401k Annual Administration - A Checklist
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In This Issue
Compliance and Regulatory 401k Annual Administration - A Checklist for Business Owners Annual 401k administration shouldn't be stressful or time-consuming for employers. A qualified 401k provider will do most of the heavy lifting by completing the many technical tasks, making the employer's role simple. Employers should use a checklist like the one provided here to ensure their 401k plan's annual administration tasks are completed on time. A 401k administration checklist can also help employers monitor their plan provider's job performance. Source: Employeefiduciary.com Year-End Compliance Issues for Single-employer DB and DC Retirement Plans By year-end 2022, sponsors of calendar-year single-employer retirement plans must adopt necessary and discretionary plan amendments to ensure compliance with statutory and regulatory requirements of ERISA and the tax code. This piece looks at key areas, including administrative compliance issues, that DB and DC plan sponsors should address by December 31, 2022. Source: Milliman.com IRS Expands Determination Letter Process for Certain Individually Designed 401k Plans On November 7, 2022, the IRS released Revenue Procedure 2022-40 which generally updates the determination letter submission process for qualified retirement plans, including 401k plans. In particular, among other changes, the program expands the eligibility for requesting determination letters for certain individually designed plans, extends the "remedial amendment period" for certain new plans, and revises the scope of IRS review generally applicable to the determination letter process. Source: Compliancedashboard.net Loans and Hardship Withdrawals From 401ks on the Rise More Americans are tapping their 401ks for financial emergencies, with the percentage of retirement savers pulling money for hardships spiking 24% in the 12 months through Sept. 30, according to new data. Source: Investmentnews.com On November 18, 2022, the DOL issued proposed amendments to the Voluntary Fiduciary Correction Program and Prohibited Transaction Exemption 2002-51. The VFCP provides relief from civil liability and an exemption from excise taxes under the Internal Revenue Code to employee benefit plan fiduciaries if they voluntarily report and correct certain transactions that breach their fiduciary duty under ERISA. Source: Westlaw.com Self-corrections would be allowed for certain low-level delinquent participant contributions, which is significant since delinquent participant contributions are the most common problem corrected through the VFCP. Source: Sidley.com »» Click here for more Compliance and Regulatory Material Fiduciary and Plan Governance Here is a high-level overview of the Final Rule, which includes the key changes the DOL has made from the proposal. Notwithstanding the changes, the Final Rule retains the DOL's core principle that the duties of prudence and loyalty require ERISA plan fiduciaries to focus on relevant risk-return factors and not subordinate the interests of participants and beneficiaries (such as by sacrificing investment returns or taking on additional investment risk) to objectives unrelated to the provision of benefits under the plan. Source: Ropesgray.com Fiduciaries May, But Not Must, Consider ESG: DOL The DOL has unveiled its much-anticipated final ESG rule that it says will allow "plan fiduciaries to consider climate change and other environmental, social and governance factors when they select retirement investments and exercise shareholder rights, such as proxy voting." The operative word for plan fiduciaries is may, not must consider ESG factors, a concern that had arisen in the wake of the proposed regulation previously issued. Source: Napa-net.org Comments on the Department of Labor's final ESG rule keep rolling in. Early responses on the final rule have been overwhelmingly positive, with many praising the DOL for allowing retirement plan fiduciaries to consider climate change and environmental, social, and governance factors. Large organizations continued to voice their approval as many processed the final rule. Source: 401kspecialistmag.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers What's Shaping the U.S. Retirement Landscape in 2023? A new T. Rowe Price U.S. retirement market outlook examines three broad trends the firm expects to continue to shape the retirement outlook for millions of Americans who are saving and investing for retirement. Source: Napa-net.org »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers Plan Advisers Value Trustworthiness, Personal Touch From DC Recordkeepers Retirement plan advisers value trustworthiness, reliability, and customer service when it comes to working with DC recordkeepers, according to the results of an annual survey by Cogent Syndicated. Among the key drivers of how retirement plan advisers valued a DC plan provider was having a human representative to support them and consistent and reliable service for themselves as well as their plan sponsors and participants. Source: Planadviser.com 403b Plans New Determination Letter Program for 403b Plans The IRS recently issued Revenue Procedure 2022-40, which permits the submission of determination letter applications for individually designed 403b plans used by certain public schools, churches, and charities. Beginning June 1, 2023, plan sponsors maintaining individually designed 403b plans will be able to request a determination letter for initial plan qualification, upon plan termination, or for other limited circumstances to be announced by the IRS. Source: Buck.com »» Click here for More 403b Material Court and Legal ICI Defends Revenue Sharing and Higher-Fee Share Classes in the Tenth Circuit Barrick Gold Case The Barrick Gold case is noteworthy because the Investment Company Institute filed an amicus brief in which they defend the use of revenue sharing and actively managed investment options. The article's author thinks it is the best argument they have seen explaining how rampant excessive fee litigation is causing plan fiduciaries to limit their investment choices in retirement plans by avoiding investments with higher potential returns because of the fear of litigation. ICI argues that defensive investment selection will harm participant outcomes. Source: Euclidspecialty.com Share Class Choice Criticized in 401k Excessive Fee Suit For the fourth month in a row, a relative newcomer to excessive fee litigation has brought suit against a multi-billion-dollar 401k plan. The allegations are familiar -- that the fiduciary defendants breached their duties under ERISA by "selecting and retaining imprudent share classes and investments for the plan" -- in this case the $2 billion Old Dominion 401k Retirement Plan and on behalf of its 24,000+ participants. Source: Napa-net.org ERISA Fee Complaint Dismissed in Pennsylvania District Court, Extending Favorable Trend In Krutchen v. Ricoh USA, a Pennsylvania district court dismissed an ERISA excessive fee complaint for failing to provide enough information about alleged comparator plans that allegedly paid less for recordkeeping services. The decision is notable for delivering defendants a victory in the Third Circuit, which previously allowed excessive recordkeeping claims to survive dismissal, and for citing favorably to recent defendant-friendly opinions from the Sixth, Seventh, and Eighth Circuits. Source: Erisapracticecenter.com Judge Recommends Dropping Most of $4.2B Retirement Plan Suit Against Nestle A U.S. District Court federal magistrate judge in the Eastern District of Wisconsin mostly sided with Nestle USA Inc. on Monday in recommending the dismissal of a class action lawsuit alleging fiduciary negligence and self-dealing in Nestle's $4.2 billion 401k savings plan but left room for two charges to be amended and refiled. Source: Planadviser.com »» Click here for more Court and Other Legal Issues
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