Department of Labor Confirms It Will Not Enforce Controversial “Pecuniary Factors” Rule for ERISA Plan Investments

On March 10, 2021, the Department of Labor’s Employee Benefits Security Administration (EBSA), the agency charged with interpreting and enforcing ERISA, announced that it will not enforce the Trump-era “Financial Factors in Selecting Plan Investments” rule, which has been perceived as potentially discouraging retirement plan fiduciaries from selecting investment alternatives which emphasize environmental, social, and governance factors (commonly referred to as “ESG investments”).

The rule, which was finalized in November 2020 and technically became effective on January 12, 2021, does not prohibit ESG investments.  However, it has been widely criticized as fostering a misapprehension that ESG investments may be subjected to a higher degree of fiduciary scrutiny than others.  Following the election, EBSA’s announcement of its non-enforcement policy comes as no surprise, as the Biden administration had already identified the rule on its “List of Agency Actions for Review.”

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Cybersecurity: A Plan Sponsor Obligation

A recently filed lawsuit against a trust company serving as a 401(k) plan trustee, the second of its kind in the last few months, highlights the need for plan sponsor diligence in protecting participant data and accounts in an increasingly electronic world. We only have one side of the story so far, the allegations in the complaint, but the trustee is charged with permitting a thief to get almost $125,000 from the business owner’s account. This was done through phone, email and bank accounts not associated in the trustee’s records with the owner’s account. It took several weeks for the trustee to notify the business owner, and the trustee only did so when it received and prevented a second fraudulent distribution request. The trust company has not yet restored the account.

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The Clock Is Ticking: DOL Issued Interim Final Rule on Lifetime Income Disclosures for Defined Contribution Plans

The Setting Every Community Up for Retirement Enhancement (SECURE) Act included several provisions related to lifetime income strategies under retirement plans, including a requirement that pension benefit statements for defined contribution plans disclose the “lifetime income stream equivalent” of each participant’s current account balance – both as a single life annuity (SLA) and as a qualified joint and survivor annuity (QJSA). On August 18, 2020, the Department of Labor (Department) issued an interim final rule implementing this requirement that includes a model disclosure and assumptions for converting benefits (the Rule), and a fact sheet.

As background, under ERISA, administrators of defined contribution plans (such as 401(k) and 403(b) plans) are required to provide pension benefit statements quarterly if the plan allows participant-directed investment, otherwise annually. Among other requirements, the benefit statements must include the participant’s current account balance.

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COVID-19 Joint Agency Relief Part 1: ERISA Enforcement Relief for Retirement Plans

As described in our May 1 blog post, the Department of Labor (DOL) and the Internal Revenue Service (IRS) recently issued guidance (the “Extension Guidance”) providing relief to benefit plan sponsors and participants for complying with certain deadline and notice requirements under ERISA and the Internal Revenue Code (“Code”). One piece of the Extension Guidance, EBSA Disaster Relief Notice 2020-01 (the “Notice”) focuses specifically on ERISA retirement plan obligations, including ERISA-required notices, ERISA rules for retirement plan loans, and ERISA timing requirements for remitting participant contributions to retirement plan trusts. This alert describes in more detail the relief in the Notice and implications for plan sponsors.

For the full alert, visit the Faegre Drinker website.