Fiduciaries of 401(k) plans and other retirement plans know that they must prudently monitor the investment options available to participants in the plan, but are they monitoring participants’ investments made through a plan’s brokerage window? Recent commentary from the Department of Labor (DOL) on cryptocurrency investments suggests maybe fiduciaries should be – and that the DOL may check in on that soon.[i]
A “brokerage window” or “self-directed brokerage account” can allow participants access to a broad array of investments beyond the regular investment menu under the plan. Most plan fiduciaries have not paid much attention to the actual brokerage window investments. This is not surprising given the DOL’s relative lack of focus on the matter. The DOL had issued guidance in 2012 that the investment disclosure portion of the fee disclosure rules could apply to brokerage window investments in certain cases but after pushback due to the administrative burdens, the DOL withdrew that guidance. In 2014 the DOL issued a Request for Information about brokerage window practices but no further guidance was issued. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-04-14 12:16:422022-04-14 13:25:48How Much is that (Investment) in the Window…A Higher Level of Fiduciary Oversight Could be Required for 401(k) Plan Brokerage Windows
Among the many phrases of ERISA, one that is familiar to investment fiduciaries is the requirement to choose investments with the care, skill, prudence, and diligence that a prudent person who is familiar with such matters would use. Recently the Department of Labor (DOL) issued guidance on how this prudence standard applies to fiduciaries who offer cryptocurrency investment alternatives to participants.
In Compliance Assistance Release 2022-01, the DOL reminds fiduciaries of their important role in selecting investments for participant direction. Plan fiduciaries must evaluate each investment option made available to participants to ensure they are prudent. Failure to remove an imprudent investment is a breach of duty. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-04-05 11:02:162022-04-05 11:02:16Can’t Touch This … DOL Discourages Plans From Investing in Cryptocurrency
Whether you’re a fan of the Buddy Holly version or Linda Ronstadt’s, you’ve got to admit “It’s so easy to fall in love” is a catchy tune. Just as it’s easy to get that song stuck in your head, it’s also easy to put your employee’s health savings accounts (HSAs) at risk!
HSAs are one of the many “consumer directed” programs that are touted as putting employee’s health care within their own control. The idea is that if consumers have an amount of money to spend on their own healthcare, they’ll be savvy about what services they seek and how much they spend on them, with the ultimate goal of making the healthcare marketplace more efficient. Congress gives tax advantages to accounts that qualify as HSAs in order to encourage employers to offer and employees to maintain them. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-04-01 13:37:352022-04-01 13:37:35It’s So Easy To … Put Your Employees’ HSAs at Risk
If your qualified pension plan does not provide for in-service distributions and has commenced benefit distributions to a retiree who experienced a bona fide retirement, the IRS says your plan may be able to rehire that retiree and let him or her continue to receive benefit payments upon rehire. Read more
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For those who have been involved in the sale of a company, Section 280G of the Internal Revenue Code may sound familiar. Section 280G governs what the IRS considers to be “golden parachute payments” and is generally applicable when a corporation is undergoing a change in control (including both stock sales and asset sales). At a high level, Section 280G imposes on disqualified individuals a 20% excise tax on excess parachute payments paid and a corresponding loss of deduction on such payments by the corporation. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-03-03 09:04:322022-03-03 09:04:32Free Fallin’…With a Golden Parachute
The Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of Treasury (collectively, the Departments) recently issued their joint report to Congress regarding their Mental Health Parity and Addiction Equity Act (MHPAEA) enforcement activities as required under the MHPAEA and the Consolidated Appropriations Act, 2021 (CAA). The report contained insights regarding the DOL’s enforcement of the new MHPAEA reporting and disclosure requirements related to non-quantitative treatment limitations (NQTLs) established by the CAA. For additional information about the CAA’s new MHPAEA reporting and disclosure requirements, please see our previous blog post (as well as earlier blog posts). Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-02-11 10:05:312022-02-11 10:05:31What Happens in a Small Town Stays in a Small Town … Until the DOL Doubles Down on Mental Health Parity Compliance
The U.S. Supreme Court’s ruling this week in Hughes v. Northwestern University will do nothing to stem the rising tide of retirement plan fee litigation. But the ruling doesn’t mean fiduciary breach claims are more likely to be successful either. Instead, the Court kept its ruling very narrow: a broad investment menu with some prudent funds will not automatically mean the fiduciaries are off the hook for offering imprudent funds.
The plaintiffs in Hughes were participants in two 403(b) retirement plans sponsored by Northwestern University. The participants brought claims for breach of fiduciary duty against the University, the retirement plan committee, and the individuals who administered the plans. The participants alleged the fiduciaries breached their duty of prudence by: (1) allowing recordkeeping fees that were too high; (2) allowing plan investments with excessive investment fees; and (3) providing participants too many investment options (over 400!) which resulted in participant confusion and poor investment decisions.Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-01-28 12:51:222022-01-28 12:51:22The Tide is High…Keep Holding On For More Retirement Plan Fee Litigation
How Much is that (Investment) in the Window…A Higher Level of Fiduciary Oversight Could be Required for 401(k) Plan Brokerage Windows
/in 401(k) Plans, 403(b) plans, 457(b) plans, DOL, ERISA, Fees, Fiduciary Duties, Investments, Litigation, Retirement Plansby Brenda Berg
Fiduciaries of 401(k) plans and other retirement plans know that they must prudently monitor the investment options available to participants in the plan, but are they monitoring participants’ investments made through a plan’s brokerage window? Recent commentary from the Department of Labor (DOL) on cryptocurrency investments suggests maybe fiduciaries should be – and that the DOL may check in on that soon.[i]
A “brokerage window” or “self-directed brokerage account” can allow participants access to a broad array of investments beyond the regular investment menu under the plan. Most plan fiduciaries have not paid much attention to the actual brokerage window investments. This is not surprising given the DOL’s relative lack of focus on the matter. The DOL had issued guidance in 2012 that the investment disclosure portion of the fee disclosure rules could apply to brokerage window investments in certain cases but after pushback due to the administrative burdens, the DOL withdrew that guidance. In 2014 the DOL issued a Request for Information about brokerage window practices but no further guidance was issued. Read more
Can’t Touch This … DOL Discourages Plans From Investing in Cryptocurrency
/in 401(k) Plans, Defined Benefit Plans, DOL, ERISA, Fiduciary Duties, Investments, Retirement Plansby Becky Achten
Among the many phrases of ERISA, one that is familiar to investment fiduciaries is the requirement to choose investments with the care, skill, prudence, and diligence that a prudent person who is familiar with such matters would use. Recently the Department of Labor (DOL) issued guidance on how this prudence standard applies to fiduciaries who offer cryptocurrency investment alternatives to participants.
In Compliance Assistance Release 2022-01, the DOL reminds fiduciaries of their important role in selecting investments for participant direction. Plan fiduciaries must evaluate each investment option made available to participants to ensure they are prudent. Failure to remove an imprudent investment is a breach of duty. Read more
It’s So Easy To … Put Your Employees’ HSAs at Risk
/in Health & Welfare Plans, IRSby Elizabeth Nedrow
Whether you’re a fan of the Buddy Holly version or Linda Ronstadt’s, you’ve got to admit “It’s so easy to fall in love” is a catchy tune. Just as it’s easy to get that song stuck in your head, it’s also easy to put your employee’s health savings accounts (HSAs) at risk!
HSAs are one of the many “consumer directed” programs that are touted as putting employee’s health care within their own control. The idea is that if consumers have an amount of money to spend on their own healthcare, they’ll be savvy about what services they seek and how much they spend on them, with the ultimate goal of making the healthcare marketplace more efficient. Congress gives tax advantages to accounts that qualify as HSAs in order to encourage employers to offer and employees to maintain them. Read more
Bye Bye Bye . . . Or Not. Rehiring Retirees in Pay Status
/in 401(k) Plans, Defined Benefit Plans, IRS, Retirement Plansby Leslie Thomson
If your qualified pension plan does not provide for in-service distributions and has commenced benefit distributions to a retiree who experienced a bona fide retirement, the IRS says your plan may be able to rehire that retiree and let him or her continue to receive benefit payments upon rehire. Read more
Free Fallin’…With a Golden Parachute
/in Equity Compensation, Executive Compensation, IRSby Benjamin Gibbons
For those who have been involved in the sale of a company, Section 280G of the Internal Revenue Code may sound familiar. Section 280G governs what the IRS considers to be “golden parachute payments” and is generally applicable when a corporation is undergoing a change in control (including both stock sales and asset sales). At a high level, Section 280G imposes on disqualified individuals a 20% excise tax on excess parachute payments paid and a corresponding loss of deduction on such payments by the corporation. Read more
What Happens in a Small Town Stays in a Small Town … Until the DOL Doubles Down on Mental Health Parity Compliance
/in Benefits Plan Creation, Corporate Governance in Benefits, DOL, ERISA, Fiduciary Duties, Health & Welfare Plans, Legislation, Litigationby Alex Smith
The Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of Treasury (collectively, the Departments) recently issued their joint report to Congress regarding their Mental Health Parity and Addiction Equity Act (MHPAEA) enforcement activities as required under the MHPAEA and the Consolidated Appropriations Act, 2021 (CAA). The report contained insights regarding the DOL’s enforcement of the new MHPAEA reporting and disclosure requirements related to non-quantitative treatment limitations (NQTLs) established by the CAA. For additional information about the CAA’s new MHPAEA reporting and disclosure requirements, please see our previous blog post (as well as earlier blog posts). Read more
The Tide is High…Keep Holding On For More Retirement Plan Fee Litigation
/in 401(k) Plans, 403(b) plans, 457(b) plans, ERISA, Fees, Fiduciary Duties, Investments, Litigation, Retirement Plansby Brenda Berg
The U.S. Supreme Court’s ruling this week in Hughes v. Northwestern University will do nothing to stem the rising tide of retirement plan fee litigation. But the ruling doesn’t mean fiduciary breach claims are more likely to be successful either. Instead, the Court kept its ruling very narrow: a broad investment menu with some prudent funds will not automatically mean the fiduciaries are off the hook for offering imprudent funds.
The plaintiffs in Hughes were participants in two 403(b) retirement plans sponsored by Northwestern University. The participants brought claims for breach of fiduciary duty against the University, the retirement plan committee, and the individuals who administered the plans. The participants alleged the fiduciaries breached their duty of prudence by: (1) allowing recordkeeping fees that were too high; (2) allowing plan investments with excessive investment fees; and (3) providing participants too many investment options (over 400!) which resulted in participant confusion and poor investment decisions. Read more