"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)]

"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)]

"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."

"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."

"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."

"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?"

"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."

"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."

"December gave us one more turn of the screw from extraordinary 2020 stock markets, pushing pension sponsors into the black for the year. Both model plans ... gained ground last month, with Plan A adding 3% and Plan B gaining 1% during the month. Plan A ended the year with close to a 2% gain, while Plan B managed a 1% gain during 2020[.]"

"Recordkeepers in DC pension plans are often paid indirectly in the form of revenue sharing from third-party funds on the menu. [The authors] show that these arrangements affect the investment menu of 401(k) plans. Revenue-sharing funds are more likely to be added to the menu and are less likely to be deleted. Overall, revenue-sharing plans are more expensive as higher expense ratios are not offset by lower direct fees or by superior performance. Rebates increase with the market power of the recordkeeper suggesting that third-party funds may revenue share to gain access to retirement assets."

"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."

"While the Notice and Proposed Regulations provided some helpful approaches to simplify the new rules for benefit plan investors, the IRS resisted making additional changes along these lines in the Final Regulations. For example, the IRS did not increase the thresholds for 'qualifying partnership interests' described in the Proposed Regulations and rejected the request of some commenters to grandfather partnership interests held before August 21, 2018. Similarly, the IRS declined to allow aggregation of all investment activities by benefit plans, regardless of the ERISA policy considerations cited by commenters. Nevertheless, the Final Regulations did make some important changes to the Proposed Regulations[.]"

"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[.]"

22 pages. "While the final guidance broadly retains the structure and approach of Proposal 3.0, DOL incorporated the following important changes ... [1] DOL further explicated and tightened its discussion of the circumstances in which it will consider rollover advice to be fiduciary 'investment advice,' under a new interpretation of the 1975 5-part test. [2] Where rollover advice is conflicted fiduciary advice that requires the relief of the new PTE, DOL added as a condition written disclosure to Retirement Investors of the reasons that a rollover recommendation is in their best interest.... DOL announced [a February 16, 2021 effective date] for the new PTE and sunset date for reliance on DOL's prior guidance on rollover advice ... and a December 20, 2021, sunset date for its temporary enforcement policy adopted after vacatur of Final Rule 2.0."

"The most significant departure from the highly prescriptive Proposed Rule is an emphasis on a more principles-based design that eliminates the potentially burdensome cost-benefits analysis and documentation requirements for proxy voting. The Final Rule requires, among other things, that plan fiduciaries act solely with the economic interest of the plan and its participants and beneficiaries in mind when managing plan assets."

"The Release gives rise to at least three broad important considerations: [1] Change in administration, impacts to effective date and scheduled revocation of FAB 2018-02.... [2] DOL's interpretation of five-part test and impact on rollovers.... [3] The conditions of the final exemption."

"The PTE is primarily targeted at financial institutions. But the new rule -- via its reinterpretation of the 1975 fiduciary advice regulation -- is generally intended to in many cases make, e.g., call center operators affiliated with financial institutions, 'advice fiduciaries.' This will likely require plan fiduciaries to monitor those advice fiduciaries' compliance with the PTE. Sponsors will want to review the extent and scope of that monitoring obligation with their counsel and discuss with their providers how they intend to comply with the reinterpreted five-part test and the PTE."

"The Final Rule reiterates the Department's long-held view that when voting (or not voting) proxies, plan fiduciaries must consider the economic significance of the issue on the plan's investment. But it explicitly rejects the broader set of considerations that it had previously articulated in Interpretative Bulletin 2016-01."

"[T]he final regulations specify a plan fiduciary is not required to (and, should not) vote every proxy. Rather, when deciding whether to vote proxies and when actually exercising such rights, the plan fiduciary must act solely in accordance with the economic interest of the plan and consider any costs involved (including costs of research).... [T]he plan fiduciary cannot absolve itself of all fiduciary responsibility related to proxy voting merely by delegating such authority to a third party."

"Year-to-Date annuity purchase prices have been volatile and are now higher for both Annuity Plan 1 and Annuity Plan 2. Annuity purchase prices relative to GAAP PBO liabilities have also been volatile but are now in line with historical expectations. This past month annuity purchase prices declined 0.29% for Annuity Plan 1 and 0.17% for Annuity Plan 2. Plan funded status has generally declined for pension plans in 2020 and PBGC premiums will increase next year."

17 pages. "[T]he DOL has eliminated many of [the proposed rule's] prescriptive requirements, resulting in what the DOL describes as a principles-based rule designed to provide certainty on fiduciaries' responsibilities under ERISA with respect to proxy voting while offering more flexibility on how those responsibilities may be met. Some of the required steps in the proposal have been effectively replaced by safe harbors. The result, while still possibly requiring changes to existing practices to ensure compliance  ... should be viewed as more consistent with those practices developed in the wake of the DOL's previous guidance in this area."

"The Final Exemption is the latest development in the DOL's longstanding efforts to regulate the provision of investment advice to ERISA plans and their participants and IRAs. However, while the exemption is described as 'final,' it is likely not the DOL's final pronouncement in this area."

"Overall, asset allocation did not drastically vary among the top- and bottom-performing funds.... South Dakota consistently outperformed other states' pensions, in both its ranking against the 60/40 strategy and its funding ratio.... ESG investment can be an important tool for diversifying portfolios and impacting corporate governance, but ultimately has not been shown to garner the same return on investment as passive investment strategies.... Public pension fiduciaries need to focus solely on the financial returns of their investments."

"After Regulation Best Interest's June 30, 2020 compliance date, the Division of Examinations (formerly the 'Office of Compliance Inspections and Examinations') launched examinations to assess the ... implementation efforts of broker-dealers.... [N]ow that approximately six months have passed since the Regulation Best Interest compliance date, the Division intends to begin its next phase by conducting more focused examinations ... beginning in January 2021. As part of this effort, Division staff will examine whether broker-dealers have written policies and procedures and systems in place to achieve compliance with the Regulation."

"One ERISA attorney who tends to represent plaintiffs says the future might hold fewer cases, thanks to certain key Supreme Court rulings and broad improvements in plan design and governance."