Top 10 Hidden Liability Pitfalls That Retirement Plan Sponsors Should Avoid

Help for 401k Plan Sponsors and Retirement Professionals

Newsletter for August 17, 2020

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401k Averages Book 20th Edition Infographic

With the release of the 401k Averages Book 20th Edition, we have updated our infographic "Are all $5,000,000 401k Plans Created Equal?" …and the findings might surprise you. The infographic compares the average costs of two $5,000,000 401k plan benchmarks. Click here to receive a copy of the infographic and see what we found out.

In This Issue

Fiduciary and Plan Governance

Top 10 Hidden Liability Pitfalls That Retirement Plan Sponsors Should Avoid

Retirement plan fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a retirement plan and their beneficiaries. These responsibilities include: acting solely in the interest of plan participants and with the exclusive purpose of providing benefits to them; carrying out their duties prudently; following the plan documents; diversifying plan investments; and paying only reasonable plan expenses. This article details pitfalls that plan fiduciaries are usually unaware of, which could expose them to potential fiduciary liability.


Do 401k Menus Suffer From a Generation Gap?

A new whitepaper finds that the use of fixed income options in 401k plans has not kept pace with workplace trends. The whitepaper points out that in the past, investment recommendations may have been more focused on achieving minimum compliance and "checking the fixed income box" rather than anticipating participant investment needs at various life stages. A multi-generational participant population has more complex needs.


»»  Click here for more Fiduciary and Plan Governance Material

Insight: Studies, Research, and White Papers

Canadian Pension Plans Outperform Their Global Peers: Study

While Canadian pension plans hold quiet confidence, it turns out they do outperform their international peers when it comes to asset performance and liability hedging, according to a research paper from McGill University and CEM Benchmarking.


Breaking Bad Behavior: Americans Leave Retirement Savings Alone

A bit of good behavioral news from Empower Retirement. The recordkeeping giant's Empower Institute finds that Americans are determined to keep their hands off their retirement savings even when faced with financial difficulties brought on by the worldwide pandemic. A survey reports that 401k participants and those with similar workplace plans would rather cut back on spending or dip into their savings accounts before touching their retirement savings.


»»  Click here for More Studies, Research, and White Papers

Items of Special Interest to Service Providers

Workers Need More Help With Retirement Plans: Report

401k plan providers have improved service overall this year, but not when it comes to communicating about COVID-19, according to Cogent. Plan participants have a lot of questions about how to respond to the COVID-19 crisis, and they haven't necessarily gotten answers from retirement plan providers and advisers.

Source: (registration may be required)

Pandemic Behind 401k Sales Slump, Client Retention Bump

Changing retirement plan providers was not a top priority for employers during the second quarter, which didn't help recordkeepers win much new business. A survey of 14 recordkeepers published last month by Limra's Secure Retirement Institute found that sales were down by 21% compared with the second quarter of 2019.

Source: (registration may be required)

403b Plans

Checklist for Amending a 403b Plan

This is a checklist for amending a 403b plan for a public educational institution. The general steps to amend a 403b plan are reviewed.


»»  Click here for More 403b Material

Plan Communications

Participant Engagement: Determining Your Audience's Preferences

One of the challenges associated with successfully engaging retirement plan participants is figuring out your audience's preferences. Understanding a participant's behavior is the key to successful engagement. Here are some of my behaviors that are relevant to the engagement process.


»»  Click here for more on Plan Education and Communications

Court and Legal

Illinois Federal Court Dismisses ERISA Claims Against 401k Fiduciaries

ERISA requires plan fiduciaries to act prudently and loyally when making decisions about a plan. In Martin v CareerBuilder, LLC, a federal district court held that the plaintiff's allegations about expensive recordkeeping costs and imprudent investment options failed to give rise to an inference that the defendants had violated their ERISA obligations.


Mercy Health Corp. Faces 403b Plan Excessive Fee Lawsuit

An ERISA lawsuit has been filed against fiduciaries of Mercy Health Corp.'s 403b plan. Among other things, the lawsuit alleges the health care system unreasonably maintained investment advisers and consultants despite the known availability of others with lower costs and/or better performance histories.


Judge Finds 401k Participants Proved No Harm From Lack of Stable Value Fund

A more than four-years-long lawsuit arguing American Airlines should have offered a stable value fund in its 401k plan rather than the AA Credit Union Fund has ended with a federal judge granting summary judgment to American Airlines.


McKinsey Settles 401k Suit for $39.5 Million

McKinsey & Co. is shelling out $39.5 million to put a class-action lawsuit over its retirement plans behind it, according to court records filed this week. Huntington Bancshares also settles a retirement plan lawsuit, while American Airlines sees a surprise win.

Source: (registration may be required)

4th Circuit Ruling Supports ERISA Stock-Drop Plaintiffs

Since an influential Supreme Court ruling known as Dudenhoeffer, plaintiffs have struggled to defeat dismissal motions in so-call stock-drop lawsuits, but a new panel ruling in the 4th Circuit bucks that trend.


»»  Click here for more Court and Other Legal Issues

Compliance and Regulatory

IRS Lends a Hand on 402(f) Notices

This week, the IRS has released updated safe harbor 402(f) notices to reflect the recent legislative change made, including changes in law made by the SECURE Act. These changes include qualified birth and adoption distributions and the change from age 70 1/2 to 72 for RMDs.


IRS Updates 401k Model Rollover Notice

The IRS issued Notice 2020-62 which updates the information that must be provided to participants in retirement plans (including 401k plans) when they become eligible for a distribution. Also, Notice 2020-62 provides two model rollover notices (one solely for payments from Roth contribution accounts, and another for payments from traditional, non-Roth accounts) which, if used for this purpose, are deemed to satisfy the statutory requirement.


IRS Provides Guidance on 2020 Waiver of Retirement Plan Required Minimum Distributions

In June 2020, the IRS issued Notice 2020-51 giving guidance on how to interpret and administer the 2020 RMD waiver provisions in the CARES Act and the required beginning date provision in the SECURE Act. Here are highlights of this recent IRS Notice.


»»  Click here for more Compliance and Regulatory Material

Marketplace News

Fisher Investments' 401k Solutions Exceeds $1 Billion in Assets

John Hancock to Waive Recordkeeping Fees in Q121

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