Newsletter for February 13, 2023
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In This Issue
Cyber and Plan Security
Who's Liable When a Plan Participant Is a Victim of Identity Theft
Because of the scarcity of case law and regulatory guidance on the issues, any case that analyzes the liability of ERISA plan sponsors and service providers following a cybersecurity incident and/or identity theft will be heavily scrutinized. A recent opinion in the Southern District of New York has widened the scope of liability for potential ERISA defendants in actions seeking to recover fraudulent distributions from ERISA-covered plans. It has also made new legal determinations that, if followed by other courts, will have an impact on future suits by plan participants seeking to recover lost retirement plan money.
Source: Wagnerlawgroup.com
»» Click here for more on Cybersecurity Issues
Fiduciary and Plan Governance
DOL's ESG Rule Attacked on Multiple Fronts
In recent weeks, opponents of the DOL's ESG rule have brought new challenges in the courts and Congress. Most of the provisions of the DOL's final rule addressing fiduciary duties for ERISA retirement plans concerning investment selection and consideration of ESG factors as well as exercises of shareholder rights, which the agency issued last fall, became effective as of January 30, 2023.
Source: Ropesgray.com
»» Click here for more Fiduciary and Plan Governance Material
Insight: Studies, Research, and White Papers
Secure Act 2.0 Litany of Retirement Change Presents Employers Enhanced Retirement Opportunities for Employees
The SECURE Act 2.0 of 2022 became law as part of the Consolidated Appropriations Act of 2023. SECURE 2.0 builds on the Setting Every Community Up for Retirement Enhancement Act of 2019 to improve retirement savings opportunities for workers. This 6-page article highlights key provisions, organized by the same headings used in the Act.
Source: Wagnerlawgroup.com
Retirement Savers Held Course in 2022 Despite 401k Declines
With equity and bond markets down in 2022, most workplace retirement plan savers saw double-digit declines in their portfolios. But according to new data from the Vanguard Group and Bank of America, most participants stayed the course with their retirement savings.
Source: Planadviser.com
7 in 10 Private-Sector Workers Have Access to Employer-Provided Retirement Plans
As of March 2022, 69% of private industry employees had access to an employer-provided retirement plan according to new data released recently by the U.S. Bureau of Labor Statistics. Fifty-two percent of private industry workers chose to participate in a retirement plan, for a take-up rate of 75%.
Source: 401kspecialistmag.com
Tracking the Confidence of Plan Participants
Plan participants may access or make changes to their retirement accounts in response to many factors, including the state of the market and the economy. These key metrics, in part, signal 401k participant confidence and sentiment. Notably, at year-end, fewer participants took money out of their plan, but slightly more loans defaulted. At the same time, participants close out the year with an average contribution rate lower than the previous years.
Source: Bofa.com
»» Click here for More Studies, Research, and White Papers
Court and Legal
Excessive Fee 401k Suit Settles
While an excessive fee suit had alleged the loss of "millions of dollars in excessive fees, costs, and lost investment opportunity," the parties have settled for a fraction of that. The suit was brought in November 2021 in the U.S. District Court for the Central District of California by former participants of the VCA Inc. Salary Savings Plan.
Source: Napa-net.org
Federal Judge Tosses Most Claims in 401k Excessive Fee Suit
Fiduciary defendants and their investment consultant, have notched a win in an excessive fee case. The suit, filed in the U.S. District Court for the District of Massachusetts, alleged that the defendants replaced well-performing funds with Aon collective investment trusts for their financial gain rather than to benefit plan participants.
Source: Napa-net.org
Nonprofit Nemours Foundation Faces 403b Lawsuit
Former employees have filed a class-action complaint against the 403b retirement plan at the Nemours Foundation -- a nonprofit operator of children's hospitals -- in U.S. District Court. The suit, Jeanna Cannarozzo et. al. v The Nemours Foundation, alleges plan participants were charged excessive fees by recordkeeper Transamerica.
Source: Plansponsor.com
Microsoft Escapes Retirement Plan TDF Suit
A U.S. District Court judge on Tuesday dismissed a lawsuit against Microsoft Corporation claiming that the BlackRock LifePath Index Funds suite of target-date funds was an imprudent investment choice for Microsoft's retirement plan participants.
Source: Planadviser.com
»» Click here for more Court and Other Legal Issues
Compliance and Regulatory
Ten Mandatory SECURE 2.0 Changes for 401k Plans
The SECURE 2.0 Act of 2022 contains over 90 provisions affecting retirement plans and IRAs, but only a handful are required changes for 401k plans. This post lists those changes and indicates when the provisions go into effect. Unless otherwise noted, 401k plans will need to be amended to reflect mandatory SECURE 2.0 changes by the end of their 2025 plan year. Some of the changes listed here, such as the paper disclosure requirement, may not require a plan amendment.
Source: Eforerisa.com
Correcting Average Deferral Percentage Test Failures
The tax code governing 401k plans was written to prevent qualified retirement plans from overly favoring highly compensated employees. A series of non-discrimination tests were devised to measure whether a plan's design or operation tends to favor the HCEs over the non-highly compensated employees. This article dives into the different methods of correcting an ADP test failure.
Source: Legacyrsllc.com
Puerto Rico Announces 2023 Limits on Qualified Retirement Plans
The Puerto Rico Department of the Treasury recently issued Internal Revenue Circular Letter No. 23-01 announcing the 2023 limits for Puerto Rico qualified retirement plans. This article reviews these new 2023 limits.
Source: Littler.com
SECURE 2.0: Emergencies, Hardships, and Disasters
Among the many changes within SECURE 2.0 is increased flexibility for participants to access certain retirement plan accounts when faced with qualifying emergencies, hardships, and disasters.
Source: Benefitslawadvisor.com
SECURE 2.0 Expansion of Self-Correction Program and Plan Loan Error Corrections
In a measure that substantively affects plan sponsors and alters retirement plan correction practices, SECURE 2.0 significantly expands the availability of self-correction by widening the range of operational failures for which self-correction is available, including plan loan errors.
Source: Spotlightonbenefits.com
SECURE 2.0 RMD Change Could Cause Trouble in States With Certain Unclaimed Property Laws
The SECURE 2.0 Act of 2022 increased the required minimum distribution age for withdrawals from individual retirement accounts to 73 this year. In 2033, the RMD age will increase to 75. However, due to the escheatment, or unclaimed property, laws in certain states, some IRAs could be considered abandoned if they are left untouched until age 75.
Source: Plansponsor.com
»» Click here for more Compliance and Regulatory Material
Marketplace News
Putnam Brings ESG-Focused TDFs to DC Plan Sponsors
OneDigital Acquires $500M Florida Retirement and Wealth Management Shop
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