"The complaint suggests the plan's recordkeeping expenses demonstrate that defendants failed to engage in prudent monitoring and engage in prudent practices to keep those costs at competitive levels." [Johnson v. Duke Energy Corp., No. 20-528 (W.D.N.C. complaint filed Sep. 23, 2020)]

"[W]hile early indications suggest that a handful of interesting new guaranteed income-oriented products are in the offing, ... adding a new and potentially complicated product or service to a plan investment lineup may not be the solution to participants' retirement income needs.... Without communication and education targeted at the right participant segments, adoption of new features can be destined for a lackluster future. Plan sponsors need to be prepared to communicate clearly and actively with participants about retirement income solutions if they want adoption."

"In both cases, the Eighth Circuit concluded that the participants' proposed alternatives -- which required public disclosure of the nonpublic information -- did not meet the Dudenhoeffer standard for imprudence claims. They also rejected the disloyalty claims because they involved essentially the same actions and would, if allowed, 'circumvent' the Dudenhoeffer pleading standard." [Allen v. Wells Fargo & Co., No. 18-2781 (8th Cir. Jul. 27, 2020); Dormani v. Target Corp., No. 18-2543 (8th Cir. Jul. 28, 2020)]

"The DOL issued this proposed rule in part to correct a 'persistent misunderstanding' that ERISA fiduciaries must vote on all proxies presented to them. There have also been substantial changes in how plan administrators invest their plan assets and in how the investment industry operates as a whole. The proposed rule is intended to align the Investment Duties regulation with these changes and with recent SEC guidance on the proxy voting process."

"[T]he consideration of costs and other relevant factors should be done in a manner that is in the investor's best interest and without putting the interests of the broker-dealer (and the financial professional) ahead of the interests of the retail customer. In some cases, though, a greater emphasis on costs could be warranted. [Prior articles] gave examples of three scenarios where costs would likely be weighed heavily in making a recommendation. This article gives additional examples."

"The suit -- one of the first of the genre filed four years ago -- was filed on behalf of some 28,000 current and former plan participants in Cornell's 403(b) plan, a plan that, as of December 2014 had $1.9 billion in assets. The one remaining claim -- and the one item that was addressed in the settlement -- was the issue of the plan's utilization of retail class mutual funds when less expensive, institutional class shares were available." (Cunningham v. Cornell Univ., No. 16-6525 [S.D.N.Y. motion for settlement approval filed Sep. 21, 2020)

"An Investment Policy statement can do more harm than good if it moves from policy to guaranteeing results. The policy can become more of a liability than a benefit if it steps over the line on trying to do too much. Should you even have an Investment Policy Statement (IPS) for your retirement plan? Yes. Should you throw everything in and include the proverbial kitchen sink? Absolutely not."

"The DOL's guidance is subject to several limitations that plan sponsors and firms should consider when evaluating and selecting investment options for 401(k) plans. [Information Letter 2020-06-03] does not allow 401(k) plan participants to directly invest in private equity funds on a stand-alone basis.... Plan sponsors must also provide participants with sufficient information to make informed investment decisions with regard to investment options available under the plan, which may be more difficult to do for private equity investments."

"Mutual of Omaha Insurance Co. has agreed to pay $6.7 million to settle ERISA complaints by participants in two company 401(k) plans that fiduciaries favored some proprietary products over other investment options and charged extra fees for non-proprietary funds in the investment lineups.... The preliminary settlement agreement said more than 7,000 participants had account balances at the end of 2018."

"The participants ... [argued] that AutoZone fiduciaries violated ERISA by retaining GoalMaker, an asset allocation service ... which allegedly steered participants' investments into high-cost investment options.... The judge ruled that plaintiffs had provided enough information to allow the complaint to go to trial regarding the use of GoalMaker; the retention of a stable value fund; the use of actively managed mutual funds and separate accounts; the fiduciaries' methodology for selecting investment share classes; and the comparing of record keeping fees to benchmarks." [Miller v. AutoZone, Inc., No. 19-2779 (W.D. Tenn. Sep. 18, 2020)]

"Prioritizing issues other than pure financial returns may be an acceptable strategy for individuals managing their own money or for corporate board rooms contemplating the future of their company, but for fiduciaries, prioritizing any kind of self-interest or ulterior motive over maximizing returns is a dereliction of duty.... While more work is needed, it appears that the [DOL] is finally in a position to implement much-needed reforms to a pension system that has for too long neglected the underlying financial security of its beneficiaries."

"It's become fashionable for investors to try to do good at the same time as they do well. Investment in so-called ESG funds ... has doubled in 2020 and now totals around $35 billion.... Some investors argue that this kind of investing will achieve a 'more inclusive capitalism' and can even enhance investment returns. But how do you know if your investments will have the desired social impact?"

"[The] fiduciary of the master trust holding the assets of the employee [DB] plans that participate in the National Retirement Program of the Blue Cross and Blue Shield Association, has filed an [ERISA] lawsuit against Allianz Global Investors and Aon Investments USA. The trust claims that promised downside protection for several AllianzGI Structured Alpha funds was not implemented, resulting in 'staggering' losses to the trust during the market crash and volatility caused by the COVID-19 pandemic." [Blue Cross and Blue Shield Assoc. Nat. Emp. Benefits Comm. v. Allianz Global Investors U.S. LLC, No. 20-7606 (S.D.N.Y. complaint filed Sep. 16, 2020)]

"The IBM fiduciaries asked the Supreme Court ... to review the appeals court decision ... [and] resolve differing lower courts' interpretations of Supreme Court rulings on stock-drop cases. 'Three courts of appeals have now correctly rejected as legally insufficient generalized allegations that the harm from inevitable disclosure only increases over time and thus earlier disclosure is always prudent,' IBM fiduciaries wrote in their petition to the Supreme Court. The New York court 'has doubled down on its contrary view.' " [Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. Jun. 22, 2020; cert. pet. filed Sep. 1, 2020)]

"Year-to-Date annuity purchase prices have been volatile and are currently higher for both Annuity Plan 1 and Annuity Plan 2. Annuity purchase prices relative to GAAP PBO liabilities have also been volatile but are currently in line with historical expectations. This past month annuity purchase prices dropped 1.16% for Annuity Plan 1 and 4.53% for Annuity Plan 2."

"The proposed regulation ... takes the position that ERISA actually requires fiduciaries NOT to vote proxies unless the fiduciary prudently determines that the matter being voted upon would have an economic impact on the plan ... Given that institutional employee benefits plans tend to be well diversified, it may prove difficult to meet this threshold."

"A number of factors, including lower fees and the outperformance of passive strategies against many of their active counterparts, have driven the rise in passive strategies in DC plans. However, there continue to be a number of misconceptions that can steer fiduciaries away from active management.... [T]here is an important role for active management in DC plans in supporting adequate retirement outcomes for participants."

"The SEC's approach requires that cost be considered as an important factor in the context of the retail customer's investment profile. The consideration of costs and other relevant factors indicated by that profile should be done in a manner that is in the investor's best interest. In some cases, though, a greater emphasis on costs would be warranted."

"[A recent Fourth Circuit] case highlights the dilemma of retirement plan sponsors and fiduciaries, who, as a result of a corporate transaction, inherit a plan investment fund consisting of a single class of stock that does not constitute an employer security for purposes of ERISA.... While courts are still evaluating how to handle these single stock fund cases, a plan fiduciary's potential exposure for continuing to maintain such a fund seems to turn, at least in part, on the manner in which ERISA's duties of prudence and diversification apply to the single stock fund as a plan investment option." [Quatrone v. Gannett Co., Inc., No. 19-1212 (4th Cir. Aug. 11, 2020)]

"The proposed rule is a good step in the right direction by the [DOL], but more should be done around proxy advisors' role in a process called automatic or robo-voting.... The [SEC] issued guidance on this front to asset managers in June of this year, and DOL should adopt this guidance as a part of the rule. Pensions should be, and once were, apolitical entities."

"Under the Proposed Rule, plan fiduciaries must research all material facts and analyze each proxy vote to determine if that vote would have an economic benefit to the plan ... [To] minimize the increased costs of such investigations and analysis, the fiduciary may choose to use a permitted policy outlined in the regulations ... [1] voting proxies with management, [2] voting only on certain types of corporate events (e.g., mergers and acquisitions), or [3] voting only if the corporate stock makes up a minimum threshold of the plan's investment holdings."

"[If] you've built your portfolio up to a point that it meets your goals ... you don't need to keep gunning for additional returns. Instead, you can switch your focus to extracting your cash flows from a more conservatively positioned portfolio that provides you with peace of mind.... The key is that the portfolio spending rate must be low enough to make it work, and the portfolio should be positioned to support that spending as well as to accommodate inflation and short-term spending shocks."

"The proposal is in line with DOL's proposed regulation on ESG investments ... in that it is (or at least appears to be) intended to have the effect of reducing 'ESG-related' shareholder engagement by holding fiduciaries to a 'pecuniary interest of plan participants' standard.... While the ESG proposal has generated significant controversy, ... the issue of proxy voting ... may be less critical ... Indeed, the tighter limits on ERISA plan shareholder activism [are] likely to be welcomed by some plan sponsors."

"Corporate governance and shareholder rights have seldom witnessed an assault on investor protection like the current federal government's onslaught. Whether weakened rules on broker accountability, rules designed to eliminate shareholder proposals, or those taking direct aim at neutering proxy voting, the feds' decisions are to the great detriment of Mr. and Mrs. 401(k)."

"We are committed to working for America's workers every day. By insisting that fiduciaries comply with ERISA, [EBSA] has achieved big results -- recovering more than $2.5 billion in direct payments to plans and workers last year. That amounts to more than $30,500 per investigator per day."