Employee Retirement Plan Archives - Spotlight on Benefits

Plan Fiduciaries Continue to Defeat BlackRock Target Date Fund Class Actions

A series of cases against fiduciaries of 401(k) plans that offer BlackRock Target Date Funds (TDFs) have been dismissed by district courts in recent months. In three recent cases, the district courts held that plaintiffs failed to allege any facts about the plan fiduciaries’ process for selecting and monitoring the BlackRock TDFs and that plaintiffs’ reliance on the BlackRock TDFs’ alleged underperformance alone was insufficient to state a claim for breach of fiduciary duty.

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IRS Relaxes Plan Amendment Deadlines for Changes Under the SECURE Act and Other Laws

The Internal Revenue Service recently granted plan sponsors additional time to amend retirement plans to reflect changes in law under: (i) Section 2203 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act); (ii) the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act); and (iii) Section 104 of the Bipartisan American Miners Act of 2019 (Miners Act).

Sponsors of qualified plans and non-governmental Section 403(b) plans (including collectively bargained plans) now have until December 31, 2025, to adopt certain plan amendments required by these recent changes in law or to conform the written plan to operational changes permitted by these laws.

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ERISA Litigation Roundup: Damned if You Do, Damned if You Don’t

A string of ERISA lawsuits has emerged in recent weeks against companies who offer BlackRock Target-Date Funds (“TDFs”) as 401k investment options to their employees. The lawsuits allege the companies, in their capacities as plan sponsors, breached their fiduciary duty by choosing the low fee investment options offered by BlackRock Inc., despite their funds’ underperformance. This new litigation sparks concern amongst 401k plan sponsors who may now have to worry about lawsuits involving investment fees from all sides-for choosing the high fee options and for choosing the low fee options.

The lawsuits focus on the LifePath Index Funds of BlackRock, a suite of 10 target-date funds. TDFs have increased in popularity over the past couple of years because they offer participants a lower fee but managed investment option based on target retirement years. Although BlackRock isn’t a party to the litigation, these lawsuits shine a spotlight on the performance of these funds.

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New Stats on Employer Retirement Plans

On June 8, 2022, the Congressional Research Service published “Private-Sector Defined Contribution Pension Plans: An Introduction.” We reviewed the report and wanted to highlight a few key data points. Defined contribution plans include 401(k), 403(b), and profit-sharing plans. The report does not include government employer plans.

Takeaways

Congress continues to introduce bills related to retirement security (see our Blog Post on Secure Act 2.0 and the Employee and Retiree Access to Justice Act). These new bills continue to focus on increasing access to part-time workers, easing the implementation of retirement plans for smaller employers, and encouraging plans to implement automatic enrollment features. Based on the results in this Congressional Research Service report, we can expect continued emphasis on those features. If you’d like to discuss design changes to your defined contribution plan, please contact a Faegre Drinker benefits attorney for assistance.

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IRS Pilots Pre-Examination Compliance Program for Retirement Plans

In its recent June Employee Plans newsletter, the Internal Revenue Service (IRS) announced the launch of a 90-day pre-examination compliance pilot program. Under the program, the IRS will notify a plan sponsor that its retirement plan has been selected for pre-examination. The notification will provide the sponsor with 90 days to review retirement plan documents and operations to determine compliance with current tax law. If the sponsor does not respond within 90 days, the IRS will contact the sponsor to schedule an examination.

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ERISA Litigation Roundup: Sixth Circuit Holds ERISA § 502(a)(2) Claims May Not Be Arbitrated Absent Plan Consent

On April 27, 2022, the Sixth Circuit decided Hawkins v. Cintas Corporation, No. 21-3156, holding that claims for breach of fiduciary duty under § 502(a)(2) of the Employment Retirement Income Security Act of 1974 (ERISA), belong to the plan, and plaintiffs asserting such claims for alleged harm to their individual retirement accounts in defined contribution plans may not be compelled to arbitrate those claims absent the plan’s consent.

Hawkins is a putative class action that participants in an ERISA-governed defined-contribution retirement plan filed on behalf of the plan against Cintas Corporation, their former employer and the plan’s sponsor, under ERISA § 502(a)(2). The plaintiffs alleged that Cintas had breached fiduciary duties it owed to them under ERISA in connection with its administration of the plan, causing losses to the plan.

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IRS Proposes Updates to the RMD Rules

On February 24, 2022, the IRS issued proposed regulations incorporating the Setting Every Community Up for Retirement Enhancement Act (“SECURE Act”) into the required minimum distributions (“RMDs”) regulations. The IRS is accepting comments until May 25, 2022, and then holding a public hearing on June 15, 2022. The proposed regulations, if finalized as currently drafted, generally would be effective for required minimum distributions that occur on and after January 1, 2022.

SECURE Act RMD Reminder

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ERISA Litigation Roundup: Mortality Table Pension Plan Litigation – Reasonableness Not Required

When determining alternative pension benefits (such as joint and survivor annuities and early retirement benefits), a recent court decision held that underlying actuarial assumptions selected decades ago do not violate federal law simply because they are outdated and may result in a pension benefit that is less than using more current actuarial assumption.

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Preview of 2022 Required Changes for Retirement Plans

As 2022 begins, retirement plan sponsors and service providers should keep in mind deadlines for required plan changes in 2022. In particular, retirement plan changes under the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) and Coronavirus Aid Relief and Economic Security Act (CARES Act) must be adopted by amendment by December 31, 2022, for calendar year plans. In addition, retirement plans must comply with new SECURE Act disclosure requirements beginning later this year.

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ERISA Litigation Roundup: SCOTUS Vacates and Remands Seventh Circuit’s 403(b) Decision in Northwestern

Last week, the Supreme Court issued its anticipated ruling in the ERISA fiduciary-breach class action Hughes v. Northwestern. In its unanimous decision, the Court vacated the Seventh Circuit’s dismissal of the case and sent the case back to the lower court for further review. The narrow decision may boost plaintiffs in similar ERISA cases involving challenges to retirement plan fees and investment options, but it also offers hope to defendants.

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