Two lawsuits questioning the prudence of plans holding the BlackRock Lifepath target-date funds were thrown out.
The two suits, one involving Capital One Financial Corp., and the other involving Booz Allen Hamilton were both dismissed by U.S. District Judge Michael S. Nachmanoff
The judge rejected arguments that the BlackRock funds could be compared with similar funds without considering different strategies, glide paths and investments.
Plaintiffs have 14 days to file an amended complaint.
My latest article on JDSupra.com can be found here.
My latest article for JDSupra.com can be found here.
If I want to get a new doctor or an attorney, I certainly want to know their background. Same with a financial advisor, I don’t want the next Bernie Madoff. When you hire a professional, you want to know their credentials.
So it’s often surprising that when a plan sponsor hires a third-party administration (TPA), they rarely check the credentials of the plan administrator in charge of their plan. Sure, many plan sponsors learn about the TPA through a referral or research, but they never check the credentials of the individual administrator.
Why bother? Simple, since the bulk of the work is usually done by this administrator; you want to make sure you are being handled by someone with the credentials and experience to do the job right.
I often find that the difference between a good TPA and a bad one is the experience of the administrators they have as well as their training. Good TPAs tend to have the most experienced administrators with credentials from ASPAA with training for them to achieve that level. Bad TPAs have administrators with little or no experience, as well as limited training and oversight.
I remember moving a law firm from one TPA to another. The administrator at what we call the bad TPA had the administrator butcher a top-heavy test, namely the administrator failed to label partners of the firm and their spouses as key employees. This administrator had 15 years of experience, but clearly with no oversight to check her testing. The good TPA (which was less expensive by 30% because they actually used revenue sharing to reduce administrative expenses) had an administrator who discovered this error upon conversion. This administrator had all the credentials from ASPAA as well as 28 years of experience and she once owned her TPA. This TPA had compliance specialists to assist this administrator with the testing, so there clearly was a check and balance to ensure correct results.
The difference between a good and bad administrator isn’t years of experience, it’s training and oversight. Just one thing most plan sponsors don’t ask of the TPA and I think they should.
While working as an ERISA attorney with a national practice (cough, cough), it’s clear to me that the biggest compliance issue that my plan sponsors clients to have these days is the late deposit of deferrals.
I remember the good old days when the Department of Labor (DOL) was kind of mum on this issue and we all assumed those plan sponsors had the 15th day of the following month to get the deferrals from payroll into the 401(k) plan. Then in its infinite wisdom, the DOL said that really wasn’t the guidance because plan sponsors should be able to deposit deferrals by the next payroll. When the world is shaped by ACH transfers, this wasn’t surprising. What was surprising is how lazy many plan sponsors really were in depositing deferrals into the plan.
In terms of plan errors, it’s not the end of the world if it’s done quickly, but when it’s a question on Form 5500 if you made deposits late as a plan sponsor, you know this is something the DOL is quite interested in. Thankfully, the DOL has a voluntary fiduciary compliance program that makes it fairly easy for plan sponsors to come clean about late deferrals and show the DOL how they corrected the error.
I suggest that any plan sponsor that didn’t get the deferrals in by the next payroll (they know who they are), should contact ERISA counsel to fix the error.
On November 22, the Department of Labor (DOL) released its final rule for retirement plan fiduciaries wishing to incorporate environmental, social, and governance (ESG) factors into their investment selection and monitoring process.
This final rule will modify and reverse certain amendments to the Investment Duties regulation under the Employee Retirement Income Security Act of 1974 (ERISA). Under the rule, as the DOL states that fiduciaries may consider climate change and other collateral benefits when making investment decisions and exercising shareholder rights. However, there is no requirement to incorporate such considerations.
A U.S. District Court federal magistrate judge in the Eastern District of Wisconsin mostly sided with Nestlé USA Inc by recommending the dismissal. of a class action lawsuit alleging fiduciary negligence and self-dealing in Nestlé’s $4.2 billion 401(k) savings plan, but left room for two charges to be amended and refiled.
A participant of the plan filed the class action claiming that breached their fiduciary duties by actions that include charging excessive fees for managed account services and self-dealing in their administration of the plan.
The magistrate judge claimed that most of the plaintiff’s allegations against Nestlé fell short of meeting the requirements to move the case forward, Two counts related to the level and quality of recordkeeping services have merit, allowing the plaintiff amend them and refile with the court.
The initial lawsuit claimed that a managed account service offered by Voya Retirement Advisors included additional fees that added no more material value for participants than its cheaper target-date fund option. The complaint also alleged that Nestlé paid itself for providing administrative service that did not provide any value to the plan, and was not provided for the exclusive benefit of the participants.
The Department of Labor’s Employee Benefits Security Administration (EBSA) proposed updates to their Voluntary Fiduciary Compliance Program (VFCP), which would allow a self-correction component.
The EBSA proposal includes a new self-correction feature for certain failures to timely transmit participant contributions (and participant loan repayments) to pension plans.
This feature will allow plan sponsors and to notify EBSA electronically that they have self-corrected certain failures to send participant contributions and loan repayments to pension plans on time. Self-correction could only be used if the following conditions are met:
My latest article for JDSupra.com can be found here.
My latest newsletter for retirement plan professional can be found here.
