Legislative and Washington DC

Secure 2.0 Included in the Consolidated Appropriations Act, 2023

The SECURE 2.0 Act of 2022, an extensive piece of legislation aimed at retirement plan reform, was included in the Consolidated Appropriations Act of 2023. SECURE 2.0 includes over 100 provisions intended to expand coverage, increase retirement savings, and simplify and clarify retirement plan rules.

Source: Benefitslawadvisor.com

SECURE 2.0 Bill Contains Popular and Widely Anticipated Retirement Reforms

The widely anticipated legislation known as SECURE 2.0 was attached to the omnibus spending package released by the Senate Appropriations Committee on Tuesday. The bill does not contain any huge surprises for those following its three component bills through Congress, and its most popular provisions survived intact into the final bill.

Source: Planadviser.com

Going Boldly: The Retirement Savings for Americans Act 2022

Congress earlier this month introduced the Retirement Savings for Americans Act of 2022, which advances the idea of a national 401k plan. What's more, the bill carries both bipartisan and bicameral support, as it is backed in the Senate by Democrat John Hickenlooper and Republican Thom Tillis, and in the House by Democrat Terri Sewell and Republican Lloyd Smucker.

Source: Morningstar.com

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General Items

401k Issues That Could Use Some More Guidance From the Government

There are areas of the retirement plan space that aren't so clear. They're cloudy and until the Internal Revenue Service or the Department of Labor clears things up, 401k plan sponsors need to understand.

Source: Jdsupra.com

Fiduciary and Plan Governance

DOL Finalizes ESG Rule for ERISA Plan Fiduciaries

The DOL has released its final rule clarifying how and when ERISA fiduciaries may consider ESG factors in making investment decisions for a plan. The rule also offers substantial guidance on the duties and responsibilities of plan fiduciaries in exercising shareholder rights, including proxy voting. Taken as a whole, the revisions contained in the final rule provide substantial relief to investment professionals who already incorporate ESG factors into their risk and return calculations and allow plans to play a central role in advancing ESG objectives, as long as these objectives are tied directly to the prudent assessment of risk and return.

Source: Shearman.com

The Pendulum Swings Back: Final ESG Regulations Give Fiduciaries More Flexibility

Consideration of ESG investments can be a minefield for ERISA plan fiduciaries. There has long been tension between the desire of some plan participants and some fiduciaries to make plan investments that take environmental, social, and governance factors into account and ERISA's prudence, loyalty, and exclusive benefit rules. In today’s polarized political world, ESG investments are especially controversial. There is a group in Congress that opposes them and would be comfortable with prohibiting or strictly restricting them. Others who are equally vocal feel that responsible investing should take ESG into account.

Source: Cohenbuckmann.com

What the DOL's Final ESG Rule Means for Plan Sponsors

On November 22, 2022, the DOL issued its much-anticipated final rule, "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights," which allows ERISA fiduciaries to consider climate change and other environmental, social, and governance factors when they select retirement plan investments and exercise shareholder rights such as proxy voting. This article summarizes the changes made from the 2020 final rules and provides future considerations.

Source: Jhinvestments.com

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Insight: Studies, Research, and White Papers

Alternative Investments in Participant Directed Individual Account Plans

Investment in private equity funds has long been a concern of practitioners, but generally concerning the issue of whether it was holding plan assets. While the plan asset issue continues to be a significant one concerning investments in private equity funds, recently the focus has been on offering private equity funds as a part of an asset allocation fund, an issue that had been addressed both by the Department of Labor and a California federal district court on multiple occasions, as discussed here.

Source: Wagnerlawgroup.com

2022 Custom Target-Date Fund Study

Over the past 15 years, target-date funds have become foundational in the defined contribution (DC) system. This study was launched in 2017, to provide insight into custom target-date fund solutions (cTDFs), including their basic structure, asset allocation, asset class exposure, and returns. 2022 is the third iteration of the study, evaluating data through year-end 2021. The analysis represents cTDF assets of $516 billion across plans with over $1.5 trillion in assets collectively. A total of 14 organizations that manage cTDFs participated in the study.

Source: Dciia.org

Why Do Some Small Businesses Offer Retirement Plans?

Many workers lack access to an employer retirement plan, and this coverage gap is driven by small firms. But about half of small firms do offer a plan, so it's important to understand the types of these firms with and without a plan. Available data suggest that the small firms with a plan are larger and have workers with higher earnings and education. Small firms without a plan cite three obstacles: not big enough or firmly established, workers prefer cash wages, and cost.

Source: Bc.edu

What 401k Plan Sponsors Need to Know About Stable Value Funds

Whether you already have a principal preservation option in your 401k plan, are considering making a change, or are conducting routine due diligence, acquainting yourself with the basics of stable value funds can help you become a better-informed fiduciary. This article provides a quick overview of what stable value funds are and a helpful 401k stable value glossary.

Source: Jhinvestments.com

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Items of Special Interest to Service Providers

Retirement Advisers Increasingly Want PEP Option in Toolbox

Pooled employer plans are still a nascent offering in the retirement market, but an increasing number of advisers want them available as an option and discussion point even if they're not recommending them.

Source: Planadviser.com

Court and Legal

DOL Moves to Dismiss Suit Challenging Its 401k Cryptocurrency Investment Guidance

The DOL recently asked a District of Columbia federal court judge to dismiss a lawsuit challenging its 401k cryptocurrency investment guidance. ForUsAll, a San Francisco-based 401k recordkeeping firm, sued the DOL in June 2022, claiming that the agency had changed policy in violation of the Administrative Procedure Act, which requires a public notice and comment period. In response, the DOL argues that its regulatory guidance does not have the force of law.

Source: Hallbenefitslaw.com

A $4 Billion 401k Strikes $4 Million Settlement

A $4 billion plan has struck a $4 million settlement and "meaningful prospective relief" in a suit that challenged the fees it paid itself as recordkeeper for its plan. Plaintiffs brought suit against Xerox Corporation, the Xerox Corporation Plan Administrator Committee and John Does 1-30 for breaching their fiduciary duties "with respect to the Xerox Corporation Savings Plan in violation of ERISA, to the detriment of the Plan, its participants, and their beneficiaries."

Source: Napa-net.org

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Compliance and Regulatory

Proposed Changes to the DOL's Voluntary Fiduciary Correction Program

The DOL published proposed updates to its Voluntary Fiduciary Correction Program. The VFCP is designed to encourage employers to voluntarily comply with ERISA by voluntarily correcting certain prohibited transactions and submitting those corrections to the Program for approval. The proposed changes are the first updates to VFCP since 2006 and provide, for the first time, a self-correction feature for delinquent participant contributions and loan repayments, the most common prohibited transactions under ERISA. Here is a summary of the proposed changes.

Source: Truckerhuss.com

DOL Proposes Significant Changes to VFCP Program

The VFCP allows plan sponsors to voluntarily correct certain fiduciary breaches to avoid civil enforcement actions and civil penalties imposed under ERISA. The most relevant components of the proposed changes for plan sponsors relate to delinquent contributions of participant deferrals and loan repayments as these tend to occur more frequently than other issues corrected through the VFCP. Importantly, the proposed amended and restated VFCP would add a new self-correction feature, clarify existing transactions currently eligible for correction and simplify certain administrative or procedural requirements for participation in and correction of transactions under the VFCP.

Source: Employeebenefitsblog.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.