Several New Reasons Employers Should Self-Audit Retirement Plans
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In This Issue
Compliance and Regulatory Several New Reasons Employers Should Self-Audit Retirement Plans Employee benefit plans must be reviewed regularly to determine whether there are compliance errors that need to be corrected before there are major correction costs and penalties. There are many reasons why doing self-audits of both tax and fiduciary compliance makes sense and provides retirement plan fiduciaries with protection. Here are four of them. Source: Cohenbuckmann.com Counting Participants in a First Year Plan The 2023 Form 5500 Annual Return/Report of Employee Benefit Plan includes some changes to previous filing requirements. One change is to the participant-counting methodology, specifically for defined contribution plans, to determine the plan filing type. But there is an important caveat for first-plan year filers. Source: Belfint.com Retirement Plans: What Categories of Employees May be Excluded? The law firm Verrill Dana is often asked about the permissibility of excluding certain categories of employees from participating in an employer's tax-qualified retirement plan. Their response here provides a high-level summary of what is and is not permitted. Source: Verrill-law.com »» Click here for more Compliance and Regulatory Material Fiduciary and Plan Governance ESG in 401k Plans in the Wake of Spence v. American Airlines, Inc. Whether investment decisions for pension, 401k, and other plans covered by ERISA should be influenced by environmental, social, and governance factors has become a flashpoint, and, unlike most ERISA issues, the controversy extends into the political arena. The recent opinion of a federal district court denying a motion to dismiss claims that ESG factors were improperly applied for 401k plan investments shows that ESG can bring risk to fiduciaries, even if they are not pursuing ESG strategies. Source: Ktslaw.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, Analysis, and Papers Americans Reducing Retirement Savings and Taking on Debt Due to Inflation Ongoing inflation has set back Americans' ability to prepare for their financial future by causing them to reduce savings, take on debt, and withdraw from retirement accounts, according to the 2024 Q1 Quarterly Market Perceptions Study from Allianz Life. Americans are more focused on their present finances than on setting themselves up for the future. About two in three (67%) say they are more concerned about paying bills than about their financial future. Source: Allianzlife.com Rising Stocks, House Prices Boost US Retirement Outlook While COVID was raging, the jump in house prices and a rising stock market were dramatically improving U.S. workers' retirement finances. In 2022, the share of households that were not saving enough to maintain their standard of living after they retired dropped to 39 percent, from 47 percent in 2019. Source: Bc.edu CITs Dominate Investment Strategies for 2023 A new Morningstar report is doubling down on its prediction that collective investment trusts will overtake mutual funds in 2024. The firm's latest Target-Date Strategy Landscape Report found that in 2023, 67% -- or $104.5 billion -- of net inflows into target-date strategies went into CITs, for a total of $156 billion. Net flows increased year-over-year, for a record high of $3.5 trillion. Source: 401kspecialistmag.com Majority of Plan Sponsors Concerned Future Retirees Will Run Out of Money in Retirement In 2024, more Americans are reaching the traditional retirement age of 65 in the same year than at any time in history, creating more than 4 million potential new retirees this year alone. While the U.S. faces this significant milestone, findings from a recent MetLife poll show a vast majority (91%) of plan sponsors are concerned that their future retirees will run out of money in retirement. When asked about what percentage of future retirees will run out of money in retirement, 83% of plan sponsors believe more than 1 in 4 retirees will deplete their retirement savings prematurely. Source: Metlife.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Advisers and Other Service Providers Small Business Retirement Plans: How Firms Perceive Benefits and Costs At any given time, only about half of U.S. private sector workers are covered by an employer-sponsored retirement plan, and few workers save without one. The coverage gap, which undermines the retirement security of the nation's workers, is driven by a lack of coverage among small employers. This article presents the results of a new survey of small employers to understand why some offer retirement plans and others do not. Source: Bc.edu The New Fiduciary Rule: Robo Advice and Robo Conflicts Under the current PTE 2020-02, the exemption relief is not extended to "pure" robo-advisers. Instead, only "hybrid" robo-advisers can provide non-discretionary fiduciary advice to retirement investors where the advice is conflicted. However, when the proposed amendments to the PTE become final and applicable, compensation resulting from conflicted nondiscretionary advice will be permitted if the conditions of the exemption are satisfied. This article discusses robo advice under PTE 2020-02. Source: Fredreish.com Court and Legal Federal Court Approves $6.75 Million Settlement of LinkedIn ERISA Class Action Lawsuit The U.S. District Court for the Northern District of California has given final approval to a $6.75 million settlement of a class action lawsuit filed by current and former LinkedIn employees regarding their investment options in the company 401k plan. The settlement covers more than 17,000 people participating in the company's retirement plan from August 14, 2014, to July 1, 2020. Source: Hallbenefitslaw.com DOL Defends ESG Rule Against 5th Circuit Appeal The DOL filed with the U.S. 5th Circuit Court of Appeals a defense of its rule governing "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights," sometimes called the environmental, social, and governance rule, as complying with ERISA. Source: Planadviser.com AllianceBernstein 401k Lawsuit Booted The US District Court for the Southern District of New York dismissed the plaintiffs' claims without prejudice, meaning that they can file an amended complaint to address the legal shortcomings within 30 days. The lawsuit, which was filed in 2022, failed to show that the asset manager could have breached its duties of prudence and loyalty, and it did not successfully allege any prohibited transactions, the court stated. Source: Investmentnews.com Defense Contractor L3Harris Settles ERISA Class Action A Florida district court judge has administratively closed an ERISA class action lawsuit against defense contractor L3Harris after the parties settled following mediation, subject to court approval of class counsel's motion for preliminary settlement approval, to be filed within 60 days. Source: Hallbenefitslaw.com »» Click here for more Court and Other Legal Issues Legislative and Washington DC Bill to Ban ESG Consideration in Retirement Plans Floated by House Republicans Another attempt at legislation to restrict the use of Environmental, Social, and Governance (ESG) factors in retirement plans was introduced in the House last week, this time by Congressman Greg Murphy, M.D. The "Safeguarding Investment Options for Retirement Act" seeks to prohibit tax-advantaged retirement plan trustees from considering factors other than financial risk and return when making investment decisions on behalf of workers, retirees, and their beneficiaries. Source: 401kspecialistmag.com Legislation Calls for Retirement Plan Marketplace in Wisconsin If bills before both chambers of the Wisconsin legislature are enacted, America's Dairyland will have a retirement plan marketplace to connect individuals and small employers with retirement plans offered by private financial services firms. Source: Napa-net.org »» Click here for more on Legislative and Washington Actions Marketplace News SPARK Elects New Governing Board Officers Ascensus to Buy Mutual of Omaha's 401k Recordkeeping Business Target-Date Plus Added as QDIA Option for Voya Retirement Plans
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