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Retirement Plan Lawsuits Show Value of Cybersecurity Policies (PDF)

"In the last week of February, six class actions were filed in the U.S. District Court for the Northern District of Illinois against [one] retirement plan administrator ... These complaints illustrate the many federal and state causes of action that can be pursued by aggrieved plaintiffs in addition to [ERISA] claims, including emotional distress, invasion of privacy and violation of consumer fraud laws. ... While no protections are 100% foolproof, [the plan administrator] might have avoided these suits by following a good written cybersecurity policy."

Why Don't More 401(k) Plans Have Lifetime Income Options?

"[Recent changes that encourage annuity options include:] [1] New fiduciary safe harbor for annuity purchases ... [2] Annuity contract portability ... [3] Annuities with deferred start dates ... [4] Changes in the marketplace ... Lifetime annuity projections ... are likely to result in participant questions about whether their plans can provide annuities." [Editor's note: This article appeared in yesterday's newsletter with incorrect author information. We regret the error!]

Fee Disclosures for 401(k)s Aren't Working; Here's How to Fix Them

"Without waiting for the DOL to act, plan fiduciaries can implement the GAO recommendations and insist that their participants get disclosures that clearly provide the essential information they need to make investment decisions. Plans can include their own language to customize their disclosures."

Should 401(k) Plans Permit Cryptocurrency on the Investment Menu?

"Although the [DOL] has not come out with any guidance regarding cryptocurrencies, plan investment options must be appropriate for all participants, including less sophisticated ones. The DOL could determine that participants shouldn't be given an opportunity to gamble their retirement money and that cryptocurrencies shouldn't be a separate asset class on a plan's investment menu."

Investment Fiduciary Hiring Tips for 401(k) Sponsors and Advisers

"Schedule meetings with the final candidates ... to get a sense of how hands-on they will be in providing advice.... Ask for references of current clients and ... at least one former client.... Ask to meet everyone who will be on the plan's team, not just the most senior person.... Everyone who will be working with the candidate should have an opportunity to participate in the final decision."

Will Your Fiduciary Insurance Cover You When You Need It?

"[1] Get a qualified independent review.... [2] [T]he commitment may become worthless in the event of bankruptcy or other financial distress. [3] Understand the exclusions in your policy and find out whether endorsements are available to eliminate some of them. [4] Consider whether your policy limits should be increased.... [5] Understand and follow the notice requirements in your policies."

401(k) Plan Data: Can It Be Hacked?

"Every services agreement should deal with this issue and provide basic protections.... Does your vendor automatically encrypt data? Who has access to the data? Does your vendor have external review of its procedures? How quickly will your vendor notify you of a breach, and how will it assist in fixing it? Does your services agreement give you the right to audit the vendor's procedures? Does your services agreement provide that the vendor will indemnify you if there is a breach?"

Collecting Taxes on 401(k) Deferrals: The Wrong Policy at the Wrong Time

"Congress is looking for ways to pay for a reduction in corporate tax rates, and the money has to come from somewhere. So why not collect the tax on 401k contributions now? This short-term gimmick eliminates individual choice and risks thwarting the long-term goal of increasing retirement savings. What can we do to convince our elected officials this is a bad idea?"

Audit Time: Do You Know Where Your Participants Are?

"[The DOL] has announced that it has expanded to the whole country a pilot program in which it asks plan administrators to provide current contact information for selected participants. The DOL considers it a breach of fiduciary responsibility if the plan doesn't know how to reach them.... On October 19, the IRS issued a memo explaining when examiners will not find a qualification failure if required minimum distributions haven't been made because participants couldn't be located.... [T]here are lots of practical steps to take and document."

Overturning of Chevron Standard Could Spark More Lawsuits Against Defined Contribution Plans

"The Supreme Court's majority opinion said scrapping the Chevron deference would create more predictability for businesses because they wouldn't be whipsawed by the changing policies of changing political administrations -- an assertion that ERISA attorney Stephen Rosenberg said is misguided.... [Attorney Carol I. Buckmann] acknowledged that overturning Chevron deference could reduce the regulatory flip-flopping that accompanies changes in political administrations. 'The question is whether that outweighs the negative factors,' she said." [Loper Bright Enterprises, Inc. v. Raimondo, Sec. of Comm., No. 22-451 (S. Ct. Jun. 28, 2024)]