Lessons Learned from Recent Fiduciary Victories

There is nothing a plan sponsor or ERISA fiduciary can do to prevent allegations of fiduciary breach; however, there are many things they can do to be prepared to rebut such claims. Unfortunately, because of “headline news,” it is easy for plan sponsors to focus on cautionary tales of what other plan sponsors and fiduciaries did wrong. However, it is just as important, if not more so, to be aware of what plan sponsors and fiduciaries did right….in their legal victories. Two recent fiduciary victories provide valuable insights into how a court would evaluate the decisions and processes of plan committees.[1] In these cases, the courts highlighted conduct by the fiduciaries as evidence that they did not breach their fiduciary duties. Specifically, the judges focused on having a process of review, seeking outside help, and diligently maintaining records. The favorable views of these activities provide guidance for other plan sponsors and fiduciaries regarding how their conduct will be viewed if they face similar claims in the future.

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Department of Labor Proposal Would Encourage Consideration of ESG Factors for Plan Investments

On October 13, 2021, the Department of Labor (DOL) released a new proposed regulation under ERISA that would replace the previous administration’s “pecuniary factors” rule – which is widely viewed as discouraging the use of environmental, social, and governance (ESG) factors when selecting plan investments – with one that would encourage their consideration and provide a clearer pathway for plan fiduciaries to do so.


Over the years, the DOL’s stated position on the consideration of ESG and other “social” factors when selecting plan investments has toggled back and forth, largely along party lines.

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Forced Rollovers of Small Retirement Account Balances: What to Do with Missing Participants

When a participant experiences a distribution event (e.g., terminating service with the employer), and when the participant does not affirmatively elect to take the distribution, a plan document may require that an account balance of $5,000 or less be distributed immediately, and without the participant’s consent, by rolling the account over to an IRA. This is sometimes called a “forced rollover.” When making a forced rollover, a plan must comply with the applicable plan provisions and related Internal Revenue Service (“IRS”) and Department of Labor (“DOL”) guidance.

A forced rollover can only be made if a participant’s vested account balance is $5,000 or less. If a participant’s vested account balance is greater than $5,000, the account cannot be distributed without participant consent (unless the participant has attained the later of normal retirement age or age 62). The only exception to that limit is for terminating defined contribution plans. Additionally, although the Code does not require a forced rollover for distributions of $1,000 or less (where a “forced” distribution can be used in lieu of a rollover), the plan document can require that mandatory distributions of $1,000 or less be rolled over to an IRA.

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Department of Labor Publishes Request for Information on Pooled Employer Plans

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 created a new type of plan that may begin operating in 2021 called a pooled employer plan (PEP). A PEP is a plan in which multiple unrelated employers will be able to participate. A PEP will have to be maintained by a pooled plan provider (PPP) which must act as a named fiduciary and take on substantially all of the PEP’s administrative duties. Though the statute is fairly detailed, it leaves open a variety of questions, including a number of prohibited transaction issues, that need to be addressed by the Department of Labor (DOL).

For the full alert, visit the Faegre Drinker website.

DOL’s Final Rule on Association Retirement Plans: What It Means for the Retirement Industry

The DOL’s newly released final regulation on “Association Retirement Plans” (ARPs) will make it easier for groups and associations of employers to jointly sponsor a combined 401(k) or other defined contribution plan. (These plans are also referred to as multiple employer plans or “MEPs.”) In recent years, there has been a push to permit service providers to create “Open MEPs,” which are plans of unrelated employers having no business connection, or what the DOL refers to as “commonality” (i.e., a relationship unrelated to employee benefits). The hope is that these plans will provide small businesses with a cost-efficient and minimally burdensome avenue for offering retirement savings opportunities to workers.

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