District of North Carolina. The settlement includes a monetary payment of $3.5 million to the class of plaintiffs, who are participants or beneficiaries of the company's defined contribution retirement plan. Source: Planadviser.com Lawsuit Questions Use of Revenue Sharing by Ricoh USA Former Ricoh USA employees have filed a lawsuit against the company, its board of directors, and its 401k plan investment committee alleging breaches of fiduciary duty under ERISA. The complaint alleges that the company and investment committee failed to objectively and adequately review the plan's investment portfolio to ensure that the cost of each investment option was not excessive. Additionally, the complaint alleges that the plan sponsor failed to control the plan's recordkeeping and administrative costs. Source: Planadviser.com »» Click here for more Court and Other Legal Issues Legislative and Washington DC Legislation Backs Automatic Reenrollment Sen. Tim Kaine and Rep. Kathy Manning have introduced legislation to increase workers' participation in employer-sponsored retirement plans by encouraging retirement plans to automatically reenroll workers in their plans. The Auto Reenroll Act of 2022 would also provide workers with the option to opt-out. Source: Napa-net.org »» Click here for more on Legislative and Washington Actions Compliance and Regulatory Is That "Missing Form 5500" Email Legit? Did you receive an email from Scott Albert at DOL for a missed Form 5500 filing? It's not spam. That's right, the DOL recently sent out approximately 22,000 emails to Form 5500 contacts for certain "stop-filer" plans. Specifically, the emails targeted plans where a Form 5500 or 5500-SF was submitted in 2019 but not in 2020. Source: Asppa.org What's New in '22 For 401ks: Disclosures for Participants About Lifetime Income A new disclosure requirement for ERISA-covered defined contribution plans requires compliance starting this year, and some remaining uncertainty shouldn't prevent ERISA-covered defined contribution plan sponsors from taking action. Source: Voya.com ERISA hasn't changed, but the new accounting standard (SAS 136) requires that the Plan Sponsor be responsible for determining that the Plan's investment information has been certified by a bank or similar institution, or by an insurance company, that is regulated, supervised, and subject to periodic examination by a state or federal agency (qualified institution). Source: 5500audit.com Correcting 401k Plan Excess Elective Deferrals With the April 15 deadline for distributing excess elective deferrals fast approaching, this post summarizes the rules for correcting excess elective deferrals made to a 401k plan. In brief, excess elective deferrals not distributed from a 401k plan by April 15 of the calendar year following the calendar year in which they were contributed will be taxed twice and may be subject to an additional 10% tax on early distributions. In addition, excess elective deferrals arising solely under a single employer's 401k plan that is not corrected by the April 15 deadline put the tax-qualified status of the plan at risk. Source: Verrill-law.com Missing Participants: The Search Continues ERISA has always required that plan fiduciaries maintain adequate plan records and distribute plan-related materials to participants and beneficiaries; however, there was no specific DOL guidance regarding missing participants, outside the context of plan terminations, until 2021, when the DOL issued such guidance in three distinct publications. Each of these important DOL publications is discussed here. Source: Truckerhuss.com »» Click here for more Compliance and Regulatory Material Marketplace News Wells Fargo Says DOL is Probing Its 401k Plan
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