Category Archives: 401(k)

The CARES Act: Helping Your 401(K) Participants During the Coronavirus Crisis


401(k), plan sponsors, recordkeeper, service providers

Special Distributions to Qualified Participants

Updated through July 28, 2020
By Fred Reish, Bruce Ashton and Betsy Olson

Our first article discussed CARES Act provisions designed to help your 401(k) participants with temporary loan enhancements.  Here we discuss a second provision of the Act that can help participants who are affected by the coronavirus (called “qualified individuals”*).  This is a special coronavirus-related distribution (a CRD).  Though we discuss this in the context of 401(k) plans, the CRD provision applies to all qualified plans, 403(b) plans and IRAs as well.  NOTE: This article has been updated to reflect guidance issued after the original publication, in Internal Revenue Service (IRS) Notice 2020-50. 

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The CARES Act: Helping Your 401(K) Participants During the Coronavirus Crisis


401(k), plan sponsors, recordkeeper, service providers

The Enhanced Loan Provision for Qualified Participants

Updated through July 28, 2020
By Fred Reish, Bruce Ashton and Betsy Olson

With the spread of the coronavirus and the resulting closures and cutbacks, many 401(k) participants are working reduced hours, but are not considered to be terminated for purposes of ERISA. Furloughs and similar required leaves are common for businesses whose employees interact directly with retail customers, such as restaurants, stores, and gyms.

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The Coronavirus Crisis: What Plan Sponsors Should Do


401(k), fiduciary, investment adviser, plan sponsors
By Fred Reish and Bruce Ashton

The Coronavirus pandemic is disrupting everyone’s personal and financial lives. While our health, and that of our families and friends, is paramount, we realize that the sudden and large investment losses in the 401(k) plans that you sponsor – and act as fiduciaries for – present issues more challenging than those typically encountered by employers and plan committees.  This article suggests steps that you can take as fiduciaries to address those challenges.  The article also applies to advisors because it addresses questions they may get from plan sponsors.

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Best Interest Standard of Care for Advisors #15


401(k), best interest
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Best Interest: Rollover Recommendations (Part I)

The SEC has issued its final Regulation Best Interest (Reg BI), Form CRS Rule, RIA Interpretation and Solely Incidental Interpretation. I am discussing the SEC’s guidance in a series of articles entitled “Best Interest Standard of Care for Advisors.”

This article discusses how the Care Obligation in Reg BI applies to recommendations to roll over accounts in 401(k) plans to IRAs. When Reg BI applies, beginning June 30, 2020, rollover recommendations to participants in “workplace retirement plans” will be subject to the Best Interest standard.

It’s important to note, though, that Reg BI still permits education and information that stops short of being a recommendation. However, the education and information cannot be a disguised recommendation.

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Best Practices for Plan Sponsors #12


401(k), 403(b), fiduciary, recordkeeper
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Lessons Learned from Litigation (#5)—The Johns Hopkins Case

This is the twelfth in a series of articles about Best Practices for Plan Sponsors. To be clear, “best practices” are not the same as legal requirements. Instead, they are about better ways to manage retirement plans. In many cases, though, “best practices” also are good risk management tools because they should exceed legal standards, address areas of concern, or anticipate future developments as retirement plans and expectations evolve.

Plan sponsors should be aware of the latest trends in fiduciary litigation to help manage the risk of being sued and, if sued, the risk of being liable. In my past four plan sponsor posts, Best Practices for Plan Sponsors #8, #9, #10 and #11, I discussed the lessons learned from the conditions in the settlement agreements for the Anthem, Vanderbilt, BB&T and ABB cases. This article—about the Johns Hopkins settlement agreement—is another example of the importance of using appropriate share classes and the monitoring of compensation of service providers . . . and more.

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3 lessons for advisers from 401(k) and 403(b) class action settlements


401(k), 403(b)

Fred Reish writes a quarterly column for Investment News. This quarter’s article points out that retirement plan committees rely on their advisers to keep them informed of new developments related to 401(k) and 403(b) plans, including advice about risk management. To help advisers fulfill those expectations, this article discusses the recent settlements in the Anthem 401(k) and Vanderbilt 403(b) cases.

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Best Interest Standard of Care for Advisors #8


401(k), 403(b), registered investment advisers, SEC

Senior Clients: The SEC is looking at practices of RIAs

I am writing two series of articles that together are called “The Bests.” One is about Best Practices for plan sponsors, while the other is about the Best Interest Standard of Care for advisors. Each series is numbered separately to make it easier to identify the subject that is most relevant to you.

This is the eighth of the series about Best Interest Standard of Care for Advisors.

The SEC has initiated examinations of investment advisers concerning their practices in working with Senior Clients. According to the SEC, a “ ‘Senior Client’ is defined as any retail advisory client who is age 62 or older, retired, or transitioning to retirement, including accounts of deceased clients, and retail clients in joint accounts with at least one individual meeting this definition.”

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Best Practices for Plan Sponsors #7


401(k), best practices, fiduciary, plan sponsors, recordkeeper

Plan Success by the Numbers (Part 1)

This is the seventh of the series about Best Practices for Plan Sponsors.

Most companies have budgets for their business operations . . . and then regularly compare budget-to-actual. In other words, they compare their actual expenses to the budgeted amounts to see if they are on track to accomplish their financial goals. That’s pretty standard, and there is nothing remarkable about it. But, why don’t plan sponsors and fiduciaries, for example, plan committees, use that same approach for their 401(k) plans? I have a theory about that. But, before I explain my theory, let me say that I believe that plan committees should have budgets, or goals, and should measure their success in reaching those goals.

My theory is that 401(k) plans don’t set goals for plan success because 401(k) plans were originally viewed as the “employees’ plan.” The idea was that employees could do what they wanted to do, since the plan was a supplemental savings plan. That approach made sense when pension plans were more popular. However, now that 401(k) plans have become the primary retirement plan for most employers and employees, it seems fairly obvious that the burden of success of 401(k) plans needs to fall primarily on employers and fiduciaries.

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Open Questions on Open MEPs


401(k), DOL

One of the shiny new coins of the 401(k) realm is “Open MEPs.” It’s anticipated that Congress will pass legislation this year that permits Open MEPs. Legislation is needed because of DOL guidance that, in essence, prohibits MEPs that are “open” to all employers. But, what is an Open Multiple Employer Plan? What other kinds of MEPs are there? How do the people that set up MEPs get paid? Here is an article that I, and my partners, Bruce Ashton and Josh Waldbeser, wrote on that subject for ASPPA.
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Best Practices for Plan Sponsors #6


401(k), best practices, DOL, fiduciary, plan sponsors, prudent

Why Wait Until After You are Sued?

This is the sixth of the series about Best Practices for Plan Sponsors.

I am surprised that, after all of the fiduciary litigation against 401(k) plan sponsors, many plan sponsors and their committees have not taken the basic steps to minimize the risk of being sued, or if sued, of being liable. In most of the settled cases, the plaintiffs’ class action attorneys require that certain conditions—or “best practices”—be adopted by the plan fiduciaries. And, in settlement after settlement, those conditions are, by and large, the same. That raises the obvious question, why haven’t plan committees reviewed these cases and instituted the practices required by the settlement agreements?

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