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All News > Retirement Plan Investments

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State Attorneys General Question BlackRock on ESG, Antitrust Concerns
planadviser Link to more items from this source
Aug. 10, 2022

"A group of 19 Republican state attorneys general have written a letter to BlackRock stating that the asset manager is using state pension fund assets in environmental, social and governance investments that 'force the phase-out of fossil fuels, increase energy prices, drive inflation and weaken the national security of the United States.' "

Tags: Retirement Plan Investments  •  Retirement Plan Investments - ESG

Why the BlackRock Investment Imprudence Cases Are Implausible and Should Be Dismissed Under the Federal Pleading Standard
Euclid Specialty Managers Link to more items from this source
[Opinion]
Aug. 10, 2022

"After years of higher-fee plans with actively managed investment options facing imprudence challenges, this next chapter in the long war against large-plan fiduciaries represents a cynical and meritless attack against low-fee plans that must be dismissed as implausible under the federal pleading standard.... These lawsuits are manufactured imprudence claims designed to profit off the high risk and cost of defending high-stakes litigation, but that is exactly why faithful application of the pleading standard is crucial to protect fiduciaries who have done nothing wrong in their service to plan participants."

Tags: Fiduciary Duties  •  Retirement Plan Investments

Plaintiffs in Seventh Circuit Fail to Meet Dudenhoeffer Pleading Standards in Stock Drop Case
Thomson Reuters Practical Law Link to more items from this source
Aug. 10, 2022

"Boeing delegated to the Investment Committee its authority to: [1] Invest, reinvest, and manage assets of all Boeing employee benefit plans. [2] Select and monitor investment options for the ESOP.... Boeing retained certain responsibilities under applicable securities laws and ERISA with respect to the offering of company stock under the ESOP.... [T]he Seventh Circuit held that the mere exercise of some authority over Boeing employee benefit plans did not mean that Boeing was exercising fiduciary authority over the investment choices and holdings of the ESOP." [Burke v. The Boeing Company, No. 19-2203 (7th Cir. Aug. 1, 2022)]

Tags: Fiduciary Duties  •  Retirement Plan Investments

Public Pensions Suffer Worst Investment Quarter Since 2020
AdvisorHub Link to more items from this source
Aug. 10, 2022

"Public pension assets posted a median return of -8.86% for the second quarter and -7.91% for the year ended June 30, according to a report ... by Wilshire Trust Universe Comparison Service. The pension funds still beat returns for all plan assets tracked by Wilshire, which posted a median return of -9.63% for the second quarter and -10.59% for the year."

Tags: Funding of DB Plans  •  Retirement Plan Investments  •  State and Local Government Plans

DOL Proposes 'Update' to QPAM Exemption
The Wagner Law Group Link to more items from this source
[Guidance Overview]
Aug. 9, 2022

"Many provisions go beyond just addressing bad actors, foreign convictions and exemption ineligibility ... These higher thresholds, and the burden of annual required updates, will be difficult to achieve for smaller QPAMs. New recordkeeping requirements add significantly to the burden of compliance, without any significant justification.... Clarification is needed on the exemption when it is used by a QPAM for hiring service providers[.]"

Tags: Retirement Plan Investments

Best Interest Standard of Care for Advisors, Part 99: The PTE 2020-02 Requirement for an Annual Retrospective Review
FredReish.com Link to more items from this source
[Guidance Overview]
Aug. 9, 2022

"[T]he fourth condition -- the annual retrospective review -- can't be satisfied until next year, since it involves a review of the covered recommendations in 2022.... [If] the review isn't performed and the report certified as required, the financial institution (e.g., broker-dealer or RIA firm) didn't satisfy the requirements of the PTE and the relief provided by the PTE isn't available. As a result, all the covered recommendations for the year, including any rollover recommendations, would be prohibited transactions[.]"

Tags: Fiduciary Duties  •  Retirement Plan Investments

SEC Publishes Bulletin on Conflicts of Interest for Broker-Dealers and Investment Advisers
Sidley Austin LLP Link to more items from this source
[Guidance Overview]
Aug. 9, 2022

"Although formally the Bulletin cannot and does not articulate legal rules beyond the existing requirements of Reg BI and investment advisers’ fiduciary duty with respect to conflicts of interest, its interpretation of these requirements is broad, and the Staff appears to treat the two standards as identical."

Tags: Fiduciary Duties  •  Retirement Plan Investments

Guidelines for 401(k) Fiduciaries on Mutual Fund Selection
Golan Christie Taglia Link to more items from this source
Aug. 9, 2022

"Although the courts are divided, there are some guidelines that plan fiduciaries need to consider when reviewing their plan's mix of mutual funds offered for participant investment: [1] Include index funds in your plan's investment choices.... [2] Be careful in selecting and monitoring actively managed funds.... [3] Plan fiduciaries should always select the lowest cost class of a selected mutual fund that is available."

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

Two More Plans Sued Over Offering of BlackRock Index Target Date Funds
Pensions & Investments Link to more items from this source
Aug. 8, 2022

"The lawsuits bring to eight the number of ERISA lawsuits in recent days ... against sponsors and fiduciaries alleging that they should not have retained the BlackRock Lifepath Index Funds. Plaintiffs contend that the BlackRock series had a poorer overall performance than four other popular target-date series, some of which were passive and some of which were actively managed."

Tags: Fiduciary Duties  •  Retirement Plan Investments

Third Circuit OKs ERISA Class Action Over Broad Fiduciary Investment Claims
Mercer Link to more items from this source
Aug. 8, 2022

"The plaintiffs in this case made broad allegations that plan fiduciaries failed to implement a prudent process for selecting and monitoring investment options, resulting in excessively expensive funds across the entire lineup. The plaintiffs also alleged fiduciaries imprudently selected actively managed target-date funds instead of lower-cost index options. The three plaintiffs had collectively invested in only seven of the plan's 37 investment options, and each plaintiff invested in just one of the 13 funds in the plan's target-date series." [Boley v. Universal Health Services, Inc., No. 21-2014 (3rd Cir. Jun. 1, 2022)]

Tags: Fiduciary Duties  •  Retirement Plan Investments

Seventh Circuit Affirms Dismissal of ERISA Stock-Drop Case
Proskauer Link to more items from this source
Aug. 8, 2022

"The Seventh Circuit recently ... [affirmed] the dismissal of claims brought by participants in the Boeing 401(k) plan, ... on grounds that [1] the fiduciary responsibilities associated with the company stock fund had been delegated to an independent fiduciary, and [2] the insider fiduciaries had no duty to disclose corporate inside information to the plan participants or the independent fiduciary.... [T]he Seventh Circuit's opinion provides helpful guidance to plan sponsors and fiduciaries that go beyond the specific circumstances presented in the case." [Burke v. The Boeing Company, No. 19-2203 (7th Cir. Aug. 1, 2022)]

Tags: Fiduciary Duties  •  Retirement Plan Investments

Brotherston v. Commonspirit Health: An Opportunity, and a Need, to Shift the 401(k) Litigation Paradigm
The Prudent Investment Fiduciary Rules Link to more items from this source
[Opinion]
Aug. 8, 2022

"[T]he CommonSpirit decision has revived the meritless 'apples and oranges' argument regarding fiduciary prudence, even though both the Brotherston decision and SCOTUS' denial of cert discredited such an argument. As a result, the Sixth Circuit has arguably created an unnecessary divide within the circuits.... [However,] the Sixth Circuit may have actually provided a valuable opportunity to provide more certainty for plan sponsors and to clarify the guidelines going forward for 401(k)/403(b) administration and litigation." [Smith v. CommonSpirit Health, No. 22-5964 (6th Cir. Jun. 21, 2022)]

Tags: Fiduciary Duties  •  Retirement Plan Investments

Proposed Stock Buyback Tax Would Hit Retirement Accounts, Business Groups Say
Washington Examiner Link to more items from this source
Aug. 5, 2022

"The stock buyback plan, proposed as a compromise by Sen. Kyrsten Sinema (D-AZ), is facing blowback from the U.S. Chamber of Commerce. The group said the tax proposal, which envisions a 1% excise tax on corporate buybacks, would filter down and have a deleterious effect on average investors."

Tags: Retirement Plan Investments  •  Retirement Plan Policy

Pension Funding Index, August 2022
Milliman Link to more items from this source
Aug. 5, 2022

"The funded status of the 100 largest corporate defined benefit pension plans decreased by $19 billion during July ... Pension liabilities soared due to a decrease in the benchmark corporate bond interest rates used to value those liabilities. As of July 31, the funded ratio dropped to 104.5%, down from 105.9% at the end of June. Despite the decline, July is the sixth consecutive month in which 'full funding' has been achieved."

Tags: Funding of DB Plans  •  Retirement Plan Investments

Is the QPAM Exemption in Jeopardy?
planadviser Link to more items from this source
[Opinion]
Aug. 5, 2022

"[Attorney Carol McClarnon] points out that, in the nearly four decades since the QPAM exemption framework was first established, the financial services world has become far more interconnected. 'In today's industry, you just have a lot more complexity, with larger conglomerates and highly sophisticated international entities that do business with U.S. retirement plans,' McClarnon says. 'The proposed framework, if it is not adjusted after the comment period, will make it very difficult for these types of entities to reliably and efficiently use the QPAM exemption.' "

Tags: Retirement Plan Investments

DOL Proposes Significant Changes to QPAM Exemption
Dechert LLP Link to more items from this source
[Guidance Overview]
Aug. 4, 2022

"The proposal would generally: [1] Substantially expand disqualification events.... [2] Impose a one-year winding-down period for the QPAM -- triggered on covered conviction or prohibited misconduct.... [3] Require written assurances and indemnities to plan clients.... [4] Mandate QPAM registration with the DOL for national database.... [5] Impose recordkeeping requirements on QPAM exemption compliance and compel access by regulators, plans and participants and beneficiaries.... [6] Offer new color on QPAM as required decision-maker.... [7] Increase client assets under management and shareholder equity thresholds."

Tags: Retirement Plan Investments

Pension Finance Update, July 2022
October Three Consulting Link to more items from this source
Aug. 3, 2022

"Pension finance enjoyed a strong month in July due to rising stock markets. Both model plans ... gained ground last month: Plan A improved almost 2% and is now up 4% for the year, while the more conservative Plan B added 1% and is now down less than 1% through the first seven months of 2022."

Tags: Funding of DB Plans  •  Retirement Plan Investments

The Fatal Flaw in Your Retirement Plan's Target Date Funds
ThinkAdvisor Link to more items from this source
[Opinion]
Aug. 3, 2022

"TDFs are a good strategy while you are in the saving phase of your life. But they have a crucial weakness that stems from what financial economists call the fallacy of time diversification, or the flawed idea that the longer you invest in markets, the less risky they are."

Tags: Retirement Plan Investments

DOL Issues Proposed Amendment to QPAM Exemption
Goodwin Procter Link to more items from this source
[Guidance Overview]
Aug. 3, 2022

"[T]he proposed rule contains no grandfathering provision for existing QPAMs ... [E]xisting QPAMs that meet the current capital and/or AUM requirement, but which may not meet the amended requirements, may need to consider alternatives to the QPAM Exemption ... The costs, in time and money, to effect these changes, which could conceivably affect millions of discretionary investment management agreements, will be significant."

Tags: Retirement Plan Investments

DOL Proposes Amending QPAM Exemption
Groom Law Group Link to more items from this source
[Guidance Overview]
Aug. 3, 2022

"The Proposed Amendment would place significant new limitations on the availability of the QPAM Exemption and would raise the risks imposed on asset managers who operate as QPAMs. The changes might cause asset managers to migrate to reliance on alternate forms of prohibited transaction relief[.]"

Tags: Retirement Plan Investments

Citigroup and Stanley Black and Decker Fiduciaries Accused of Fiduciary Malpractice for Choosing Morningstar's Top-Rated BlackRock Target Date Funds
Euclid Specialty Managers Link to more items from this source
[Opinion]
Aug. 2, 2022

"In both lawsuits, Miller Shaw flips the script of the typical excessive fee lawsuit by alleging that the respective plan fiduciaries 'chased the low fees' charged by the BlackRock index target-date funds and saddled the plans with purportedly inferior returns compared to other target-date funds. The complaints are filled with charts ... implying that Morningstar validates their fiduciary malpractice claims. But they leave out the most important chart in the entire Morningstar survey -- the one that identifies the very same BlackRock target-date funds as the number one rated target-date funds in the 2022 Morningstar survey."

Tags: Fiduciary Duties  •  Retirement Plan Investments

DOL Proposes Stricter Requirements for All Managers Relying on the QPAM Exemption
Ropes & Gray LLP Link to more items from this source
[Guidance Overview]
Aug. 2, 2022

"[T]he proposed amendment significantly bolsters the ineligibility provisions of PTE 84-14 due to criminal convictions or other acts of prohibited misconduct. But in seeking to accomplish these objectives, the DOL has proposed various additional conditions that could make the QPAM Exemption ... potentially less appealing or even unavailable in some situations."

Tags: Retirement Plan Investments

Text of Seventh Circuit Opinion: Delegation of Investment Decisions to Outside Fiduciary Shields Boeing from Fiduciary Liability in Stock-Drop Case
U.S. Court of Appeals for the Seventh Circuit Link to more items from this source
Aug. 2, 2022

30 pages. "The central question here is whether the delegation of those investment responsibilities protects the company and company insiders from liability for the plan's continued offering of Boeing stock as an investment option for employees before and during a time when the value of Boeing stock dropped significantly.... We agree with the district court that the delegation ... means that neither Boeing nor the other defendants acted in an ERISA fiduciary capacity in connection with the continued investments in Boeing stock." [Burke v. The Boeing Company, No. 19-2203 (7th Cir. Aug. 1, 2022)]

Tags: ESOPs  •  Retirement Plan Investments

Risk Literacy and Why Plan Committees Should Consider It
PlanPILOT Link to more items from this source
Aug. 2, 2022

"Risk comes in many forms that sponsors have to take into consideration for participants in plan oversight—market volatility, downside risk, shortfall risk in retirement, inflation risk, interest rate risk, and participant behavioral risk, to name the primary risk factors.... Plan sponsors who take the time to understand each risk and the impact on the choices they make on behalf of participants will be in a position to establish a hierarchy of risk prioritization to guide their work, leading to more informed decision-making.... [The authors] have provided a list of considerations [for plan committees]."

Tags: Retirement Plan Administration  •  Retirement Plan Investments

CRS Report: Railroad Retirement Board Trust Fund Investment Practices (PDF)
Congressional Research Service [CRS] Link to more items from this source
Aug. 2, 2022

12 pages. "Congress structured the Trust in an effort to ensure investment independence and limit political interference.... The Trust's assets are invested in a diversified portfolio ... The Trust is a tax-exempt entity independent of the federal government, and it is not subject to the same oversight as federal agencies." [RS22782 Aug. 1, 2022]

Tags: Federal Government Plans  •  Retirement Plan Investments

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