The Rosenbaum Law Firm P.C. Blog

PNC Financial Services Group Inc. won their lawsuit brought by their employees, that accused them of paying excessive recordkeeping fees for their 401(k) plan.

Federal Judge Christy Criswell Wiegand in the Western District of Pennsylvania said that expert witness, Ty Minnich, hired by employees to discuss 401(k) recordkeeping fees did not use “reliable methodology” in concluding that the plan fees were unreasonable.

In 2014, the plan’s base recordkeeping fee was $46.55 per participant, and it declined to $32 per participant by January 2022, according to the case documents.

PNC had argued that Minnich’s testimony was not reliable because his opinion was based solely on his experience without using any reproduceable or traceable process. The judge agreed.

The PNC Inventive Savings plan contains about $8.1 billion in assets and 80,335 participants, according to the most recent Form 5500 filing.

Fisher Investments announced that they will be spinning out an independent 401(k) solutions division.

Fisher Investment 401(k) Solutions will become an independent firm named Fisher Retirement Solutions to be run by CEO Nathan Fisher, son of Fisher Investments founder and CEO Ken Fisher.

The retirement group had $4.75 billion in assets under management for over 1,600 retirement plans.

Scrivener’s error is a mistake made by someone who is writing or copying something down, like a typo or a misspelling. It’s also a losing argument for most mistakes in a retirement plan document.

Intent is a nice idea. It’s a reminder of where you want to spend your attention and energy. The problem with intent is that if you had intended to exclude certain classifications of employees and the plan document didn’t do that, no time machine can make you fix that error. People who should have been excluded are included if the plan document was quiet on their ineligibility. That means you will have to make corrective contributions to employees you wanted to exclude from 401(k) participation. A retroactive amendment to exclude them, won’t pass muster with the Internal revenue Service and it certainly won’t pass muster with the Department of Labor.

Milliman beat back claims that it breached a duty by retaining in-house target risk funds in its 401(k) plan.

At issue were some Milliman-owned, proprietary allocation funds, a suite of target risk funds (the Unified Trust Wealth Preservation Strategy Target Growth Fund, Unified Trust Wealth Preservation Strategy Target Moderate Fund, and Unified Trust Wealth Preservation Strategy Target Conservative Fund. The lawsuit claimed that the funds were launched in November 2012, with no track record, and that by the end of 2013, the Millman Plan was the sole investor in the Moderate and Conservative Funds and represented about 97% of the assets of the Aggressive Fund.

The Judge concludes that Milliman employed a prudent process in deciding to keep the proprietary Funds in the Plan. The Judge said the plaintiff failed to proffer evidence that there was a breach of the fiduciary process and that using the proprietary funds was a breach of the duty of loyalty.

I think I learned in American politics that first semester in Stony Brook that if men were angels, there would be no need for government. If people did the right thing, there would be no need for government regulation.

I’m happy that the new fiduciary rule will limit the abuses that I saw when it came to rollovers to an Individual Retirement Account when a broker would push a high-fee product that wasn’t in the participant’s best interest, instead of keeping the money in the plan or a cheaper investment solution. I know the abuse because I got hoodwinked into rolling over a 401(k) account balance once to an unlisted REIT, that was then the focus of a class action lawsuit. The kicker is when the broker switched brokerage firms, tried to get my business, and then started to deride the REIT he sold me at the other firm.

When it comes to retirement savings anything connected with retirement plan assets, should require a fiduciary standard.

A federal judge in Northern California stated HP Inc. doesn’t violate the Employee Retirement Income Security Act (ERISA) by using forfeited 401(k) money to pay contributions it’s required to make to the plan, by dismissing a proposed class action.

HP had argued that “settled law expressly allows the use of forfeited amounts to reduce employer contributions,” pointing to two Treasury regulations for that view. In addition, HP cited a “new” proposed Treasury regulation that affirmed the right to use forfeitures to pay administrative expenses, to increase participant benefits, OR to reduce employer contributions.

The judge rejected the plaintiff’s theory that using forfeitures to offset contributions instead of paying administrative expenses is a breach.

The ERISA Industry Committee (ERIC) is pushing back on the Department of Labor (DOL) ask to require retirement plans to provide what it calls excessive amounts of participant information for its SECURE 2.0-mandated “Retirement Savings Lost and Found” database.

ERIC has pushed on the DOL to redraft its proposed guidance implementing the Lost and Found database. ERIC is an industry group that represents large employers. ERIC says DOL is asking for plans to provide too much information outside the scope of SECURE 2.0. In addition, ERIC claims the proposal raises significant privacy concerns and questions about efforts to coordinate with the Internal Revenue Service (IRS) to access existing information needed to build the database.

I don’t like being volunteered to do things, so I can understand why any employer doesn’t want to provide information to the DOL.

A Vanguard published report found that the average participant deferral rate matched the historic high of 7.4% in 2023. When combined with employer contributions, the average participant’s savings rate kept pace with the all-time high of 11.7%, reached in 2022.

Any news like that is good news. A record high is good news. It should be better and get more people to save for retirement.

For about a 25-year run, mutual funds dominated the 401(k) market, but signs are changing. A recent Cerulli report indicates CITs (Collective Investment Trusts) are currently on pace to overtake mutual funds as the most popular target-date vehicle in 2024, as they now represent 49% of the 401(k) market.

It’s an incredible number and probably has to deal with lower investment fees and the ability to negotiate fees. I would imagine CITs are cheaper because of less marketing and overhead by CIT provides. They will get further ground in the retirement plan space when they are eventually permitted in the 403(b) space, which will eventually happen.

The best retirement plan committees I’ve seen are dedicated to the process. That means regularly scheduled meetings, a documented record, and adherence to board policies. I will always say that having no committee is better than having a committee that won’t follow the process it adopted to follow.

Communication is also a key facet of a good committee. Bringing in plan providers to be a part of it, keeps the plan sponsors on their toes in reviewing the plan provider and bringing up issues that need to be addressed.