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"[A]sset managers and private equity fund sponsors have launched a coordinated push to bring private equity, private credit, and other alternatives into participant-directed accounts.... It is, we are told, time to democratize access. What this framing tactfully omits is that the accredited investor standard, the prudent expert rule under ERISA, and the diversification and liquidity expectations baked into Section 404(a) exist for reasons.... Stripping those guardrails away is not democratization. It is the unilateral repeal of protection, sold to the people who lost it as a favor."  MORE >>

"The regulatory framework governing retirement plans was built at a time when most workers relied on defined benefit pensions. Investment decisions were centralized; participants bore little direct market risk. Today, that world has been replaced almost entirely by defined contribution plans, where individuals shoulder both investment and longevity risk.... [T]his post examines how ERISA's fiduciary model fits, sometimes uncomfortably, with a system in which participants choose from increasingly complex menus and defaults shoulder enormous responsibility on their behalf."  MORE >>

"The case was moving toward trial after a judge denied UHG's motion for summary judgment, noting that the plaintiff presented sufficient evidence that UHG had 'its hand in the cookie jar.' Facing a costly trial that they were unlikely to win, UHG chose to settle. Based on the alleged actions of UHG and their committee, this announcement of one of the highest ERISA litigation settlements is no surprise." [Snyder v. UnitedHealth Group, No. 21-1049 (D. Minn. proposed settlement filed Dec. 13, 2024)]  MORE >>

"Investment menu design is a key fiduciary responsibility that each retirement plan committee will undertake. Committees and their advisors combine investment theory with behavioral finance to develop a set of investment options used by a diverse group of participants with varying levels of investment knowledge, interest, and time to dedicate toward developing their personal investment strategy. Each committee should establish a fundamental set of beliefs relative to the construction of an investment menu."

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"[I]ndependent evaluation of a consulting relationship requires looking past process documentation to economic architecture. The most important questions are not about methodology. They are about money. How does your firm generate revenue beyond our retainer? Does any portion of your compensation, or that of your parent, flow, directly or indirectly, from recordkeepers or investment managers you recommend to us? ... Can you help us understand, in writing, every way your firm, not just your team, is compensated in connection with our retirement plan? How is individual consultant compensation structured, and does any component create incentives around provider relationships?"  MORE >>

"Recordkeepers now operate as platforms, not just service providers. They control most participant touchpoints while plan sponsors retain the fiduciary risk.... Infrequent recordkeeper changes and captive participants give recordkeepers durable commercial leverage.... Participant data use, indirect compensation, and rollover recommendations are emerging exposure areas.... Outdated contracts, limited monitoring, and infrequent RFPs leave sponsors exposed.... Sponsors must understand, monitor, and periodically re-market their recordkeeping arrangements."  MORE >>

34 pages. "In retirement plans, especially [DC] plans, assets are increasingly moving into structures that live outside the strictest 'retail' regimes (CITs, private equity, insurance separate accounts, alternative vehicles).... The fiduciary overlay under ERISA ... may not fully compensate for diminished product-level protections. What this paper will do:[1] Describe how the investor-protection architecture was built and what it was meant to solve. [2] Show where and how the perimeter is shifting in the retirement marketplace. [3] Provide a practical framework for fiduciaries to evaluate 'non-40 Act' and private-market exposures in DC plans. [4] Suggest policy and industry responses that balance innovation with durable investor protections."  MORE >>

"Recordkeepers are expanding into wealth management, managed accounts, and participant-level services -- areas once reserved for advisors.... These dynamics risk becoming co-option -- where advisors, dependent on recordkeepers for referrals, technology, and even marketing support, lose their independence. When that happens, plan sponsors and participants may face higher costs, less transparency, and weaker fee negotiations."  MORE >>

"Private equity's influence on service sectors ... has revealed a troubling pattern: quality can suffer when profit extraction takes precedence.... [P]rivate equity (PE)-backed roll-ups and shifting policy stances are changing how retirement plans are advised and constructed. Fiduciaries must scrutinize ownership structures, compensation models, and product incentives or risk exposing participants to degraded outcomes."  MORE >>

"From the perspective of a private equity manager, accessing the $12.4 trillion defined contribution marketplace would be nitrous to an already explosive market, and the fees and deal opportunities it would unlock for private equity managers are undeniable. The benefits to the fiduciaries who bear the risk of poor disclosure, obtuse valuations, and high fees are far less clear."  MORE >>

"Managed accounts are often marketed as 'better' for participants in the long run ... However, ... a participant needs to supply additional data inputs ... to make the service and investment allocation more effective. If most of your QDIA participants are, by definition, not fully engaged and are not supplying the additional data needed to maximize the managed account services, then is the extra half percent, or more, in fees worth it to essentially have an enhanced target-date investment?"  MORE >>

"The arguments have evolved over the past three to five years from straightforward claims of excessive fees to allegations of specific gaps or failures in the decision-making process of the fiduciary committee. Lawsuits also challenge ancillary services offered to participants, such as managed accounts."  MORE >>

"As the consulting / advisory market has consolidated, larger advisory firms fueled by outside capital from private equity and the public markets are pressing recordkeeping organizations to provide more to the advisors or risk losing market share and being excluded from client RFPs. It's easy to see the risks this creates for all involved, but plan sponsors must act to avoid them.... [T]he pressure for data sharing by conflicted advisors is raising significant concerns about conflicts of interest and participant data security."  MORE >>

"Some providers are proposing insurance separate accounts as less expensive alternatives to popular mutual funds used in retirement plans. This blog will explore the benefits and risks associated with these accounts, as well as the regulatory and compliance issues that fiduciaries need to consider."  MORE >>

"When services such as consultancy, recordkeeping, or investment management are 'bundled' with providers with whom the company has other business dealings, the risks of perceived or actual conflicts of interest increase dramatically."  MORE >>

"The plaintiffs will argue that defaulters are less engaged participants in their investments and will not provide additional data points needed to customize their portfolio. Without the additional data points, a managed account is essentially a target date fund ... As a result, the investment returns from the higher-cost managed account are no different from low-cost target date funds and, therefore, inappropriate to be used as the default option." [Hanigan v. Bechtel Global Corp., No. 24-0875 (E.D. Va. complaint filed May 24, 2024)]  MORE >>

"[Employers] should review the administrative changes required ... to track the after-tax savings accurately.... [T]he contributions must be reported on Form 1099-R.... If the employee is not aware that the employer has not taken out taxes, they may face a higher tax burden when they file their tax return."  MORE >>

"Here are four reasons you might consider conducting a search even if you feel your fees and services are reasonable. [1] Leverage for further reducing fees ... [2] Fiduciary liability insurance ... [3] Better service ... [4] Fiduciary risk."

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"[The] Retirement Fairness for Charities and Educational Institutions Act ... would allow 403(b) plans subject to [ERISA] and governmental plans to invest in CITs. SECURE 2.0 opened the door for 403(b) plans to use CITs through changes in tax-related provisions, but it was not implemented as the provisions did not include the necessary changes to the securities provisions."  MORE >>

8-page chart lists and describes SECURE 2.0 provisions and effective dates.  MORE >>