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The tidal surge of funds flowing from actively managed funds into passive funds reached a tipping point in 2019, when Morningstar preliminary data indicated that passive U.S. equity assets would surpass active equity assets for the first time.
Plan sponsors and retirement plan committees are likely to encounter a myriad of industry-related naming devices and designations. It is important that they understand what each means in terms of definition, background, and practical impact/importance to the plan, the plan’s fiduciaries, and the plan’s participants.
The template Investment Policy Statement (IPS) MCF makes available to Clients is crafted by a team of ERISA attorneys and investment professionals. Throughout the years, our organization receives myriad versions of the template IPS as edited by a vast number of clients’ in-house counsel as well as ERISA counsel. The ERISA team takes the best of the ideas and incorporates them into a revised IPS template as appropriate. In essence the template IPS is the product of hundreds of ERISA attorneys whose input is all taken into consideration.
Investment refresh is an optional extension to automatic enrollment whereby participants would be notified that, as of a certain date, their current investment allocation will be transferred to the plan’s qualified default investment alternative (“QDIA”) investment. The QDIA is frequently an age/risk appropriate target date fund (“TDF”). Any participant may opt out of this action prior to or at any time after the transfer date.
The coronavirus relief includes a “temporary rule preventing partial plan terminations” for plan sponsors of defined contribution retirement plans. The provision specifically states, “A plan shall not be treated as having a partial termination (within the meaning of 4119(d)(3) of the Internal Revenue Code of 1986) during any plan year which includes the period beginning on March 13, 2020 and ending on March 31, 2021, if the number of active participants covered by the plan on March 31, 2021 is at least 80 percent of the number of active participants covered by the plan on March 13, 2020.”
Department of Labor (DOL) enforcement recoveries are on the rise. A recent DOL report indicates that DOL recoveries have doubled since 2018 and tripled since 2016 (https://www.investmentnews.com/dol-retirement-plan-recoveries-198660). As a result, fiduciary liability premiums have increased 35% since last year (https://www.investmentnews.com/fiduciary-insurance-costs-401k-litigation-198407).