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Our Perspective

DOL Motion To Dismiss In Case Challenging Crypto Guidance

On September 12, 2022, the Department of Labor filed a motion to dismiss in ForUsAll, Inc. v. Walsh, a lawsuit by a 401(k) service provider challenging DOL’s March 10, 2022, “Compliance Assistance Release” (the “Release”) generally cautioning against 401(k) plans including “cryptocurrencies” (and other “digital assets” including “tokens,” “coins,” “crypto assets,” and “derivatives thereof”) in a 401(k) plan fund menu or brokerage window.

August 2022 Pension Finance Update

Pension finances were mixed during August, as higher interest rates offset the impact of falling stock markets. Both model plans1 we track were close to even last month: Plan A improved less than 1% and is now up almost 5% for the year, while the more conservative Plan B lost a fraction of 1% in August and is now down 1% through the first eight months of 2022:

August Annuity Purchase Update 2022

Pension Risk Transfer market activity was vigorous thus far in 2022, with a 71% surge in total premium compared to the first half of 2021.

Post-Hughes v. Northwestern – plaintiffs win in three motion-to-dismiss decisions

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.

Retirement income and inflation – April 2022 update

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.

SECURE 2.0 Approved by House in 414-5 vote

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.

Outlook 2022 – The Retirement Policy agenda – Highlights

In this article, we briefly consider the 2022 retirement policy legislative, regulatory, and litigation agenda. Most of these issues are carryovers from 2021, and we have discussed them at length elsewhere. We are, therefore, going to keep our preview of 2022 brief, focusing on the “highlights,” and providing links to our prior, more comprehensive treatment.

Measuring UVBs for variable-rate premiums – the alternative vs. standard method election due October 15, 2022

Defined benefit plan sponsors that (1) are currently using the alternative (24-month average) method to determine unfunded vested benefits (UVBs) for purposes of calculating Pension Benefit Guaranty Corporation variable-rate premiums, and who (2) have the ability to elect to switch to the standard (spot-rate) method, may want to consider electing to switch to the standard method for 2022 (that election generally must be made (for a calendar plan) by October 15, 2022). While that election will generally not have a significant effect on 2022 variable-rate premiums, it is likely that it will (because of 2022 interest rate increases) reduce 2023 premiums significantly. And there are some “pros and cons” to making that election this year.

Seventh Circuit upholds DOL cybersecurity subpoena against Alight requiring disclosure of client/plan name

On August 12, 2022, the Seventh Circuit Court of Appeals upheld a decision by a lower court in Walsh v. Alight Solutions LLC enforcing (with modifications) an administrative subpoena by the Department of Labor against Alight. The subpoena requires Alight to produce documents in connection with alleged cybersecurity breaches at Alight with respect to the retirement and health plans for which it provides recordkeeping services.

Law firm files a series of complaints targeting use of BlackRock TDF

Recently, participants and former participants in some of the largest 401(k) plans in the US have sued plan fiduciaries claiming that the use of one of the largest target date funds, the BlackRock LifePath Funds, was imprudent, because those funds “underperformed” alleged “comparators.”

These sorts of fiduciary imprudence/TDF underperformance claims have emerged as a second major line of attack (after the attack on fund and recordkeeping fees that began in the early 2000s) by plaintiffs lawyers on 401(k) plan fiduciaries.

July 2022 Pension Finance Update

Pension finance enjoyed a strong month in July due to rising stock markets. Both model plans1 we track gained ground last month: Plan A improved almost 2% and is now up 4% for the year, while the more conservative Plan B added 1% and is now down less than 1% through the first seven months of 2022: