GA January 2021 Newsletter

  • VOLUME XXXIX | NUMBER XXXVI| January 2021

    • Should Plan Sponsors Outsource Retirement Plan Investment Advisory Services?

      Department of Labor (DOL) enforcement recoveries are on the rise. A recent DOL report indicates that DOL recoveries have doubled since 2018 and tripled since 2016 (https://www.investmentnews.com/dol-retirement-plan-recoveries-198660). As a result, fiduciary liability premiums have increased 35% since last year (https://www.investmentnews.com/fiduciary-insurance-costs-401k-litigation-198407). Fiduciaries are personally responsible for participant losses resulting from a fiduciary breach. Plan sponsor fiduciaries who handle plan investments themselves, or use advisors who do not assume fiduciary status, face potential exposure for both investment performance and all plan fees. The Employee Retirement Income Security Act of 1974 (ERISA) specifies that any plan fiduciary level decision must be informed by expertise. Most plans do not have a credentialed investment expert on committee (if they do, that individual is typically not amenable to accepting the responsibility...

       

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    • Former Employees with Plan Assets are Still Plan Participants

      Plan Sponsors should understand that terminated employees who left their account balance in your plan, are still considered participants under ERISA. As such, they have the same rights as current employees. They cannot contribute to their account under the plan but otherwise they have the same ERISA protected rights as plan participants. One protected right is to receive all ERISA required notices that current participants receive. The distribution of notices to former employees can be challenging. With online notice distributions now allowed, it may ease this problem a bit, but losing track of former employees through undeliverable mail or emails can be troubling. Participant direction of investments and notice of investment changes is another obligation that is more difficult with terminated employees. A fundamental fiduciary...

       

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    • Should You Adopt a Plan Committee Charter?

      Yes! The primary purpose of a committee charter is to document overall plan governance. It is not dissimilar to how your Investment Policy Statement (IPS) acts as a “roadmap” for managing your plan investments. The charter also documents delegation of fiduciary responsibilities from the plan’s “named fiduciary” to co-fiduciaries. Even small plans with a single fiduciary who makes all plan management decisions can benefit from having a plan governance document. But simply having a committee is not sufficient. Per ERISA, a retirement plan governance committee charter sets out the committee’s goals and responsibilities. It should include certain specific fiduciary principles, such as managing the plan for the exclusive benefit of participants; practicing ERISA’s procedural prudence; adhering to the plan document; and ensuring proper diversification of...

       

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    • Participant Memo: Jan 2021 – Financial Wellness 101: How Much Do You Know About Your Retirement Plan

      This month’s employee memo encourages employees to learn about their retirement plan to determine whether any changes need to be made.

       

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