Generative Artificial Intelligence (AI) and 401k Plan Fiduciary Implications
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Fiduciary and Plan Governance Generative Artificial Intelligence (AI) and 401k Plan Fiduciary Implications AI is emerging as a major transformative force across various industries, including finance and retirement planning. Like everyone else, fiduciaries are increasingly turning to AI-powered tools and algorithms to optimize investment strategies, enhance decision-making processes, and improve participant outcomes. However, integrating AI in 401k plan management has its challenges, and not everything AI is positive. Therefore, an ongoing fiduciary oversight of AI may be warranted. Source: Foley.com What It Means to Be an ERISA Fiduciary ERISA's definition of fiduciary encompasses three categories of responsibility or activities concerning an employee benefit plan. In addition to anyone who is specifically named as a fiduciary by the terms of a plan, a person is a fiduciary of a plan to the extent they exercise certain discretionary authority or responsibility. Here is an overview. Source: Employeebenefitslawgroup.com An Accident Waiting to Happen: Annuities, Spreads, and Fiduciary Liability The DOL recently filed an amicus brief in the pending Home Depot 401k litigation. The DOL summed up a fiduciary's duties vis-a-vis cost-consciousness. At first glance, the issue of reasonable expenses would seem to be fairly straightforward. However, cost issues are arguably potentially more complicated, especially in connection with more complicated investments such as annuities, which often lack the transparency of other investments. As a result, plan sponsors may mistakenly believe they understand an investment and its costs, while closer examination often reveals issues they had not initially considered. Source: Fiduciaryinvestsense.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, Analysis, and Papers Participants Prefer SECURE 2.0 PLESA Benefit Over Withdrawal Feature A new survey by Commonwealth analyzes the impacts of SECURE 2.0 legislation on low to moderate-income employees. Commonwealth worked with five focus groups, for a total of 20 participants, to assess interest and requests for emergency expense provisions under SECURE 2.0. Under SECURE 2.0, employers can implement a PLESA feature that would allow employees to make post-tax contributions towards a rainy-day fund, which can be used during financial hardships. Source: 401kspecialistmag.com For Most Near-retirees, Leaving the Workforce at 65 Is a Lost Cause The retirement landscape in the US is shifting dramatically as a significant portion of the population approaches the traditional retirement age of 65, a goal many say is increasingly out of reach, according to a new survey by Nationwide. The findings of the survey, which drew responses from around 500 advisors and roughly 2,400 investors, reflect a trend of financial insecurity and the fact that many workers must now work beyond the traditional retirement age of 65. Source: Investmentnews.com »» Click here for More Studies, Research, and White Papers 403b Plans If you administer a 403b plan you should be familiar with the term "universal availability." This concept means that, as a general rule, all employees must be allowed to make elective deferrals into the plan immediately upon hire. There are a few limited exceptions to this rule that permit the plan sponsor to exclude certain groups of people, but compliance with these exclusions is often akin to traversing a minefield. Source: Brickergraydon.com »» Click here for More 403b Material Employee Education and Communications The Art of Communicating to Employees: A Guide for Plan Sponsors In a 2022 study by LIMRA, 60% of retirement plan participants in the study felt that communications about their plan were "ineffective." This lack of productive communication may lead to lower enrollment, and indifference about plan benefits, and perhaps contribute to overall employee apathy, morale, and productivity issues. Here are some insights on how to successfully reach participants about their retirement plan in a way they understand and is meaningful to them. Source: Planpilot.com »» Click here for more Education and Communications Material Court and Legal Fifth Circuit Revives ERISA Imprudence Lawsuit Over Investments and Recordkeeping Fees In Perkins v. United Surgical Partners International, Inc., the court concluded that Defendants failed to refute the Plaintiffs' allegations about the more expensive retail shares and that the Plaintiffs sufficiently allege a plausible breach of the duty of prudence. Concerning recordkeeping costs, the court concluded that the Plaintiffs' allegations about the Plan's costs in comparison to other similar plans are sufficient to survive dismissal. Source: Robertsdisability.com Revisiting Plan Service Provider Agreements: To Provide or Not to Provide to Plan Participants In Zavislak v. Netflix, the court held that the plan administrator of a health plan was not required to provide a participant with copies of various service provider agreements. While the Zavislak decision provides a detailed analysis of the topic, the issue of whether service provider agreements must be disclosed remains unsettled across other jurisdictions. Accordingly, plan administrators who receive such requests should consider the extent to which such agreements must be provided based on case law in the applicable jurisdiction. Source: Erisalitigation.com »» Click here for more Court and Other Legal Issues State-Based Private-Sector Retirement Programs The design of a state-facilitated auto-IRA retirement savings program's investment menu, its cost structure, and fee transparency are important enablers of a participant's ability to build high-quality, well-diversified portfolios that will generate risk-adjusted returns over time. This article provides a comparative review of investment design and cost structures. Source: Georgetown.edu Compliance and Regulatory Retirement Lost and Found: DOL Proposes Voluntary Reporting The SECURE 2.0 Act of 2022 directed the DOL to establish a database that individuals can search to help locate their retirement benefits. The database was originally intended to leverage existing filing requirements, but the IRS determined it could not legally share Form 8955-SSA data with DOL. Consequently, DOL has issued a proposed procedure to collect data directly from plan administrators voluntarily via a new filing made along with, but not as part of, Form 5500. Source: Groom.com ERISA reporting requirements, as well as other retirement plan reporting requirements, can be daunting for plan sponsors and administrators new to the process. This article is an introduction to those requirements and responsibilities. Source: Employeebenefitslawgroup.com Department of Labor Finalizes QPAM Exemption Amendment The DOL final amendment to Prohibited Transaction Class Exemption 84-14, the QPAM Exemption is commonly relied upon by investment managers for ERISA-governed employee benefit plans and individual retirement accounts to avoid potential prohibited transaction issues, was published in the Federal Register on April 3, with the changes becoming effective on June 17, 2024. This article reviews the key changes to the exemption. Source: Morganlewis.com How IRS Notice 2024-35 Affects Beneficiaries Under the proposed RMD regulations, if an account owner dies on or after their required beginning date, beneficiaries who are subject to the 10-year rule must take annual life expectancy payments during the first nine years. This applies to beneficiaries of account owners and to successor beneficiaries of eligible designated beneficiaries who died in 2020 or later. Source: Ascensus.com IRS Provides Guidance Regarding 2024 RMDs The IRS has issued Notice 2024-35, which guides certain required minimum distributions for 2024. Notice 2024-35 also states that final regulations regarding RMDs will not apply before the 2025 distribution calendar year. Here is a review of the guidance. Source: Westlaw.com DOL Issues Final Rule Amending QPAM Exemption On April 3, 2024, the DOL released its final rule amending Prohibited Transaction Exemption 84-14. The inclusion of foreign crimes modernizes PTE 84-14 in light of the increasing globalization of the financial services sector, and the increase in asset management and equity thresholds ensures that the exemption remains limited to large managers. Source: Shearman.com »» Click here for more Compliance and Regulatory Material Marketplace News Vanguard to Exit Individual 401k Business With Ascensus Deal
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