On May 5, 2022, Senator Tuberville (R-AL) introduced the “Financial Freedom Act of 2022.” The bill would push back on recent positions the Department of Labor has taken with respect to, e.g., “climate related financial risk,” private equity, and cryptocurrency investments, particularly in participant directed defined contribution plans.
Stock markets tumbled in April, but sharply higher interest rates offset most or all of the impact for pension sponsors. Our two model plans1 saw mixed experience on the month, with Plan A treading water, remaining up almost 5% for the year, while the more conservative Plan B lost 1% last month and is now even through the first four months of 2022:
On January 24, 2022, in a unanimous decision, the Supreme Court vacated the Seventh Circuit’s decision in Hughes v. Northwestern – an ERISA prudence case implicating a number of issues that have been raised in 401(k) fee litigation. The Court rejected the Seventh Circuit’s reliance on the availability of lower cost alternatives as a defense to claims that the cost of certain funds and of plan recordkeeping was unreasonably high, remanding the case for consideration under the rule in Tibble v. Edison, that a fiduciary has an obligation to remove imprudent investments.
Until 2021, the main drivers of retirement finance/retirement income were interest rates and asset performance. The other variable affecting nominal performance, mortality, has been (and is expected to continue to be) relatively stable.
We are (concurrently) publishing an update to our article analyzing the effect of inflation on retirement income to include data through the first quarter 2022. This is an update to our more technical article, discussing, generally and theoretically, the issues of increased inflation/inflation risk present for both DB and DC plans.
Annuity Purchase interest rates jump 60 basis points – the largest month-to-month increase we have ever observed.
On April 5, 2022, the House Education and Labor Committee, by a 29-21 party line vote, approved the Democrat-sponsored Protecting America’s Retirement Security Act (PARSA). The bill now goes to the House floor for consideration.
On March 29, 2022, the House of Representatives, by a nearly unanimous (414-5) vote, approved the Securing a Strong Retirement Act of 2022 (SECURE 2.0). The bill represents a synthesis of the Ways and Means Committee’s Securing a Strong Retirement Act of 2021 and the Education and Labor Committee’s RISE Act.
The DOL released Compliance Assistance Release No. 2022-01 401(k) “Plan Investments in ‘Cryptocurrencies.” which generally cautions against 401(k) plans including crypto and other digital assets in a 401(k) plan.
Market volatility doesn’t deter Plan Sponsors from derisking as the PRT market remains very active.