As described in our recent blog posts, the Department of Labor (“DOL”) recently issued guidance in the form of FAQs to address questions concerning the practical application of PTE 2020-02, Improving Investment Advice for Workers & Retirees. This blog post discusses the guidance the DOL offers with respect to various topics under PTE 2020-02. Guidance with respect to the general requirements of PTE 2020-02 was discussed in our prior blog post and the DOL’s guidance with respect to the application of PTE 2020-02 to rollover recommendations was discussed in our prior blog post.
On May 21, 2021, the terms of the proposed ERISA class action settlement in Cates v. The Trustees of Columbia University in the City of New York were announced. The settlement, which includes a $13 million payment and many non-monetary terms, serves as a reminder for fiduciaries/committees to review their processes for selecting and retaining investment options — and to examine the fees and services of plan providers.
On May 18, 2021, the IRS released Notice 2021-31, a lengthy series of FAQs clarifying many aspects of the new COBRA subsidy made available under the American Rescue Plan Act of 2021 (ARPA). The FAQs address many of the issues raised by plan sponsors since the subsidy was enacted earlier this year. Although this blog post does not address every nuance of the guidance—the IRS issued a whopping 86 FAQs—below we point out some clarifications that might be of interest to group health plan sponsors:
As described in our recent blog post, the Department of Labor (“DOL”) recently issued guidance in the form of FAQs to address questions concerning the practical application of PTE 2020-02, Improving Investment Advice for Workers & Retirees. Recommendations regarding the rollover of assets from an employee benefit plan to an IRA are a key focus of the DOL and of these FAQs. This blog post discusses the guidance the DOL offers with respect to rollover recommendations under PTE 2020-02.
In 1975, the DOL issued a regulation that adopted a five-part test for determining when investment advice is “fiduciary investment advice” and would qualify an investment professional as a fiduciary under ERISA (the “1975 Labor Regulation”). The five-part test is met if an investment professional: 1) renders advice to a plan, plan fiduciary or IRA owner as to the value of securities or other property, or makes recommendations as to the advisability of investing in, purchasing, or selling securities or other property; 2) on a regular basis; 3) pursuant to a mutual agreement, arrangement, or understanding with the plan, plan fiduciary or IRA owner; 4) where the advice will serve as a primary basis for investment decisions with respect to plan or IRA assets; and 5) where the advice will be individualized based on the particular needs of the plan or IRA.
With SECURE Act 1.0 (officially titled “Setting Every Community Up for Retirement Enhancement Act”) still being implemented by many plan sponsors, Congress is now considering a new package of laws designed to help close the nation’s retirement savings gap, referred to as SECURE Act 2.0 (officially titled “Securing a Strong Retirement Act”).
While the House of Representatives’ Ways and Means Committee unanimously approved SECURE Act 2.0, it has still not been voted on by the full House, and certain representatives may want changes implemented. And it has likewise not been approved by the Senate. Thus while SECURE Act 2.0 appears to have bi-partisan support, passage in its current form is not a sure thing.
On December 18, 2020, the Department of Labor (“DOL”) adopted PTE 2020-02 Improving Investment Advice for Workers & Retirees (“PTE 2020-02”), a new prohibited transaction exemption related to fiduciary investment advice offered to plan sponsors and plan participants of ERISA-governed retirement plans and IRA owners.
Last month, the DOL issued guidance in the form of FAQs to address questions concerning the practical application of PTE 2020-02 (“FAQs”). These FAQs discuss various applications of PTE 2020-02, including guidance with respect to the general requirements of PTE 2020-02, recommendations for the rollover of employee benefit plan assets to an IRA, the use of disclaimers, the requirement to mitigate conflicts of interest, the use of payout grids for compensation, and the application of PTE 2020-02 to insurance industry financial institutions.
In a matter of first impression, the Ninth Circuit affirmed that ERISA does not preempt a California law that created a state-managed retirement program for certain private employers. Howard Jarvis Taxpayers Association v. California Secure Choice Retirement Savings Program, 2021 WL 1805758 (9th Cir. May 6, 2021).
On May 4, 2021, the United States District Court for the Eastern District of Michigan granted in part and denied in part a motion to dismiss in a class action lawsuit regarding the adequate notice of the right to continued insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The decision follows a blitz of class action lawsuits alleging deficient COBRA notices and underscores the importance of careful review by employers.