The Rosenbaum Law Firm P.C. Blog

A Texas federal district court ruled that American Airlines breached its fiduciary duty of loyalty, but not its fiduciary duty of prudence, in allowing its $26 billion 401(k) plan to be influenced by environmental, social, and governance (“ESG”) policies unrelated to the best interests of participants.

Judge Reed O’Connor found American Airlines fulfilled its duty of prudence and the airlines’ processes were “consistent with and, in many aspects, exceeded the processes of other fiduciaries.”

However, O’Connor said American Airlines acted disloyally.

The damages for the case are yet undetermined, but I expect an appeal.

Transamerica announced a brand revamp.

According to Transamerica, these changes include an update to their logo, which will start to feature the Transamerica Pyramid Center rising from a horizon, along with changes to their visual language.

The brand’s typography will also change to a new font called Forever Forma.

John Hancock has launched FutureStep, an open-architecture retirement plan offering powered by Vestwell.

The firm’s existing plan lineup is set to launch in the early 2025s. The FutureStep interface is designed to facilitate interactions between advisers, employers, and participants.

FutureStep will include competitive pricing and enhanced employer engagement. It supports personalized onboarding, ongoing administration, and payroll integration.

The Internal Revenue Service (“IRS”) issued proposed regulations regarding the provisions of the SECURE 2.0 Act of 2022 (“SECURE 2.0”) that relate to catch-up contributions.

The proposed regulations are for the requirement imposed by SECURE 2.0 that catch-up contributions for highly compensated employees in Section 401(k), 403(b), and governmental 457(b) plans be designated as Roth contributions (the “mandatory Roth catch-up” provision).

The Roth catch-up requirement was originally scheduled to become effective for taxable years beginning after December 31, 2023, but it was delayed until taxable years beginning after December 31, 2025.

The regulations will permit a 401(k) or 403(b) plan to provide that a participant who is subject to the mandatory Roth catch-up requirement is deemed to have irrevocably designated any catch-up contributions as designated Roth contributions. A plan could provide for such a deemed election regardless of whether it requires separate catch-up contribution elections or utilizes a spillover design. However, a plan that provides for such a deemed election must provide the participant with an opportunity to make a new election that is different from the deemed election.

The regulations hold that an individual who did not have any FICA wages from the employer sponsoring the plan for the preceding calendar year would not be subject to the mandatory Roth catch-up requirement under the plan in the current year.

The FICA wage threshold would not be prorated for an individual’s year of hire. So that means that a participant who worked for the employer sponsoring the plan for only part of the preceding year would be subject to the mandatory Roth catch-up requirement under the plan in the current year only if the participant had wages exceeding the full FICA wage threshold from the employer for the preceding calendar year.

The regulations also include two self-correction programs that a plan could use to correct a failure of the mandatory Roth catch-up provision. A plan could provide for either correction method but must use the same correction method for all participants with deferrals over the same applicable limit in a plan year. To use these correction methods, a plan must have practices and procedures in place that are designed to result in compliance with the mandatory Roth catch-up provision. As part of such practices and procedures, a plan must provide for a deemed Roth catch-up election for participants who are subject to the mandatory Roth catch-up provision. Plans would not be permitted to avoid mistakes by categorically requiring that all catch-up contributions be made as designated Roth contributions.

Where a participant’s Form W-2 for a year has not yet been filed or furnished to the participant, a plan is allowed to correct a participant’s pre-tax catch-up contribution that was required to be a designated Roth contribution by transferring the deferral (adjusted for allocable gain or loss) from the participant’s pre-tax account to the participant’s designated Roth account and reporting the contribution (not adjusted for allocable gain or loss) as a designated Roth contribution on the participant’s Form W-2 for the year of the deferral. The contribution would be includible in the participant’s gross income for the year of the deferral.

The other correction method is allowing the plan to correct a participant’s pre-tax catch-up contribution that was required to be a designated Roth contribution through an in-plan Roth rollover. Under this method, a plan would directly roll the deferral (adjusted for allocable gain

or loss) from the participant’s pre-tax account to the participant’s designated Roth account and report the amount of the in-plan Roth rollover on Form 1099-R for the year of the rollover. The contribution (adjusted for allocable gain or loss) would be included in the participant’s gross income for the year of the rollover.

Mariner announced the acquisition of Cardinal Investment Advisors.

Mariner’s advisory assets will grow to $550 billion in the first quarter of 2025.

With offices in Chicago and St. Louis, Cardinal provides investment consulting services to insurance companies, as well as corporate retirement plans, healthcare systems, foundations, and endowments.

The agreement was signed on Jan. 3, 2025. The Mariner and Cardinal integration is expected to be completed by the end of March.

Starting in 2026, Highly Compensated Employees will have to make their Catch Up Contributions as after tax Roth deferrals. The Internal Revenue Service issued regulations to that effect, after the SECURE 2.0’s required implantation date of 2024.

With a new administration and tax legislation a certain topic that a Republican-led Congress will tackle, one question is whether the change will go into effect.

There are good third-party administrators (TPAs) and bad ones. No matter how good your TPA is, they’re not a mind reader. So when it comes to providing information to your TPA, you need to level with them. If you don’t provide the necessary information about the census, ownership, ownership in other entities, and other qualified plans you maintain, your TPA can’t do its job credibly.

I’ve seen too many TPAs discover errors, just because the plan sponsor didn’t provide the necessary information. Corrective contributions might be owed if you did the employee census incorrectly or if you didn’t provide all the companies you own. There might be an issue if you had a SIMPLE plan and didn’t let anyone know.

The easiest errors to avoid are the ones you can avoid by providing the information your TPA asks and by volunteering information that you think they should know.

As a plan fiduciary, I still can’t believe it. A Third Party Administrator (TPA) we terminated was trying to hold us up for valuations and a Form 5500 we paid for, as part of, annual administration. It was $80,000.

We were staying with the same custodian and the old TPA thought we would blink and pay the ransom. We didn’t and had the successor TPA do the work. It’s been 4 years now, and I still don’t know what the Department of Labor did to this TPA, as part of my complaint.

If you’re owed money, there is always an incentive not to do the work they need. You can fail to provide the valuation or Form 5500 that they need to squeeze what they owe you, but they can certainly go somewhere including the new TPA to do the work and you will be out of luck.

Leverage isn’t what it used to be.

Friday, I was supposed to attend the New York Comic Con for a special session since I had a wholesale account with the leading comic book distributor. I’m sure the breakfast would have had some free giveaways and I was looking forward to it.

Thursday, I got a call from the Managing Attorney that I had to show up at the Garden City office for a meeting. My crime: I sent an email to a former client that I worked with at the Third Party Administrator (TPA) I worked at. The TPA sent the e-mail in a complaint to the Firm I was working at. Like emails and maybe going to the bathroom, I needed permission.

When I walked into the Garden City office, didn’t know if I was getting fired or not. The managing attorney was a little strained as one of the partners to the firm had their son become New York Governor, which raised questions over the government union clients we handled. Week and strained, the Managing Attorney treated this e-mail bigger than it was. I survived that day and heard enough dumb lines from her, that will last me a lifetime. As Henry Hill said in GoodFellas, there are times when you have to take a beating.

So when I hear employees losing their jobs because of filmed meltdowns and inappropriate behaviors, I have no sympathy because people in life have been fired for a lot less and a part of me thinks I still could have been clipped that day, almost 17 years ago. The guy acting like a jerk at an Eagles game and he’s identified as working for your firm, he has to go. It’s bad enough to have workers do terrible things at work, it’s far worse if your company’s name is brought up when an employee does something really stupid off the job.

I’m sorry, I just have no sympathy because I was trying to help my firm, and I still caught grief for it.

Most plan screwups happen when either the plan provider doesn’t ask and/or the plan sponsor doesn’t volunteer. It either involves another plan or another affiliated or similarly owned company. As a plan provider, you could ask and the plan sponsor may not tell. If you don’t ask, the mistake is on you. If you did ask, the plan sponsor will still blame you.

That’s why when it comes down to them revealing ownership and prior plan, some language on the form (whether online or not), should have an affirmation from the client that the information is complete and accurate. People, including plan sponsors, don’t like to admit when they’re wrong. So CYA and have them affirm everything is accurate, so the blame isn’t assigned to you.