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DOL Wins ERISA Appeal Authorizing its DOL Cybersecurity Subpoena

A recent Seventh Circuit Court of Appeals case reminds plan sponsors and service providers that ERISA grants the DOL broad authority to seek plan-related information reasonably relevant to an investigation from both fiduciaries and non-fiduciaries. Plan cybersecurity practices have been a recent focus of the DOL and resulted in its 2021 issuance of cybersecurity best practices for plan sponsors, fiduciaries, recordkeepers, and plan participants, which are available here.  In this case, the court ruled in favor of the DOL in connection with the DOL’s 2019 investigation into the processing of unauthorized distributions of plan benefits due to cybersecurity breaches in the ERISA plan accounts serviced by Alight Solutions LLC (“Alight”). The DOL indicated that Alight failed to report, disclose, and restore the distributions. Alight denied any knowledge of the breaches. Alight argued that the subpoena fell outside of the DOL’s authority because the DOL does not have the authority under… Continue Reading

Department of Labor Releases Spring 2022 Regulatory Agenda

The DOL recently released its Spring Regulatory Agenda, and it contains several important retirement and welfare plan initiatives for this year. Below is a summary of some of the material items that plan sponsors should be aware of, along with the DOL’s proposed schedule of rulemaking:  Final Pension Benefit Statement Lifetime Illustrations Rule (Final Rule scheduled for August 2022). Note: Under the DOL’s previously issued Interim Final Rule, the inclusion of lifetime illustrations once per year on pension benefit statements became effective in June 2022. Revised procedures for granting prohibited transaction exemptions (the DOL is currently reviewing comments from its Proposed Rule from March 2022). Amendment and restatement of the DOL’s Voluntary Fiduciary Correction Program to expand the scope of eligible transactions and to streamline correction procedures (Interim Final Rule scheduled for July 2022). Amendment of the regulatory definition of the term “fiduciary” under ERISA for those persons who render investment… Continue Reading

IRS Introduces Pre-Examination Compliance Pilot Program

Starting this month, when the IRS selects a tax-qualified retirement plan for examination, it will notify the plan sponsor by letter and provide the sponsor a 90-day window to review the plan document and operations for compliance with all plan qualification requirements.   If the sponsor’s review reveals any operational or documentary failures that would otherwise qualify for self-correction under the IRS’s Employee Plan Compliance Resolution System (“EPCRS”), the sponsor will have the opportunity to self-correct those mistakes. If the plan sponsor’s review reveals any operational or documentary failures that, absent the examination, would require correction under the voluntary correction program (“VCP”) component of EPCRS, the sponsor can request a closing agreement, and the IRS will use the VCP fee structure to determine the sanction amount the sponsor will pay under the closing agreement.  The sponsor must notify the IRS of the errors discovered and the correction within the 90-day window. The… Continue Reading

It’s Time For Your Fiduciary Check-Up!

Due to the recent surge in ERISA litigation against employers and executives alleging, among other things, that they breached their fiduciary duties to plans and participants by allowing service providers to charge excessive fees, some fiduciary liability insurers have reportedly revamped their processes for evaluating applications for fiduciary liability coverage. These changes may impact an employer’s ability to obtain adequate fiduciary liability coverage, thereby increasing the exposure to plan sponsors and their executives.   Periodic fiduciary check-ups are always a good idea, but in light of these developments, it is perhaps more important than ever that plan sponsors conduct periodic internal reviews to ensure they continue to meet their fiduciary duties to their plans and participants. Among other things, responsible plan fiduciaries should:  Determine whether the committee (or committees) responsible for administering the plan and overseeing plan investments meets regularly and properly documents its meetings, including information on not just what… Continue Reading

DOL Issues Guidance Cautioning 401(k) Fiduciaries Against Offering Crypto as an Investment Option

The DOL issued guidance reminding responsible 401(k) plan fiduciaries of their ongoing duty to monitor investments and cautioning that the DOL “has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies.” The DOL listed five reasons why cryptocurrency investments and their derivatives (collectively, “Crypto”) may not be a prudent selection at this time and threatened that 401(k) plan fiduciaries who allow Crypto as an investment option (even if through a brokerage window) “should expect to be questioned about how they can square their actions with their duties of prudence and loyalty.” Accordingly, 401(k) plan fiduciaries who are contemplating including or retaining Crypto as a plan investment option should factor this DOL guidance into their decision-making process.   Compliance Assistance Release No. 2022-01 is available here.

DOL Supplements Prior Information Letter on Private Equity in Designated Investment Alternatives

The DOL recently published a supplement statement (the “Supplement Statement”) relating to its June 3, 2020 Information Letter (the “Letter”) regarding the use of private equity investments in designated investment alternatives for individual account retirement plans. The Letter stated that a plan fiduciary would not violate the fiduciary duties under ERISA solely due to the plan fiduciary’s offering of a professionally managed asset allocation fund with a private equity component as a designated investment alternative, subject to the conditions set forth in the Letter. The DOL noted that the Letter was not an endorsement of such private equity investments and that plan fiduciaries must determine whether such an investment is prudent and made solely in the interests of plan participants and beneficiaries. Our prior blog post regarding the Letter is available here. The Supplement Statement clarified that plan fiduciaries should not misread the Letter “as saying that [private equity]—as a… Continue Reading

Retirement Plan Cybersecurity—Truth, Justice, and the DOL Way

At a time when digital security and cyberattacks are key concerns for individuals and businesses alike, plan sponsors and other plan fiduciaries have a key role to play in protecting retirement plan assets and data. Otherwise known as “responsible plan fiduciaries,” these individuals and certain plan service providers have a fiduciary duty to ensure there is a robust cybersecurity program in place to keep plan assets and data secure. As we previously reported on our blog here, the DOL recently issued guidance in this arena to keep employers and plan fiduciaries compliant. The DOL is now specifically targeting employers and plan fiduciaries who fail to adequately protect employee retirement plan assets from hackers and cyberthieves, so the time to act is before the DOL issues a plan audit and before participants are victimized by cybercriminals or hackers. The DOL requires that plan fiduciaries responsible for prudently selecting and monitoring service… Continue Reading

DOL Rules that Audio Recordings and Transcripts of Telephone Conversations with Plan?ÇÖs Insurer may have to be Disclosed

The DOL recently issued Information Letter 06-14-2021 addressing whether the claims procedure regulations under ERISA require plan fiduciaries to provide, upon request, the audio recording and transcript of a telephone conversation between a claimant and a representative of the plan?ÇÖs insurer relating to an adverse benefit determination. The claims regulations under ERISA provide that a document, record, or other information is relevant to a claim for benefits, and therefore must be provided to a claimant upon request, if it (i) ?Ç£was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination?Ç¥ or (ii) ?Ç£demonstrates compliance with the administrative processes and safeguards.?Ç¥ The DOL concluded that a recording or transcript of a conversation between a claimant and a plan?ÇÖs insurer would not be excluded from the ERISA disclosure requirements on the… Continue Reading

Group Health Plan Service Contracts Trigger Compensation Disclosures

Among the new requirements that are, or soon will be, imposed on employer-sponsored group health plans subject to ERISA (?Ç£GHPs?Ç¥) by the Consolidated Appropriations Act of 2021 (the ?Ç£CAA?Ç¥) are compensation disclosure requirements which apply to GHPs and certain of their third-party service providers. Background ERISA contains prohibitions on certain transactions between an employee benefit plan, including a GHP and a party-in-interest, such as a third-party service provider.?á Section 408(b)(2) of ERISA provides an exemption from the prohibited transaction rules for reasonable contracts entered into by a plan and a service provider for necessary plan-related services (?Ç£Contract?Ç¥), provided that no more than reasonable compensation is paid for such services (the ?Ç£Prohibited Transaction Exemption?Ç¥). The relevant fiduciary of the plan under ERISA (the ?Ç£Fiduciary?Ç¥) is responsible for determining whether compensation to be paid under the Contract is reasonable in order to comply with the Prohibited Transaction Exemption. Disclosure Requirement under the… Continue Reading

The DOL Announces a Non-Enforcement Policy on Final ESG Investment and Proxy Voting Rules

On March 10, 2021, the DOL released an enforcement policy statement (the ?Ç£Statement?Ç¥), which announced that until the DOL publishes further guidance, it will not enforce the recently issued ?Ç£Financial Factors in Selecting Plan Investments?Ç¥ final rule (the ?Ç£ESG Rule?Ç¥) and the ?Ç£Fiduciary Duties Regarding Proxy Voting and Shareholder Rights?Ç¥ final rule (the ?Ç£Proxy Voting Rule?Ç¥, together with the ESG Rule referred to herein as, the ?Ç£Final Rules?Ç¥). The ESG Rule generally required plan fiduciaries to select investments and investment courses of action based solely on consideration of ?Ç£pecuniary factors,?Ç¥ and the Proxy Voting Rule set forth a plan fiduciary?ÇÖs obligations when voting proxies and exercising other shareholder rights in connection with plan investments. The implementation of the ESG Rule in particular has caused concerns for plan fiduciaries about the use of environment, social, and governance considerations in its investment decisions and has been met with increasing criticism from a… Continue Reading

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