Joe Urwitz, Todd Solomon and Chris Nemeth discuss provisions of The Employee Retirement Income Security Act of 1974 (ERISA) of particular relevance to tax-exempt entities and their investment managers, as well as ongoing litigation against Section 403(b) plans.
The new Disaster Tax Relief and Airport and Airway Extension Act of 2017 provides additional relief and flexibility for retirement plan participants impacted by recent hurricanes, including relaxed rules for plan distributions, withdrawals and loans.
At the 36th Annual ISCEBS Symposium, Todd Solomon presented best practices for plan fiduciaries to avoid 401(k) plan and 403(b) plan class action lawsuits. Todd discussed fiduciary responsibilities under ERISA as well as potential consequences of breaching fiduciary responsibilities. He highlighted notable cases brought against plan fiduciaries, including those that allege excess plan fees. Todd discussed the need for rigorous monitoring and documentation of the review process.
Offering employer stock in a 401(k) plan investment lineup can seem like a win-win situation. It can enable employees to become company owners—real, skin-in-the-game, participants in their employer’s economic future—through a simple deferral election. The U.S. Supreme Court has even recognized the value of employer stock funds, confirming that Congress sought to encourage their creation through provisions and standards contained in the Employee Retirement Income Security Act of 1974 (“ERISA”).
However, in the wake of a series of high-profile employee lawsuits seeking recovery against Enron, Lehman Brothers, and other employers for losses from 401(k) investments in employer stock, such funds can—almost as easily—seem a recipe for disaster. This article examines the quandary that employer stock funds pose for plan sponsors, who must navigate ERISA’s careful balance of (1) ensuring fair and prompt enforcement of employee rights under employer-provided retirement plans while (2) encouraging employer creation of these plans.
Originally published in Bloomberg Law, May 25, 2017
Two recently published memoranda by the Internal Revenue Service (the IRS) indicate that it is permissible for 401(k) and 403(b) plan sponsors and their third party administrators (TPAs) to rely on participants’ written summaries describing their financial hardships when processing hardship withdrawals from plans that apply the safe harbor event rules. Plan sponsors and TPAs may find relief from the former time-consuming, manual reviews of participants’ hardship withdrawal documentation.
The future of the fiduciary rule—originally set to be implemented this upcoming April—remains uncertain after the White House directed the United States Department of Labor (DOL) to reevaluate, defer implementation and consider rescinding the controversial new fiduciary rule on February 3, 2017. In response to the White House, the acting US Secretary of Labor announced that the DOL will now consider its legal options to delay the applicability date to comply with the President’s directive. McDermott’s ERISA practice will closely monitor these developments and provide additional guidance as it becomes available.
The future of the fiduciary rule—originally set to be implemented this upcoming April—remains uncertain after the White House directed the United States Department of Labor (DOL) to reevaluate, defer implementation and consider rescinding the controversial new fiduciary rule on February 3, 2017. In response to the White House, the acting US Secretary of Labor announced that the DOL will now consider its legal options to delay the applicability date to comply with the President’s directive. McDermott’s ERISA practice will closely monitor these developments and provide additional guidance as it becomes available.
On Monday, October 24, Chicago partners Todd Solomon and Brian Tiemann will speak at the Association of Financial Professionals conference in Orlando, Florida. Joined by Kendall Frederick, Senior Manager of Finance Integration at Hanesbrands Inc., the panel will discuss how to use financial planning and analysis analytics to help plan fiduciaries assess the need and potential effectiveness of plan design changes for 401(k) plans, including automatic enrollment and reenrollment strategies. The panel will discuss the analytics considered by Hanesbrands prior to its recent participant reenrollment and introduction of white label funds under its 401(k) plan as a case study.
Conference attendees can join the speakers for this discussion on Monday, October 24 at 8:30 a.m. Eastern in Room W307CD at the Orange County Convention Center, located at 9400 Universal Blvd, Orlando, FL 32819. More information is available here.
Ten short years ago, revenue sharing seemingly presented a “win win” opportunity for third-party administrators (TPAs) and defined contribution plan sponsors. TPAs generally retained all revenue sharing payments received from plans’ investment fund companies in exchange for administrative services provided to the investment funds. In recognition of the revenue sharing received from the investment fund companies, TPAs often provided “free” plan administrative services to plan sponsors. Starting in the mid-2000s, however, more plan sponsors began to question the amount of money received by the TPAs under this arrangement, and plaintiffs’ lawyers and the DOL began to monitor and scrutinize revenue sharing.
This article summarizes the evolution of revenue sharing over the past ten years and examines its future through the lens of the recent U.S. Supreme Court decision in Tibble v. Edison and the subsequent uptick in 401(k) fee litigation.
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