Wait, SECURE 2.0 Might Not Pass?
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In This Issue
Legislative and Washington DC Wait, SECURE 2.0 Might Not Pass? Senator Ben Cardin, D-Maryland, expressed concern that the SECURE 2.0 retirement reform legislation might not pass this year while speaking at the Employee Benefit Research Institute Retirement Summit on Thursday. The legislative package may be running out of time, suggested Senator Cardin. Cardin participated in an online discussion with retiring Senator Rob Portman hosted by Eric Stevenson, president of Nationwide Retirement Plans. Source: Planadviser.com »» Click here for more on Legislative and Washington Actions Fiduciary and Plan Governance The DOL Issues its Final Word on ESG and Proxy Voting The final regulations create a framework within which an ERISA fiduciary may take ESG into account in a manner that complies with ERISA. They largely track the DOL's proposed regulations issued in October 2021 with two notable additions. Source: Debevoise.com This final rule effectively overturned two rules published in the last months of the Trump administration, which essentially prohibited the consideration of ESG factors when ERISA fiduciaries selected investments or exercised shareholder rights. In effect, the Biden administration has now enabled fiduciaries managing ERISA funds to consider "factors [that] may include the economic effects of climate change and other ESG considerations on the particular investment or investment course of action." Source: Mintz.com DOL Reframes ESG Investing and Proxy Voting for ERISA Fiduciaries The Final Rule clarifies that ERISA-regulated fiduciaries may take into account ESG factors that are relevant to an investment's expected risk return and other financial factors. While the Final Rule gives a thumbs up to ESG investing in certain circumstances, when considered against the proposed version of the rule published by the DOL in October 2021, it deemphasizes ESG factors specifically and instead provides a more principles-based gloss on appropriate fiduciary decision-making processes in general. Source: Morganlewis.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers 401k Plan Asset Allocation, Account Balances, and Loan Activity in 2020 Key Findings: 401k plans draw in many young retirement savers and new hires. Younger 401k plan participants tend to be invested more in equities than older 401k plan participants. Ownership of investments in equities is widespread among 401k plan participants. Target date funds continue to be an often-used investment option among 401k plan participants. 401k plan loans are widely available but rarely taken. The average 401k plan account balance tends to increase with participant age and tenure. Source: Ebri.org Hot topics for Defined Contribution Plans This 8-page publication highlights recent and ongoing issues and developments that are relevant to defined contribution plan sponsors. Highlighted are fundamental areas in plan design and administration, participant engagement, compliance and risk, and investments. Source: Buck.com Younger 401k Participants Favor Investment in Equities Younger 401k plan participants tend to favor equity investing more than older participants. That's a key finding from a new joint study from EBRI and ICI which found that at year-end 2020, 42% of 401k plan participants' account balances were invested in equity funds, on average, in line with recent years. Another 35% of 401k participants' account balances were invested in balanced funds, largely target-date funds. Source: 401kspecialistmag.com Roth 401k Remains Underutilized Despite Potential Benefits A well-designed Roth 401k may be an attractive option for many plan participants, and it is important for plan sponsors considering such a feature to design the plan with the needs of their workforce in mind. It is also critical to communicate the differences between the pre-tax option, the specific timing rules required, and the tax-free growth it offers. Additionally, plan sponsors should be mindful of potential administrative costs and other compliance requirements in connection with allowing the Roth option. Source: Berrydunn.com The Retirement Income Challenge in 401k Plans: Overcoming Legal Obstacles Many participants in 401k plans would benefit from guaranteed retirement income to protect them from risk factors. Before the SECURE Act, perceived fiduciary liability and practical constraints were barriers to the inclusion of guaranteed retirement income contracts in 401k plans. The enactment of the SECURE Act, with its fiduciary safe harbor, its expanded distribution option to address portability, and the requirement to educate participants on the retirement income their accounts will provide, has been a significant step in removing those barriers. Source: Dciia.org »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers Momentum is Growing to Educate Advisers on Plan Options for Lifetime Income Three years after the "Setting Every Community Up for Retirement Enhancement Act" made it easier for companies to add annuities to their retirement plan options, the momentum is growing for educational programs in this area that are tailored to the needs of advisers. Retirement industry groups are ramping up efforts to help advisers understand and compare annuities for plans and consider how to communicate those options to plan sponsors and participants. Source: Planadviser.com Court and Legal Judge Dismisses Charge of "Unreasonable" 401k Fees by Electronics-Maker Ricoh A federal district court bounced two fiduciary breach claims brought by participants against Ricoh USA, saying plaintiffs failed "to plausibly allege the committee breached its ERISA-imposed fiduciary duty by charging unreasonable recordkeeping fees." Source: Planadviser.com DC Plan Sponsors Prevail in Two Recent Stock-Drop Rulings Two different federal appeals courts recently upheld the dismissal of lawsuits challenging the prudence of employee stock ownership plan offerings in DC plans. Both of these stock-drop cases involved allegations that plan fiduciaries -- who were corporate insiders privy to nonpublic information about the sponsor -- breached their ERISA duties by failing to take appropriate action based on that information. In each case, the court ruled that plaintiffs hadn't met the pleading standard set by the Supreme Court in Fifth Third Bancorp v. Dudenhoeffer. Source: Mercer.com Federal Judge Dismisses Two of the BlackRock TDF Suits Two of the suits challenging the prudence of plans holding the BlackRock Lifepath target-date funds were dismissed recently. The suits were both dismissed by U.S. District Judge Michael S. Nachmanoff following oral arguments, reportedly rejecting the arguments that the BlackRock funds could be compared with the so-called "comparator" funds without considering different strategies, glide paths, and investments. Source: Napa-net.org »» Click here for more Court and Other Legal Issues Compliance and Regulatory 2023 US Defined Contribution Plan Compliance Calendar For calendar-year defined contribution plans, this retirement plan compliance calendar list key IRS, Pension Benefit Guaranty Corp., and Labor Department reporting and disclosure deadlines. Source: Mercer.com DOL Proposes Updates to the Voluntary Fiduciary Correction Program The DOL proposes what it calls a "Self-Correction Component" concerning delinquent participant contributions and loan repayments, subject to several conditions discussed below. It is important to note that the self-correction contemplated by the VFCP update differs from the self-correction afforded under EPCRS because it would still require a submission to the DOL, albeit a streamlined one. Source: Wagnerlawgroup.com 2022 Required Amendments List Includes No Changes in Qualification Requirements While this year's IRS Required Amendments List does not specify changes, that does not necessarily mean that 401k plan sponsors have no amendments to adopt. The RA List does not cover discretionary plan amendments, which generally must be adopted by the end of the plan year in which discretionary plan design or operational changes are implemented, except for certain discretionary amendments that must be adopted before they are implemented. Source: Thomsonreuters.com »» Click here for more Compliance and Regulatory Material Marketplace News 401k Robo-Adviser Blooom Shuts Services, Sells Tech to Morgan Stanley Securian and Qualified Plan Advisors Offer Personalized Managed Accounts The Standard Closes Deal to Acquire Securian's Recordkeeping Biz
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