Plan Recordkeeping to Get More Expensive
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In This Issue
Fiduciary and Plan Governance Plan Recordkeeping to Get More Expensive If your retirement plan recordkeeper wasn't acquired within the past few years, don't be surprised if it happens in 2022. The frenzied M&A activity across corporate America has been particularly evident in the retirement plan recordkeeping industry, and industry observers predict continued consolidation in the years ahead. The reasons industry stalwarts have exited the recordkeeping business are many, but a primary contributor has been the intense fee compression seen by the industry over the past decade. The organizations that remain are desperately seeking alternative revenue sources, leaving plan sponsors with several new concerns. Source: Francisinvco.com Five Reasons DOL (Almost) Prohibits 401k Cryptocurrency Investments The DOL has expressed serious concerns about a 401k plan fiduciary's decision to expose participants to investments in cryptocurrency and related investments. The DOL identifies numerous issues with the kinds of risks that accompany investments in cryptocurrencies and takes the extraordinary measure of threatening to investigate plans and plan fiduciaries that allow participants to invest in cryptocurrency and related products. The agency outlines five reasons in support of its cautionary stance. Source: Frostbrowntodd.com Flexibility in DC Investing Now Essential: JP Morgan Given that strategies that worked for DC plans in the past may be less successful in the future, it will be critical to incorporate forward-looking market views to keep participants on track, the firm suggests in a new paper. In the paper, JP Morgan's Jared Gross and Emily Cao explain that factors, such as asset allocation, manager selection, performance, and fees, were less meaningful in a period of sustained strong investment returns. Source: Asppa.org »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers What Trends Are Impacting DC Plan Investment Menus? NEPC is out with its 2021 Defined Contribution Plan Trends and Fee Survey, examining current plan investment trends and innovations across major sectors. While target-date funds continue to be the "turnkey solution," NEPC notes that one of the more prominent developments is that menus are moving toward index funds. In 2021, 44% of respondents had plan assets invested in TDFs, compared with 28% in 2011. In addition, 97% of plans offer TDFs and 95% of 2021 respondents are using TDFs as the plan default. Source: Asppa.org Collective Investment Trusts and Good Governance Considerations This 14-page paper explores relevant portions under each of the three legs of the regulatory triad. In particular, it examines the regulatory emphasis on the central role that good CIT governance -- in the form of well-designed and implemented bank-maintained processes and procedures -- plays in the ongoing management and operation of CITs. It also addresses and discusses how regulatory considerations inform CIT governance policies and may be reflected and implemented through good governance practices. Source: Wilmingtontrust.com Employers Use SDBAs to Give Employees Choice Self-directed brokerage accounts allow plan sponsors to keep their menu streamlined, while also alleviating specific investment demands from some participants. They can also help keep participants in the plan and be an avenue for offering not-so-standard investment options, but they're not right for every plan. Source: Plansponsor.com »» Click here for More Studies, Research, and White Papers Court and Legal Work Product in the ERISA Context Documents that are used in the administration of a retirement plan and would have been prepared regardless of pending litigation are not protected by the work product doctrine. Similarly, "as a general rule, investigatory reports and materials are not protected by the attorney-client privilege or the work product doctrine merely because they are provided to, or prepared by, counsel." Thus, the proponent of the work product privilege must show, at the very least, "some articulable claim likely to lead to litigation has arisen." The threshold inquiry when analyzing the work product doctrine is whether the documents were prepared in anticipation of litigation. Source: Wagnerlawgroup.com Whitepaper: Debunking Recordkeeping Fee Theories in Excessive Fee Cases According to Euclid's whitepaper, "most large defined contribution retirement plans in this country have low recordkeeping fees -- fees that are often five to ten times lower than the recordkeeping fees in most under $100 million small-asset plans." This new whitepaper reviews the common tactics used by plaintiff law firms to allege excessive plan administration fees. Source: Euclidspecialty.com District Court Dismisses ERISA Lawsuit Against Principal A new order has been issued in a complex ERISA lawsuit involving Principal, granting the defense's motion to dismiss and likely bringing a convoluted litigation process to a close. The litigation was originally focused on fiduciary breach allegations leveled against a hospital network -- claims which have since been settled -- but it also included separate accusations against Principal. Source: Planadviser.com Judge Refuses to Dismiss Lawsuit Against DST Systems and Investment Manager The lawsuit alleges 401k plan fiduciaries and a former investment manager breached their fiduciary duties by allowing a large portion of plan assets to be invested in Valeant Pharmaceuticals stock. Source: Planadviser.com Ruling Permits Key Parts of Pentegra ERISA Suit to Proceed A new order has been issued in an ERISA lawsuit filed against Pentegra Retirement Services in the U.S. District Court for the Southern District of New York, granting in part the defendant's motion to dismiss but siding mostly with the plaintiffs. The core allegations in the complaint can now proceed to discovery and potentially to trial. Source: Planadviser.com Federal Judge Grants Class Certification to Astellas Workers Over 401k Losses The employees allege that violations of fiduciary duty and prohibited transactions caused them to lose millions in retirement savings. An Illinois federal judge granted class certification to three classes of Astellas Pharma US Inc. 401k retirement plan participants in their ERISA suit. The "equitable relief" class consists of all plan participants with a current account balance, about 4,000 workers. The other two classes, the "payment of plan assets" class and the "investment loss" class, consist of those workers who invested in certain funds, or about 2,500 and 2,300 workers, respectively. Source: Hallbenefitslaw.com Small(er) Plan Targeted with Excessive Fee Suit Another 401k has been charged with falling short of its fiduciary obligations and of failing to leverage its "tremendous bargaining power," though it's a smaller plan than most caught in those crosshairs. The plan, in this case, is 99 Cents Only Stores, an American deep-discount retailer operating primarily in California and the Southwest, a plan that, as of Dec. 31, 2020, had 2,715 participants with account balances and $69,907,378 in assets. Source: Asppa.org »» Click here for more Court and Other Legal Issues Legislative and Washington DC SECURE 2.0 Approved by House in 414-5 Vote On March 29, 2022, the House of Representatives, by a nearly unanimous (414-5) vote, approved the Securing a Strong Retirement Act of 2022 (SECURE 2.0). The Senate is currently working on its version of comprehensive bipartisan retirement policy reform. Some believe there is a possibility that some combination of SECURE 2.0 and whatever the Senate produces could pass in a post-election lame-duck session. This article reviews the bill, focusing on some key provisions. Source: Octoberthree.com Protecting America's Retirement Security Act Introduced in House Representative Lucy McBath and five other Democratic co-sponsors have introduced the Protecting America's Retirement Security Act in the House of Representatives. The bill proposes fee disclosure improvements, increasing spousal protections, and automatic re-enrollment for defined contributions plans. Source: Ascensus.com Legislation Establishing Starter 401k Plans Introduced A bipartisan bill introduced in the U.S. Senate March 30 would make it easier for small businesses to offer retirement plans for their employees. The Starter-K Act of 2022 (S. 3955) was introduced by Sens. John Barrasso and Tom Carper, both of whom sit on the tax-writing Senate Finance Committee. The bill would create starter retirement plans that streamline regulations and lower costs for small businesses and start-ups, resulting in more access to easy retirement savings. Source: Asppa.org »» Click here for more on Legislative and Washington Actions Marketplace News New Fiduciary Best Practices for Insurance and Annuities: CBCF Annexus, State Street Partner on TDF with Embedded Income Solution
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