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[Official Guidance]

Statement by the SEC Staff Standards of Conduct Implementation Committee Regarding New Form CRS Disclosures

"[The Committee] is reviewing relationship summaries from a cross-section of firms to assess compliance with the content and format requirements of Form CRS. The relationship summaries reviewed to date generally reflect effort by firms to meet the content and format requirements of Form CRS, and the Committee's initial reviews have identified good examples of simple, clear disclosures. At the same time, the Committee's initial reviews have identified examples that may lack certain disclosures or could be clearer or otherwise improved."

Standards of Conduct Implementation Committee, U.S. Securities and Exchange Commission [SEC]

[Official Guidance]

SEC Charges VALIC Financial Advisors with Failing to Disclose Payments to Promote Services to Florida Educators

"The [SEC] today charged Houston-based VALIC Financial Advisors Inc. (VFA) in a pair of actions for failing to disclose to teachers and other investors practices that generated millions of dollars in fees and other financial benefits for VFA. In the first action, the SEC found that VFA failed to disclose that its parent company paid a for-profit entity owned by Florida K-12 teachers' unions to promote VFA and its parent company services to teachers. In the second action, the SEC found that VFA failed to disclose conflicts of interest regarding its receipt of millions of dollars of financial benefits that directly resulted from advisory client mutual fund investments that were generally more expensive for clients than other mutual fund investment options available to clients. VFA agreed to pay approximately $40 million to settle the charges in these two actions."

U.S. Securities and Exchange Commission [SEC]

[Official Guidance]

SEC Chairman Jay Clayton Describes SEC's Ongoing Efforts to Protect Teachers' Retirement Savings

"[The] Teachers Initiative ... is an important aspect of [the SEC's] efforts to focus enforcement and investor education resources where they are needed and will have the greatest impact -- we have at least 800,000 teachers who participate in defined contribution plans with a total of over $1 trillion in assets ... That is a pool of assets that should be managed with due care and candor.... [T]he amounts at stake are high and our teachers deserve our attention. It is clear that we and our fellow authorities -- federal, state and local -- should be watching this space."

U.S. Securities and Exchange Commission [SEC]

[Guidance Overview]

PBGC Clarifies Effect of CARES Act Funding Relief on Variable Rate Premiums

"Plan sponsors contemplating taking advantage of the funding relief provided by the CARES Act should consider whether they benefit (by reducing VRP premiums paid) from completing any intended 2019 plan year contributions by October 15, 2020. Without the CARES Act, September 15 would have represented the last day for making contributions that would factor into the VRP calculation."


[Guidance Overview]

Temporary Relief for 401(k) Safe Harbor Plans: IRS Notice 2020-52 (PDF)

"[P]lan sponsors have inquired whether they can reduce safe harbor contributions to their safe harbor plan solely on behalf of highly compensated employees (HCEs) without triggering the mid-year change rules. The Safe Harbor Relief Notice clarifies that the mid-year change rules do not apply for HCEs; however, plan sponsors are still required to timely provide an updated safe harbor notice and an opportunity for the affected HCEs to change their election."

Roberts & Holland LLP


SPARK/DCIIA Summer Policy Series

Live virtual event, every Wednesday, July 15 to August 19. Domestic and global topics; general and breakout sessions (live broadcast), exhibitor hall and virtual networking happy hours. Replay on demand. Free to SPARK and DCIIA members. Learn more! Learn more

Sponsored by SPARK and DCIIA

[Guidance Overview]

How to Consider ESG Factors in Relation to the Fiduciary Standards of ERISA

"The proposed rule, while certainly not positive for ESG investing, is not the death knell of ESG investing in DC plans. Rather, ... the proposed rule shifts the ESG conversation away from one of ESG-themed funds to a discussion of the more holistic and ultimately impactful approach of ESG integration. The proposed rule is likely to create significant barriers for further implementation and use of ESG-themed funds, particularly those with short track-records, low assets under management, specific and narrow objectives (e.g., a clean water fund) or relatively higher fees compared to other non-ESG-related investment alternatives."

MFS Institutional Advisors, Inc.

Eighth Circuit Opinion Dismissing ERISA Stock Drop Suit Against Wells Fargo (PDF)

13 pages. "This appeal arises out of the unauthorized-accounts scandal at Wells Fargo.... The initial public disclosure of the fraud caused the market value of Wells Fargo's stock to drop drastically ... Appellants alleged that, by failing to take corrective measures to protect the Plan participants, such as publicly disclosing Wells Fargo's unethical sales practices prior to September 2016, freezing investment in the Wells Fargo Stock Funds, or purchasing a hedging product, Appellees breached their duties of prudence and loyalty under ERISA.... We find that a prudent fiduciary -- even one who knows disclosure is inevitable and that earlier disclosure may ameliorate some harm to the company's stock price and reputation -- could readily conclude that it would do more harm than good to disclose information about Wells Fargo's sales practices prior to the completion of the government's investigation. " [Allen v. Wells Fargo, No. 18-2781 (8th Cir. Jul. 27, 2020)]

U.S. Court of Appeals for the Eighth Circuit

Fiduciary Duties for Financial Services Companies: The Unique ERISA Paradigm (PDF)

13 pages. "For more than a decade, the financial services industries have faced an escalating demand, from the market, legislatures, regulators, and litigants, for more transparency and accountability in the products and services they offer.... As the industries consider this trend and contemplate its future direction, it may be useful to compare and contrast these more recent developments with the 45-year old fiduciary standards that have been said ... to be 'the highest known to the law': the fiduciary paradigm enacted in [ERISA]."

Eversheds Sutherland

T. Rowe Price: 401(k) Participation Nears 80%

"T. Rowe Price Retirement Plan Services' annual benchmarking report of the plans it serves shows that, in 2019, plan participation was 79.6%. This is up from 78.1% in 2018 ... The increase is largely because 61% of the plans for which T. Rowe is the recordkeeper use automatic enrollment, a rate that has increased by more than 2 percentage points from 2018 and 14 percentage points from 2013."


The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2019 (PDF)

32 pages. "In 2000, 401(k) plan participants incurred an average expense ratio of 0.77 percent for investing in equity mutual funds. By 2019, that figure had fallen to 0.39 percent, a 49 percent decline.... Employers offering 401(k) plans typically hire service providers to operate these plans, and these providers charge fees for their services. Employers and employees generally share the costs of operating 401(k) plans."

Investment Company Institute [ICI]

How Best to Prepare Yourself to Go from Zero to MEP/PEP in Four Months

"The transition process from stand-alone 401(k) to 401(k) MEP/PEP begins as soon as October.... So, just who are these partners you should be looking into? What types of service providers make up the 401(k) MEP/PEP environment?"

Fiduciary News; free registration required

Markets 2020: Effect on DC Plan Participants

"[Given] two example participants: [1] a 35-year old invested in a 2050 target date fund (TDF), and [2] a 55-year old invested in a 2030 TDF ... the amount of retirement income our age 55 participant can buy with his account balance has gone down 14% since the beginning of the year, and the amount of retirement income our age 35 participant can buy with her account balance has gone down 28%.... The net loss in retirement income for both example participants is at this point entirely attributable to the significant decline in interest rates -- around 75 basis points -- so far this year."

October Three Consulting

Understanding Preretirees' Retirement Income Preferences

"Confusion about different retirement income products creates an opportunity for traditional advice or advice-embedded retirement income solutions. Preference for managed payout accounts and annuities weakens as participants get close to retirement. Willingness to work with a financial professional increases at the same time. Participant preferences suggest that retirement income solutions need to evolve beyond products to provide participants with an experience that makes them confident about their choice."

T. Rowe Price

Defined Benefit Pension Policies and Social Responsibility Performance: Do Socially Responsible Firms Walk the Talk?

"[T]his study finds that firms with higher [corporate social responsibility (CSR)] scores report higher pension net assets and are less likely to have underfunded pension than their counterparts. These firms also adopt more responsible (conservative) pension accounting assumptions ... to estimate pension benefit obligations.... Firms with higher CSR scores are also less likely to have a pension freeze."

Maretno A. Harjoto and Indrarini Laksmana, via SSRN


Editor's Pick Pension Rights Center Calls on Retirement Plan Participants to 'Ask for Paper!' in Response to New Anti-Consumer DOL Disclosure Rule

"The 'Ask for Paper!' Call to Action is an educational effort aimed at alerting consumers about a new [DOL] rule that could adversely affect their ability to plan for retirement and prove their entitlement to benefits.... Although studies show that there is a huge digital divide in this country ... the new rule gives retirement plans the green light to simply send individuals a notice by text or email telling them that key information is available on a website. Then it's up to the workers and retirees to hunt that information down -- effectively making this 'notice-and-access' rule into a 'no-access' rule."

Pension Rights Center


Composite Plan Legislation Jeopardizes the Retirement Security of Workers and Retirees (PDF)

"Composite plan legislation, including the GROW Act, poses a grave threat to the retirement security of millions of Americans. The GROW Act runs directly counter to the goals of strengthening multiemployer plans and placing the [PBGC] multiemployer insurance program on solid fiscal ground.... This report, backed by an in-depth actuarial study, illustrates the far-reaching damage of composite legislation to the funding of multiemployer plans, the solvency of the PBGC, and the benefit promises to millions of Americans."

Trustees of the Western Conference of Teamsters Pension Trust

Benefits in General

Different Perspectives on Phased Retirement, Retirement Ages and Working in Retirement (PDF)

13 pages. "With an increase in longevity and years in retirement, many people need or want to work longer or work as part of their retirement.... Organizations should undertake a deep and rigorous study of their demographics, business needs, talent needs and benefit plans. This will better position them to create policies that allow them to capitalize on the knowledge, expertise and human capital of their entire workforce, including older workers."

Benefits Quarterly, published by the International Society of Certified Employee Benefit Specialists [ISCEBS]

Benefit Plans in M&A Deals: Avoiding That Call After the Deal Has Closed

"Most employee benefits issues have quantifiable exposure that can be factored into the deal terms if issues are timely identified. The scope of due diligence in this area is also easily budgeted and quantified -- if you know what you are doing. Getting good results for buyers and sellers requires more than just a robust set of reps and warranties."

Employee Benefits Law Group

Selected Discussions
on the BenefitsLink Message Boards

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Reporting a Roth Conversion on the Form 5500: Distribution/Rollover? Transfer?

"I generally see two schools of thought on this topic: [1] Process the conversion as a distribution and a rollover. [2] Process as a transfer and it is just a wash so no 5500 reporting. Does anyone know of any formal or informal guidance on either of these?"

BenefitsLink Message Boards

What's a Better Name Than 'TPA'?

"'What your company needs is a third-party administrator.'-- 'A what?' -- 'A TPA.' -- 'I'm still clueless. I have an investments guy and a mutual funds company that says they'll keep track of where my company's retirement contributions go. What's a TPA?' ... Wouldn't it be great for business development, and more appreciation by plan sponsors, if there were a better name for TPAs than 'TPA'? On your marks, get set ... GO."

BenefitsLink Message Boards

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Press Releases

Most Popular Items in the Previous Issue, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
(407) 644-4146

Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2020, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of, Inc., or in the case of third party materials, the owner of those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

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