The Rosenbaum Law Firm P.C. Blog

What is old is new again. Again, the Department of Labor (DOL) is trying to unveil a new fiduciary rule.

The DOL finalized the new rule, which updates the definition of an investment advice fiduciary adopted in 1975 under the Employee Retirement Income Security Act and the Internal Revenue Code. It takes effect Sept. 23, 2024.

The DOL stated that it has also amended related prohibited transaction class exemptions, or PTEs, that are available to investment advice fiduciaries, which includes PTE 2020-02 on rollovers and 84-24 on annuities.

While the new fiduciary rule and the amendments to the PTEs are effective on Sept. 23, 2024, there is a transition period under amended PTEs 2020-02 and 84-24, which go into effect on September 23, 2025. A change in the White House in January will likely change everything.

The Department of Labor (DOL) issued a proposed information collection request (ICR) to help implement a lost-and-found database to assist former plan participants with locating missing retirement accounts.

Section 303 of the SECURE 2.0 Act of 2022 requires the DOL to create an online searchable database, to be known as the Retirement Savings Lost and Found within 2 years.

The DOL says that it initially had planned to use data that plan administrators submitted to the Internal Revenue Service (IRS) on Form 8955-SSA. However, IRS has now indicated that it will not authorize the release of this data to the DOL.

So now, the DOL is proposing to request plan administrators to voluntarily furnish the information specified in the proposed ICR.

Paychex is fighting a lawsuit by a participant claiming their distribution check was stolen in New York state court.

Wisely, Paychex is trying to move the case to Federal court since this is an ERISA matter and a federal question.

In the state case, Dylan Handy, has claimed fiduciary breach violations by a Paychex, which was third-party administrator to the retirement plan offered by Handy’s former employer, Elm Street Technology LLC.

Handy claims that checks for his entire $116,125.45 401(k) account balance was intercepted in the mail on the way to his rollover account provider, then altered and the assets deposited into someone else’s account.

Handy’s state complaint seeks damages of $383,214, plus fees, costs and interest.

Only problem is that Paychex isn’t a fiduciary.

Ascensus has entered into an agreement to acquire Vanguard’s Individual 401(k), Multiple Participant SEP (Multi-SEP), and SIMPLE IRA plans business.

Ascensus will assume recordkeeping and client servicing for Vanguard’s SIMPLE, Multi-SEP, and Individual 401(k) retirement plans, and Ascensus wilk increase the overall retirement plans under administration to nearly 280,000 plans.

Ascensus will provide custodial and trustee services, recordkeeping, client servicing, transaction processing, tax reporting, and other services, and plan participants will retain access to a diverse lineup of Vanguard mutual funds via the Ascensus platform.

According to the latest Judy Diamond Report, certified public accountant firms have the best-performing 401(k) plans.

CPA firms ranked first among 27 industry groups that were evaluated on seven metrics of plan performance, including average account balances, participation rates, and even rates of return.

CPA 401(k) plans had the highest account balances, averaging $113,193. They also placed first in participation rate, second in employee contributions and plan score, fourth in both employer contributions and employee longevity, and fifth in rate of return. Out of a perfect overall score of 7, they scored 19.

The other industries ranked among the five with the best-performing 401(k) plans were physicians, lawyers and legal services, dentists, and banking with overall scores of 27, 28, 42, and 53. If the highest score is 7, these numbers aren’t great. As an aside, the plans that drive me the most nuts as an ERISA attorney are doctor plans. So surprised they’re on the list.

The CPA industry ranked first for the second year in a row and has been in the top five since the benchmark report started eight years ago.

A survey conducted by the 401(k)-platform, Guideline, found that while employers and employees both agree that retirement benefits are valuable, some companies underestimate their value in retaining and recruiting employees.

While 93% of participants in the survey note that a retirement benefit would influence their decision to join a company, only 36% would rank retirement benefits within their top three most valuable features.

When asked about their top five employer benefits, 81% of employees placed retirement as a leading feature. However, 62% of plan sponsors did the same.

A law firm partner sends an email to another partner that he’s in trouble, and that the other partner should go to Walgreens and buy gift cards and send over the information for the gift card number and pin. The people at Walgreens told him it was a scam and like many law firm partners, he was too arrogant to think he was being scammed. The best part is he was scammed and wanted the law firm to reimburse him for the $750.

While the Brooklyn in me, won’t allow me to fall for that or other Venmo/Zelle scams, not everyone is that street-smart. Plan participants and sponsors can be scammed and with 401(k) plans having transactions being done online, plan providers, as well as plan sponsors, will have to make sure that distributions are for the right people, at the right address. When we have seen lawsuits for cyber scams in 401(k) plans, it usually happens when the plan provider doesn’t see the scam coming, such as a participant claiming a new address and a new checking account for the ACH. Continued vigilance and security measures will curtail cyber thefts of plan distributions.

I got an urgent phone call on Friday at 5 pm from a plan sponsor with a unique situation. They talked about terminating their 401(k) plan to their third-party administrator (TPA) and the TPA canceled access to their plan. Reminds me of when they cut the heat and lights in a hostage situation.

I already feared the TPA was embezzling money but the plan sponsor located all the assets in their brokerage account.

That being said, I instructed that the plan sponsor would benefit more by contacting the local Department of Labor (DOL) Employee Benefits Security Administration (EBSA) office for free, rather than spending money on an ERISA attorney. They are also here to help plan sponsors when it comes to protecting the benefits of employees.

The U.S. District Court for the District of Maryland ordered engineering firm Bicallis LLC and its owner, Bryan Hill, to restore missing contributions to the Bicallis LLC 401(k) Plan.

The court order followed an investigation by the Department of Labor’s Employee Benefits Security Administration (EBSA).

EBSA found put that company matching and safe harbor contributions were owed but not made to the 401(k) plan from October 2017 through December 2019.

The court ordered Hill to “irrevocably forfeit” his share of $388,458 and directed the trustee to distribute the assets to an independent fiduciary to satisfy Hill’s obligations for damages.

AMI Benefit Plan Administrators Inc. has been appointed to serve as the independent fiduciary.

Labor economist and TikTok creator Kathryn Anne Edwards, in a recent webinar, claimed that 401(k) plans alone are failing to solve the retirement crisis in America and that the federal government needs to take a more active role in providing access to retirement savings.

Edwards argued the Federal government should stop subsidizing 401(k) accounts (by making contributions tax-deductible) because she says it uses about 1% of the country’s GDP (in potential, unrealized taxes) to benefit the retirement savings of the wealthiest 25% of Americans.

Instead, she supports a program similar to the Federal Retirement Thrift Savings Plan. The program would give workers access to portable, tax-advantaged retirement savings accounts, with federal matching contributions for certain low- and middle-income workers.

I think if we want to eliminate 401(k) plans, you can’t find a worse idea than having retirement accounts with the Federal government. As far as tax incentives benefiting the rich, the fact is that with a high tax burden and a high cost of living, many people can’t save for retirement if they are low or middle-class employees.

Too much blame is hoisted on an inanimate object (401(k) plans), and too little blame is placed on a government that failed to create a Social Security trust fund and failed to rein in reckless spending. In addition, Wall Street makes so much money off 401(k) plans, that their lobby won’t allow a public sector replacement.