• 401(k) Cyber Theft - Who Is Responsible?

    2/11/21

    Courts are now sorting out who is responsible when an impostor diverts a participant's retirement funds with fraudulent distribution requests.

    Can the employer, as the plan sponsor, be held responsible when an outside service provider honors a suspicious distribution request?

    One federal court recently dismissed such a case against the employer because the plan's website provider was alleged to have processed and authorized a fraudulent online distribution request without adequate participant confirmation. However, employers are plan fiduciaries with a duty to select and monitor the performance of plan service providers. This opens the door to potential claims against employers for their alleged failure to pick service providers with adequate cyber security practices - even if the employer's own data systems are secure and well maintained.

    What should an employer do about this?

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  • Cybercriminals May Be Stalking Your 401(k) Plan

    1/5/21

    At least two pending federal cases deal with attacks on individual 401(k) plan accounts. The fact patterns are similar: a participant submits an electronic benefit withdrawal request to the employer or the plan's record keeper. The request is passed on to the plan's custodian for implementation.

    The custodian, as holder of the plan assets, then transfers the requested funds to the participant's bank account This is a routine transaction and the distribution has been implemented as intended.

    So what is the problem?

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  • Is Your 401(k) Plan Too Complicated?

    11/18/20

    Recent cases against university-sponsored retirement plans include allegations that these plans are complicating the investment decisions of participants because the plans offer too many investment choices.

    As alleged in one complaint, the plans provide so many options that participants are left with a "virtually impossible burden" of deciding where to invest their retirement funds.

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  • Coronavirus Benefits Lawsuits Have Begun

    9/2/20

    Former participants in a 401(k) profit sharing plan have filed suit in Federal court in New Jersey seeking recovery of investment losses allocated to their accounts by the employer-sponsor.

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  • What Health Plan Fiduciaries Need to Worry About

    2/25/20

    Much has been written about excess fee claims involving 401(k) and 403(b) retirement plans. In fact, a St. Louis law firm has specialized in filing class action excess fee cases around the country. So, the personal risk to retirement plan fiduciaries has been well documented.

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  • ERISA 2019 Hall of Shame

    1/14/20

    Doctor X’s various schemes to deprive employees of their plan benefits reduced their lump sum payments by almost one-half! This could leave a lot more money for Doctor X – who also was a participant in the plan.

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  • IRS Announces Painless Retirement Plan Fix

    12/18/19

    What can you do if your retirement plan operations don’t square with the provisions of your plan document?

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  • ERISA Fiduciary Claim Barred By Employee Release

    11/5/19

    The U.S. District Court for the Southern District of Iowa granted Bankers Trust’s motion for summary judgment. In doing so, the court determined that the language of the Release was so broad that it included ERISA claims, and that Bankers Trust was protected by the Release as a person “acting on behalf of” Telligen stockholders.

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  • Who Owns A Participant's Personal Information?

    10/24/19

    Service providers for 401(k) and other retirement plans require access to personal data on participants including name, age, address, date of hire, compensation and possibly social security number. This data is necessary to allow plan administrators and recordkeepers to properly allocate plan contributions and earnings to individual participant accounts, to prepare participant statements and for income tax reporting purposes.

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  • Retirement Plan Records and the Forever Rule

    9/20/19

    Retirement plan retention requirements are pretty clear. The retention lapses that do occur both in the Estate of Barton case and in our experience usually result from business acquisitions where the acquiring business either does not receive or fails to retain the “forever” records of the acquired entity. So, any due diligence checklist in a business acquisition should contain a detailed inquiry about the target’s “forever” records. And yes, you can retain your own forever records electronically in accordance with applicable Department of Labor regulations.

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  • Should 401(k) Fiduciaries Offer In-Plan Annuities?

    8/14/19

    Legislative concerns about 401(k) participants who are financially unprepared for retirement has resulted in a number of specific provisions intended to encourage participants to save more. Those provisions include tax credits for small businesses that include automatic enrollment provisions in their 401(k) plans, expanded availability of multiple employer plans, 401(k) eligibility for tenured part-time employees, postponed start date for required minimum distributions from age 70½ to 72, and penalty free participant withdraws of up to $5,000.00 upon the birth or adoption of a child.

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  • Surprise Billing - And What You Can Do About It

    7/22/19

    Roughly one in six emergency room or hospital visits results in surprise billing, although the odds vary significantly depending on where you live. Such charges can be significant as the out-of-network doctor typically charges a full “list price” for services. Consumer bankruptcies have resulted because in some cases surprise billing has amounted to tens of thousands of dollars.

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  • Court Setback for Association Health Plans

    5/8/19

    The Department of Labor issued guidance in mid-2018 which allowed employer associations to adopt a single multiple employer health plan to cover a greater number of employers and their employees. These Association Health Plans (or “AHPs”) were intended to allow more smaller employers and self-employed individuals to band together in order to secure simpler health plan arrangements and cheaper coverage in the marketplace (our February Benefits Bulletin provides some of the details here).

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  • Court Case Clears the Way for Illinois Secure Choice Program

    4/12/19

    The Illinois Secure Choice Savings Program requires employers with at least 25 Illinois employees to set up a state-sponsored IRA based retirement program if they do not already have a retirement plan. Although the program is funded solely by payroll contributions from employees, subject employers must go through an online registration and enrollment process, forward payroll contributions to the program custodian and provide program information to employees.

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  • Will a MEP Plan Solve Your 401(k) Fiduciary Problems?

    2/26/19

    Department of Labor proposed regulations would allow certain employers (including employer groups or associations) and business owners with no employees to share a single 401(k) plan. This arrangement would transfer administrative and compliance responsibility to the sponsor of the retirement plan under a multiple employer plan, or “MEP.”

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  • ERISA 2018 Hall of Shame

    1/24/19

    In McLain v. Poppell, it was alleged that Dr. Poppell, owner of the Emerald Coast Eye Clinic and trustee of its 401(k) plan with total investment discretion, invested plan assets primarily in VirnetX, a publicly traded company whose principal business was acting as a “patent troll” (a company that acquires patents and uses them primarily to sue other businesses for alleged patent infringement).

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  • ERISA Fiduciary Duties: How to Help Your Clients

    11/19/18

    Whether you are an accountant, lawyer, banker, business consultant or investment advisor, many of your business clients will have a 401(k) or other qualified retirement plan. You may not specialize in retirement plans, but consider the following as the kinds of things you might do to assist your clients and prospects with their retirement plans:

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  • Are No Fee Funds A No-Brainer?

    10/24/18

    No fee mutual funds are here!

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  • Beyond Investments: The Other 401(k) Responsibilities

    9/17/18

    We’ve all read about the lawsuits questioning an employer’s 401(k) investment fund selections and related claims of excessive fund costs. And typically a plan’s professional investment advisor (yes – you should have one unless you have an investment professional on staff) meets with company representatives periodically to discuss a detailed report on fund investment performance and any recommended changes in the plan’s investment fund selections. So, your 401(k) plan files bulge with investment-related materials (and they should!). But what about the rest of an employer’s 401(k) responsibilities?

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  • Is Illinois Secure Choice Your Best Option?

    8/6/18

    Employers with 25 or more employees in Illinois will be subject to the Secure Choice Savings Program Act (the “Act”) if they do not already have an employer sponsored retirement arrangement like a 401(k) plan. For such employers with 500 or more Illinois employees that have been in business for at least two years, the compliance deadline is November 1, 2018. By that date, these employers must register at the Secure Choice website here and enroll their employees. Subject employers with fewer than 500 Illinois employees have compliance dates deferred until July 1, 2019 (100-499 employees) and November 1, 2019 (25-99 employees).

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  • Fund Options That Protect 401(k) Fiduciaries

    6/29/18

    Fiduciaries who handle investments for 401(k) and other self-directed retirement plans (such as 403(b) plans for not-for-profit organizations) are increasingly exposed to liability for their investment decisions. Those fiduciaries, including employers and any individuals charged with investment decision making, are being second guessed for the investment funds they select. Plan fiduciaries have been sued for a variety of allegations ranging from excessive fees, self-dealing, lack of transparency and poor investment performance. Some of these actions are filed as class actions, and like other fiduciary claims, they assert personal liability against plan fiduciaries.

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  • Are You A "Checkbook Fiduciary?"

    5/10/18

    There are judicial decisions holding that a business owner can be personally responsible when the owner has control over company finances and exercises such authority by paying company creditors instead of making required payments to a welfare benefit plan. But a recent decision of the U.S. Court of Appeals for the Ninth Circuit holds that an employer does not become an ERISA fiduciary merely because it breaks its contractual obligations to make welfare plan contributions (see Glazing Health & Welfare Fund v. Lamek).

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  • DOL Decrees New Rules For ESOP Fiduciaries

    4/9/18

    All transactions involving the purchase or redemption of employer stock by an Employee Stock Ownership Plan (“ESOP”) must be conducted at fair market value. This assures that the statutory prohibited transaction exceptions available to compliant ESOPs will apply. Fair market value for private companies must be determined by an independent appraisal. This would include annual valuations and, more important, the valuation of the ESOP’s critical acquisition of the employer stock that it is required to maintain as its “principal investment.”

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  • Coach Will Cost Alabama $2 Million More Under Tax Reform

    2/7/18

    Nick Saban is the highest paid college football coach in the country. In 2017, he was reportedly paid $11 million by the University of Alabama. If he is paid that amount in 2018, the recently passed Tax Cuts and Jobs Act (the “Act”) will impose an excise tax on Alabama, his employer, of over $2 million!

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  • Does your Retirement Plan need a 3(16) Fiduciary?

    1/11/18

    Your retirement plan may have an outside third party administrator (TPA) to assist with plan administration. However, a TPA typically is not a fiduciary to the plan and does not act as “plan administrator” (that’s usually the employer itself as provided in a typical TPA services agreement). This leaves the employer ultimately responsible for the plan’s compliance with all applicable legal requirements. So, even if your TPA makes a mistake, the employer is likely on the hook for any resulting liability because the TPA’s services agreement usually imposes damage limits and employer indemnities that protect the TPA.

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