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Retirement Plans Newsletter

September 8, 2022

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[Guidance Overview]

DOL Proposed QPAM Amendments May Disrupt Plan Sponsors' Investment Arrangements

"[Plan] sponsors would have to take speedy action to maintain their existing QPAM relationships by amending their contracts to add new required provisions within 60 days. These provisions -- which include a requirement that QPAMs reimburse plans for certain losses -- might increase the cost of asset-management services."  MORE >>

Mercer

[Sponsor]

ASC CE Webcast: Distribution and Forfeitures

Eventually, plan participants receive distributions from their defined contribution plan accounts. Plans must satisfy certain distribution and forfeiture rules based on their specific plan design. Learn more! Register Now!

Sponsored by ASC

Third Circuit: ESOP Plaintiffs Failed to Meet Pleading Standard for ERISA Breach of Prudence Claim Based on Inside Information

"[T]he Third Circuit was tasked in deciding whether fiduciaries of the Johnson & Johnson ESOP ... violated their fiduciary duties by failing to protect the ESOP's beneficiaries from a stock price drop which followed from growing allegations and lawsuits related to asbestos in Johnson's Baby Powder.... Plaintiffs allege two alternative actions that the ERISA fiduciaries should have taken ... The Third Circuit determined that neither of these actions satisfies Dudenhoeffer because a prudent fiduciary in the Defendants' position could have concluded that either action would harm more than help the ESOP." [Perrone v. Johnson & Johnson, No. 21-1885, 2022 WL 4090301 (3d Cir. Sep. 7, 2022)]  MORE >>

Roberts Disability Law

Seventh Circuit Provides Hope for ERISA Plan Sponsors and Fiduciaries Defending Investment Fee and Performance Litigation

"Notwithstanding an initial set of discouraging post-Hughes opinions denying motions to dismiss ... the more recent trend has turned in a more favorable direction. In addition to the ruling in Oshkosh, the Sixth Circuit (in two separate cases) and two district courts have affirmed dismissal of similar fee and investment claims. These decisions show that in a post-Hughes environment, courts will still (and arguably must) dismiss complaints that fail to strictly adhere to the applicable pleading standards." [Albert v. Oshkosh Corp., No. 21-2789 (7th Cir. Aug. 29, 2022)]  MORE >>

Proskauer

Trying to Make Sense of ERISA Pleading Law After the Seventh Circuit's Oshkosh Decision

"[T]he Seventh Circuit in Oshkosh has issued an opinion that limits the ability of plaintiff law firms to create a liability trap for plan fiduciaries who utilize revenue sharing and active funds in their investment lineup.... The key takeaway from Oshkosh is that we now have both the Seventh and Sixth Circuit's interpreting the Supreme Court's decision in Hughes v. Northwestern narrowly." [Albert v. Oshkosh Corp., No. 21-2789 (7th Cir. Aug. 29, 2022)]  MORE >>

Euclid Specialty Managers

District Court Compels Proposed ESOP Class to Individual Arbitration Based on Plan Document

"[The opinion synthesizes] the historical case law and [provides] guidance and clarification on when mandatory class action waiver and arbitration provisions in ESOP plans are enforceable. Ultimately, the Court compelled the plaintiff to arbitrate her claim on an individual basis, enforcing the mandatory class action waiver and arbitration provisions set forth in the ESOP plan document." [Robertson v. Argent Trust Co., No. 21-1711 (D. Ariz. Jul. 27, 2022)]  MORE >>

Holland & Knight

Changing Views on Pension Plan Loans in Bankruptcy: Is It a 'Debt'? (PDF)

"[M]any courts have taken the view that a pension plan loan does not create a 'debt' for purposes of the bankruptcy.... [A] bankruptcy court has challenged this seemingly well established concept ... [If] pension plan loans are treated as 'debts' ... by more bankruptcy courts, then pension plans may face increased litigation arising from participant bankruptcies. This could include ... efforts by a chapter 7 trustee to claw back loan repayments made prior to bankruptcy[.]" [Montoya v. Dubbin (In re Dubbin), No. 19-12040-17 Adv. 21-1004-t (Bankr. D.N.M. Aug. 6, 2021)]  MORE >>

Ice Miller LLP, via NCPERS PERSist

ESG Investments: Practical Tips for Plan Sponsors

"In this fast-changing environment, to minimize the risk of lawsuits and DOL investigations based on ERISA's duty of prudence, plan sponsors and fiduciaries considering ESG investments may wish to consider ... [1] Focus on process ... [2] Implement rigorous documentation ... [3] Economics still matter ... [4] Monitor developments."  MORE >>

Bloomberg Law

Pension Finance Update, August 2022

"Pension finances were mixed during August, as higher interest rates offset the impact of falling stock markets. Both model plans ... were close to even last month: Plan A improved less than 1% and is now up almost 5% for the year, while the more conservative Plan B lost a fraction of 1% in August and is now down 1% through the first eight months of 2022."  MORE >>

October Three Consulting

Pension Indicator, August 2022

"Overall, the same lesson that has been mentioned previously this year still holds true: if you are only looking at the asset side of the ledger, you would assume performance is terrible. However, the results here show most plans actually have improved their funded position during 2022 as higher interest rates should reduce pension liabilities."  MORE >>

Findley

Evaluating ARPA's Impact, 1 Year Later

"The American Rescue Plan Act of 2021 created funding relief for single-employer defined benefit pension funds by extending the amortization period for shortfalls and stabilizing the interest rates used to calculate their funded level."  MORE >>

PLANSPONSOR; free registration may be required

[Opinion]

New 401(k) Lawsuits Go Too Far

"[W]ith most plan sponsors now focused on fees, aggressive and opportunistic law firms have found a new target: past performance. Ten companies, typically those with more than $500 million in assets in their 401(k) plans, face allegations that they violated their fiduciary duty by only focusing on selecting a low-cost option over better-performing peers.... [Q]uestioning if a plan sponsor fulfilled its fiduciary responsibilities based largely on past performance can incite frequent swapping of investment options when they aren't top performers to avoid similar lawsuits in the future."  MORE >>

Morningstar

Employee Benefits Jobs

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CecilCo 401k Managed Solutions

Remote / Dallas TX

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          for CecilCo 401k Managed Solutions

Selected New Discussions

Carryover of Deferral Elections Under Terminated 401(k) Plan Into a New 401(k) Plan

"We have a situation in which a company is acquiring a new subsidiary in a stock transaction. The acquiring company has a 401(k) plan. The acquired company had a 401(k) plan before the transaction, but it was terminated immediately before the transaction to avoid the rule that you can't terminate a 401(k) plan if the employer maintains another 401(k) plan. Acquiring company would like to provide that an individual's election regarding deferrals in the acquired company's plan would carry over to the acquiring company's plan. Has anyone experienced this situation? And has the IRS ever approved or disapproved of it that you know of?"

BenefitsLink Message Boards

OK to Allocate of Portion of DB Contribution to the Prior Plan Year?

"A $1,000,000 contribution was made to a DB plan on 7/1/2022. Are there any problems assigning a portion of this contribution to the 2021 plan year, i.e., $700,000 will be shown on the 2021 Schedule SB, and the remaining $300,000 will be shown on the 2022 Schedule SB?"

BenefitsLink Message Boards

Press Releases

National Alliance Helps Employers Get to Fair Price for Hospital Services

National Alliance of Healthcare Purchaser Coalitions

Retirement Technology Provider Smart Names Gaobo Pang Ph.D., CFA, Head of Quantitative Strategy

Smart

Last Issue's Most Popular Items

Draft of IRS Form 5330: Return of Excise Taxes Related to Employee Benefit Plans (PDF)

Internal Revenue Service [IRS]

Roth IRA Distribution Ordering Rules

Slott Report

Inflation Reduction Act Means Employers Should Review Benefits Plans Now for Compliance

Murphy Austin

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587.

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