Insight: Studies, Research, and White Papers

Has Vesting Gotten Controversial?

Against all odds, vesting schedules have become the stuff of headlines. Personal-finance writers around the U.S. are offering advice and insight into how employees should regard the schedule in which they vest in their employers' contributions to their defined contribution retirement plans. For workers in businesses that have shorter employee tenures, a long-graded vesting schedule could be seen as unfair to workers. But for plan sponsors, vesting schedules can control costs and help with employee retention.

Source: Plansponsor.com

How the Great Resignation Is Impacting Plan Sponsors

Whether you call it the great resignation or the Great Reshuffle, employees from entry-level associates to C-suite executives are making career moves, motivated by pandemic-prompted introspection, rising wages, and more leverage to negotiate for perks like telecommuting or flexible scheduling. For some plan sponsors, the high quit rates of the past few years -- both internally and at the recordkeepers and advisers with whom they work -- have created some challenges.

Source: Plansponsor.com

Keeping Retiree Assets in Plan, Has Your Committee Established a Preference?

This article offers insight into a growing area of focus for plan sponsors, which is whether or not retaining participant assets in the defined contribution plan at retirement is a priority. As DC plans have grown into their role as the primary retirement vehicle for most plan participants, it begs the question: What does that mean for the destination of retiree assets?

Source: Planpilot.com

Study Finds Disconnect Between Actual and Perceived Retirement Risks

Retirees face many financial risks, such as outliving their money, investment losses, and unexpected health expenses, but a new study finds that they may be overestimating some risks while underestimating others. A new study by Wenliang Hou, a quantitative analyst at Fidelity Investments and former research economist at the Center for Retirement Research at Boston College, develops a lifecycle model of a typical retired household facing five categories of risk.

Source: Napa-net.org

Plan Participants Have Modest Retirement Expectations

It might be time to put to bed the cliched, sunny depictions of retirees traveling overseas or enjoying their golden years carefree on the beach, a survey from Principal shows. A key retirement goal for 71% of workers is now merely to maintain their standard of living, according to the latest update of the Principal Retirement Security Survey. Meanwhile, 44% of individuals cited splurging periodically in retirement as a priority. Between these bookends, 47% of respondents said that not outliving their savings in retirement is a top goal.

Source: Plansponsor.com

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Fiduciary and Plan Governance

A Message to Fiduciaries From the Supreme Court

"That reasoning was flawed." With those four words, the Supreme Court of the United States reaffirmed that retirement plan fiduciaries' responsibilities apply independently to each investment option. Offering a lot of investment options does not eliminate the responsibility related to each of them. Offering some cheap investment options does not excuse expensive ones. Offering some stronger performers does not excuse poor performers. The bad stuff is not okay simply because there's also some good stuff. This 12-page paper underscores why plan fiduciaries must take notice of this ruling.

Source: Qualifiedplanadvisors.com

DOL Pushes Back on "Downright Bizarre" Fiduciary Challenge

The DOL is pushing back against litigation challenging specific elements of its FAQs regarding the fiduciary rule. The suit (Am. Sec. Ass'n v. U.S. Dep't of Labor) was one of two filed earlier this year challenging the DOL's PTE 2020-02. While both were filed on behalf of individuals whose businesses were detrimentally impacted by the expanded definition of fiduciary, specifically in this case in FAQs issued after the regulation. The suit alleged that the Labor DOL regulated via the FAQs, rather than going through the standard, required, notice and comment period.

Source: Ntsa-net.org

Congressional Research Service Report: Cryptocurrency in 401k Retirement Plans

Digital assets, which include cryptocurrencies, crypto-assets, or digital tokens, among others, are digital representations of value and are issued and transferred using distributed ledger or blockchain technology. Bitcoin, Ethereum, and Dogecoin are among the most well-known cryptocurrencies. A November 2021 Pew Research Center and a March 2022 NBC News poll found that around one-fifth of Americans indicated that they had invested, traded, or otherwise used cryptocurrency. In recent months, policymakers have paid increasing attention to the prospect of defined contribution pension plan participants being able to invest in cryptocurrency.

Source: Congress.gov

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Court and Legal

Sixth Circuit Provides Guidance on Excessive Fee Claims

On June 21, 2022, the Sixth Circuit in Smith v. CommonSpirit Health provided updated guidance for plan sponsors in excessive 401k fee complaint cases. In their opinion, which affirmed a September 2021 decision from the Eastern District of Kentucky, the court held that whether an ERISA excessive fee claim is plausible "depends on a host of considerations, including common sense and the strength of competing explanations for the defendant's conduct." The Courts decision provides a win for plan fiduciaries, in a growing list of excessive 401k fee lawsuits.

Source: Graydon.law

Defendants Secure Motion to Dismiss Victories in Three Post-Hughes Decisions

In April it was noted that there was a discouraging trend of opinions allowing commonly asserted breach of fiduciary duty claims in 401k and 403b plan investment litigation to survive motions to dismiss. While it may be too soon to declare a reversal of that trend, three recent decisions dismissing these types of claims present some hope for plan sponsors and fiduciaries that in appropriate cases they may be able to avoid the costs and burdens of class action discovery. In particular, the Sixth Circuit became the first Court of Appeals to affirm the dismissal of a 401k fee litigation since the Supreme Court's decision in Hughes v. Northwestern University and two district courts dismissed similar claims.

Source: Erisapracticecenter.com

University 403b Plan Faces ERISA Breach Lawsuit

Northeastern University is the latest plan sponsor to confront a lawsuit alleging breach of fiduciary duty to participants. The plaintiff has alleged excessive fees for recordkeeping, administrative services, and investment management in a new fiduciary breach lawsuit.

Source: Planadviser.com

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Legislative and Washington DC

Hopes Are High for Lame-Duck Passage of SECURE 2.0

One retirement industry policy expert says the conversations she is having on Capitol Hill make her optimistic that the ambitious retirement reform package could pass after the November elections.

Source: Plansponsor.com

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Cyber and Plan Security

Cybersecurity in the Committee Room

Cybersecurity is not merely a technology issue. For that reason, fiduciary committees must understand they have a legal duty to protect the personally identifiable information, personal health information, and assets of their employee benefit plans from exposure and to protect electronic systems from exploitation by hackers. Read how some fiduciary committees address the challenge.

Source: Rolandcriss.com

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Compliance and Regulatory

Retroactive Retirement Plan Adoption for New Qualified Plans Under the SECURE Act

This is a considerable change from the original IRS stance that employers had to adopt a plan before the end of their taxable year. This eliminates the time pressure for employers to decide if they can afford a new retirement plan. Now any plan that is adopted before the due date of an employer's tax return (including extensions) is considered to have been established on the last day of the tax year.

Source: Tri-ad.com

IRS Launches Pre-Examination Retirement Plan Compliance Program Trial

Employers will have the opportunity to review and self-correct retirement plan failures upon being identified for plan examination by the IRS. The IRS announced in early June 2022 the rollout of a new pre-examination compliance pilot program with the intention that it will save resources spent on employee benefit plan audits. The announcement stated that the IRS would evaluate the program at the end of the pilot period, but it did not specify the duration of the period.

Source: Ogletree.com

It's Form 5500 Season: Five Common Mistakes That Plan Sponsors Should Avoid

We are just past the "official" start of summer, which means it is time for sponsors of retirement plans and many health and welfare plans to think about preparing and submitting Form 5500. This article examines the most common mistakes encountered when plan sponsors complete Form 5500.

Source: Dickinson-wright.com

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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.