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<< Older News  |  January 20, 2021

News

All News > Fiduciary Duties

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DOL Provides Guidance on Missing Pension Plan Participants
Verrill Dana LLP Link to more items from this source
[Guidance Overview]
Jan. 19, 2021

"The first step towards establishing good procedures is for plan fiduciaries to identify problems with their plans. The Best Practices guidance identifies [a list of] 'red flags' indicating that a plan may have a missing participant problem ... [T]he DOL has compiled lists of best practices for recordkeeping, communication strategies, and missing participant searches."

Tags: Fiduciary Duties  •  Retirement Plan Administration

Motion Picture Industry ERISA Plan Under the Bright, Hot Lights
LawyersAndSettlements.com Link to more items from this source
Jan. 19, 2021

"At first glance, this looks like many other ERISA fiduciary breach lawsuits. The plaintiffs have the daunting task of working backwards from disappointing investment results to show that fiduciaries breached fundamental ERISA legal duties.... [This case] pushes the argument one step farther, claiming that the plan's basic design amounted to a breach of duty.... If bad design can be a violation of ERISA, the potential for fiduciary liability increases exponentially." [Klawonn v. Board of Directors for the Motion Picture Industry Pension Plans, No. 20-9194 (C.D. Cal. complaint filed Oct. 7, 2021)]

Tags: Fiduciary Duties  •  Retirement Plan Design  •  Retirement Plan Investments

BlackRock 401(k) Plan Class Action Headed for Trial
Jackson Lewis P.C. Link to more items from this source
Jan. 19, 2021

"A class action alleging that BlackRock entities favored their own proprietary funds when selecting investment options for BlackRock's 401(k) Plan is headed for trial after [the District Court judge] denied both parties' motions for summary judgment[.]" [Baird v. BlackRock Inst'l. Trust Co., No. 17-1892 (N.D. Cal. Jan. 12, 2021)]

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs  •  Retirement Plan Investments

When Can 401(k) Fiduciaries Get Excessive Fee Suits Dismissed?
Cohen & Buckmann, P.C. Link to more items from this source
Jan. 19, 2021

"[T]he number of [ERISA fee litigation] lawsuits filed in 2020 was double the number filed in 2018. While some of the fiduciaries who were sued didn't take their fiduciary responsibilities seriously, many others who tried to do a good job were caught in the sights of aggressive class action attorneys.... [Two recent] decisions may provide a template for further dismissals of cases filed based on conclusory allegations and speculation rather than the actual conduct of the defendants."

Tags: Fiduciary Duties

Ethics, Earnings, and ERISA: Ethical-Factor Investing of Savings and Retirement Benefits
Law Offices of Albert Feuer, via SSRN Link to more items from this source
Jan. 19, 2021

"Two fiduciary and tax-qualification questions arise in the retirement/savings plan realm with respect to ethical factor investing. Fiduciaries of non-ERISA plans, such as many government plans, often must satisfy tax-qualification rules similar to fiduciary rules governing ERISA plans. To what extent may fiduciaries make available ethical-factor investment options to participants and beneficiaries, who self-direct their investments, such as those for 401(k) plans or 403(b) plans? To what extent may plan fiduciaries, make ethical-factor investments on behalf of participants and beneficiaries, such as those for defined benefit plans?"

Tags: Fiduciary Duties  •  Retirement Plan Investments - ESG

Plaintiffs in DST Systems 401(k) Suit Awarded $79 Million
Pensions & Investments Link to more items from this source
Jan. 15, 2021

"The original complaint, filed in September 2017, accused the defendants of pursuing 'an exceptionally imprudent investment strategy with respect to a significant portion of the plan's assets.' The complaint said the defendants 'failed to adequately monitor the investments of the plan and the fiduciaries,' causing participants to lose 'well in excess of $100 million.' According to the proposed settlement, DST Systems will pay $27 million; the investment advisory firm Ruane, Cunniff & Goldberg will pay $21.5 million; and Robert D. Goldberg, the former president and CEO of the firm, will pay $30.5 million."

Tags: Fiduciary Duties  •  Retirement Plan Investments

Best Practices for ERISA Plan Fiduciary Governance (PDF)
Winston & Strawn LLP, via Defined Contribution Insights Link to more items from this source
Jan. 14, 2021

"Are my delegations of authority accurate and up to date? ... Do I need a committee charter for my ERISA fiduciary committee? ... Do I have to have a committee? How many committees do I need? ... How often should my committee meet? ... Should I have minutes of the committee meetings? If so, what should they contain? ... What is the function of an ERISA appeals committee (or subcommittee), and how should one operate? ... How does my employer's board fulfill its ERISA fiduciary duty to monitor the activities of the committees? ... Should committee members get training on fiduciary duties?"

Tags: Fiduciary Duties

The DOL's Fiduciary Interpretation and Exemption: Impact on Rollover Recommendations
Faegre Drinker Link to more items from this source
[Guidance Overview]
Jan. 13, 2021

"To understand the impact of these changes, the starting point is in the prohibited transaction restrictions in ERISA and the Internal Revenue Code. Without getting into the weeds, those rules prohibit fiduciary recommendations to plans, participants or IRA owners that result in increased compensation for the 'fiduciary advisor.' That raises two issues. The first is the meaning of increased compensation and the second is what constitutes a fiduciary recommendation? [The authors] discuss both questions, and the answers, in the context of rollover recommendations."

Tags: Fiduciary Duties  •  Retirement Plan Investments  •  Rollovers

Missing Participants: Best Practices for Defined Benefit and Defined Contribution Plans
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL] Link to more items from this source
Jan. 12, 2021

"This document outlines best practices that the fiduciaries of defined benefit and defined contribution plans, such as 401(k) plans, can follow to ensure that plan participants and beneficiaries receive promised benefits when they reach retirement age.... Based on EBSA's experience working with plans, the following practices have proven effective at minimizing and mitigating the problem of missing or nonresponsive participants. [1] Maintaining accurate census information for the plan's participant population.... [2] Implementing effective communication strategies.... [3] Missing participant searches.... [4] Documenting procedures and actions."

Tags: Fiduciary Duties  •  Retirement Plan Administration

Text of EBSA Compliance Assistance Release 2021-01: Terminated Vested Participants Project -- Defined Benefit Pension Plans
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL] Link to more items from this source
[Official Guidance]
Jan. 12, 2021

"The purpose of this memorandum is to ensure consistent investigative processes and case-closing practices among [EBSA's] Regional Offices conducting Terminated Vested Participants Project (TVPP) audits and to facilitate voluntary compliance efforts by plan fiduciaries.... The TVPP has three key objectives for defined benefit pension plans. First, to ensure these plans maintain adequate census and other records necessary to determine (a) the identity and address of participants and beneficiaries due benefits under the plan, (b) the amount of benefits due under the plan, and (c) when participants and beneficiaries are eligible to commence benefits. Second, to ensure these plans have appropriate procedures for advising participants with vested accrued benefits ('terminated vested participants' or 'TVPs') of their eligibility to apply for benefits as they near normal retirement age and the date they must start required minimum distributions (RMDs) under federal tax law. Third, to ensure these plans implement appropriate search procedures for terminated participants and beneficiaries for whom they have incorrect or incomplete information.... [This Compliance Assistance Release provides guidance for Regional Directors about:] Opening the investigation ... Information we ask for ... Errors we look for ... How cases are closed."

Tags: Fiduciary Duties  •  Retirement Plan Administration

Text of DOL Field Assistance Bulletin 2021-01: Temporary Enforcement Policy Regarding the Participation of Terminating Defined Contribution Plans in the PBGC Missing Participants Program
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL] Link to more items from this source
[Official Guidance]
Jan. 12, 2021

"This memorandum announces the [DOL's] temporary enforcement policy on terminating defined contribution plans' (e.g., 401(k) plans) use of the [PBGC's] expanded Missing Participants Program. The policy applies to fiduciaries of terminating defined contribution plans and qualified termination administrators (QTA) of abandoned individual account plans....

Pending further guidance, the Department will not pursue violations under section 404(a) of ERISA against either responsible plan fiduciaries of terminating defined contribution plans or QTAs of abandoned plans ... in connection with the transfer of a missing or non-responsive participant's or beneficiary's account balance to the PBGC in accordance with the PBGC's missing participant regulations rather than to an IRA, certain bank accounts, or to a state unclaimed property fund, ... if the plan fiduciary or QTA complies with the guidance in this memorandum and has acted in accordance with a good faith, reasonable interpretation of section 404 of ERISA with respect to matters not specifically addressed in this memorandum.

However, this temporary enforcement policy does not preclude the Department from pursuing violations under sections 404 or 406 of ERISA for a failure to diligently search for participants and beneficiaries prior to the transfer of their account balances to the PBGC or from pursuing violations under sections 107, 209 or 404 of ERISA for a failure to maintain plan and employer records. This memorandum expresses a temporary enforcement policy; it does not address the rights or obligations of other parties. To the extent this memorandum conflicts with the distribution guidance of Field Assistance Bulletin 2014-01, this memorandum controls."

Tags: Fiduciary Duties  •  Retirement Plan Administration

Do 401(k) MEP/PEPs Really Reduce Fiduciary Liability for Member Companies?
Fiduciary News; free registration required Link to more items from this source
Jan. 12, 2021

"With PEPs, member companies can relax knowing that those investment selections are under the domain of the PEP plan sponsor. But that doesn't mean they're totally out of the water when it comes to fiduciary liability.... It depends on any number of factors, so companies interested in becoming a member of a PEP can't just jump in. Due diligence is required."

Tags: Fiduciary Duties  •  MEP/PEP  •  Retirement Plan Design

Editor's Pick The Emerging Patchwork of Fiduciary Investment Advice Regulation
Eversheds Sutherland Link to more items from this source
[Guidance Overview]
Jan. 12, 2021

"As anticipated, a number of fiduciary and best interest investment advice regulations advanced at both the federal and state levels last year. As we begin 2021, firms subject to these regulations face challenges in dealing with rules that impose a host of new obligations, and that at times overlap and conflict with one another. This chart is intended to help firms take stock of the evolving framework and aid firms in putting the pieces together."

Tags: Fiduciary Duties

DOL Issues Final Investment Advice Prohibited Transaction Exemption
Ice Miller LLP Link to more items from this source
[Guidance Overview]
Jan. 11, 2021

"Under [PTE 2020-02], plan fiduciaries are required to meet impartial conduct standards, provide certain disclosures, conduct annual reviews, maintain policies and procedures, and keep records. However, the PTE relaxes proposed restrictions on fiduciary compensation to allow fiduciaries to be compensated for advice to rollover assets from a retirement plan to an [IRA] and to engage in principal transactions that previously were not permitted."

Tags: Fiduciary Duties  •  Retirement Plan Investments

DOL’s Final Rule on Investment Duties of ERISA Fiduciaries and Its Impact on Retirement Plan ESG Investing
Epstein Becker Green, via National Law Review Link to more items from this source
[Guidance Overview]
Jan. 11, 2021

"The Final Rule clarifies that ERISA's duty of loyalty, which requires a fiduciary to act solely in the interest of plan participants and beneficiaries for the exclusive purpose of providing benefits and defraying expenses, applies to the evaluation of investments and investment courses of action. The Final Rule therefore states that the duty of loyalty forbids ERISA fiduciaries from sacrificing investment returns or taking additional risks to promote non-pecuniary goals. Thus, ERISA fiduciaries may not select ESG investments to promote any goal other than ensuring financial benefits for plan participants."

Tags: Fiduciary Duties  •  Retirement Plan Investments - ESG

Stable Value Funds: A Risk-Free Dilemma
Retirement Plan Advisors [RPA] Link to more items from this source
Jan. 8, 2021

"Insurance company fixed (or general) accounts and stable value funds are prevalent across defined contribution retirement plans. Stable value funds often account for a large portion of a plan's total assets, particularly in governmental retirement plans where they commonly account for 20-40% or more. But, is that a sound and rational choice for most investors? What role should stable value play for a person saving and investing for retirement?"

Tags: 401(k) Plans  •  Fiduciary Duties  •  Retirement Plan Investments

A Framework for the DOL’s New Proxy Voting Rule
Stradley Ronon Link to more items from this source
[Guidance Overview]
Jan. 8, 2021

"From a substantive standpoint, the rule compels fiduciaries to only exercise shareholder rights, including proxy voting, if they are undertaken solely in accordance with the economic interests of the plan and its participants and beneficiaries.... The costs of proxy voting and other shareholder rights must also be considered, as they too affect the economic interest of the plan.... The rest of the rule is more process-oriented, which speaks to how fiduciaries can satisfy these substantive obligations in practice."

Tags: Fiduciary Duties  •  Retirement Plan Investments

Final ERISA Regs Describe Fiduciary Duties Related to Plan Proxy Voting
Mayer Brown Link to more items from this source
[Guidance Overview]
Jan. 7, 2021

"The Proposal would have required ERISA fiduciaries to vote all proxies which would have an economic impact on the plan and conversely, not vote any proxies which would not have such an impact.... [T]he DOL removed this language from the [final regulation]. Instead, the [final regulation] emphasizes that an ERISA fiduciary need not vote every proxy and in fact, should not exercise shareholder rights if the cost of doing so would outweigh the economic benefits of exercising such rights."

Tags: Fiduciary Duties  •  Retirement Plan Investments

Plaintiffs Claim Fiduciary Breach Acknowledging Insufficient Data to Determine Reasonable Fee Levels
Hall Benefits Law Link to more items from this source
Jan. 6, 2021

"[T]he suit ... alleges that the defendants breached their fiduciary duties by ... '[1] authorizing the Plan to pay unreasonably high fees for recordkeeping and administration; [2] authorizing the Plan to pay unreasonably high fees for managed account services; and [3] engaging in self-dealing with regard to administration of the Plan.' " [Guyes et al. v. Nestle USA Inc., No. (E.D. Wis. complaint filed Oct. 9, 2020)]

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

2020 ERISA Litigation Trends Hint at What's Ahead This Year (PDF)
Groom Law Group Link to more items from this source
Jan. 6, 2021

"By any measure, 2020 was a record-setting year for litigation under [ERISA]. The U.S. Supreme Court issued four ERISA decisions, more than it has issued in a single year in the 45-year history of the statute.... As 2021 begins, this trend shows no sign of slowing down, with important developing issues related to fee and performance litigation for smaller retirement plans, COBRA notices, arbitration clauses and class action waivers, actuarial assumptions, cyber theft, and employee stock ownership plans, or ESOPs -- among others."

Tags: Fiduciary Duties  •  Health Plan Administration  •  Retirement Plan Design

When You May Need to Fire Your 401(k) Advisor
Ary Rosenbaum, via JD Supra Link to more items from this source
Jan. 4, 2021

"The advisor's fee is unreasonable ... They don't regularly communicate with the plan sponsor ... They ignore plan participants ... Giving awful plan provider referrals ... The advisor made a mistake and won't admit it."

Tags: Fiduciary Duties  •  Retirement Plan Administration

Editor's Pick The Return of Identity Theft: The Risk Fights Back
Ferenczy Benefits Law Center Link to more items from this source
Dec. 31, 2020

"[H]aving a properly written, well-understood, cyber insurance policy can be the difference between making it through an incident relatively unscathed or emerging at the end, significantly battered and bruised (or, frankly, perhaps not emerging at all).... This rapid evolution in coverage prompts a few questions: Is any of this covered by my current insurance? What does cyber insurance actually do for me? How do I know if my broker knows my cyber risk?"

Tags: Cybersecurity  •  Fiduciary Duties  •  Retirement Plan Administration

Understanding Private Equity Investments in Defined Contribution Plans
ORBA Link to more items from this source
Dec. 30, 2020

"In giving its green light to such investments, the DOL laid out several factors that plan sponsors should keep in mind, given potentially problematic features of private equity investing for some plan participants. These include the typical multiyear holding period for portfolio companies, and the challenge in providing an accurate stock valuation before a sale."

Tags: Fiduciary Duties  •  Retirement Plan Investments

DOL Finalizes Fiduciary Investment Advice Guidance
Spencer Fane Link to more items from this source
[Guidance Overview]
Dec. 30, 2020

"The Exemption applies to SEC- and state-registered investment advisers, broker-dealers, banks, insurance companies, and their employees, agents and representatives that are investment advice fiduciaries under the newly interpreted 'five-part' test of fiduciary status. It imposes certain conditions to protect the interests of retirement plans, participants, beneficiaries, and IRA owners. The Exemption is set to become effective February 16, 2021[.]"

Tags: Fiduciary Duties  •  Retirement Plan Investments

DOL Finalizes Rules Prohibiting Proxy Voting Based on Non-Pecuniary Factors by ERISA Fiduciaries
Davis Wright Tremaine LLP Link to more items from this source
[Guidance Overview]
Dec. 30, 2020

"The final regulations also establish two safe harbors with respect to proxy voting policies.... The final regulations make clear that ERISA plan fiduciaries are not required to vote every proxy or exercise every shareholder right.... The final regulations also establish two safe harbors with respect to proxy voting policies."

Tags: Fiduciary Duties


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