Looks like those hoping for some clarity on a threshold issue involving ERISA fee litigation will have to wait for another day.
I’m referring, of course, to last week’s ruling by the Supreme Court on the case of Hughes v. Northwestern University et al.—a case that the law firm of Schlichter Bogard & Denton—which seems to have “invented” this class of excessive fee litigation—said was having a “chilling effect” on this type of lawsuit, more precisely their ability to proceed to trial (or settlement). Consequently, ERISA fiduciaries were waiting anxiously for a ruling on the case, which involved allegations that Northwestern University had failed to comply with its fiduciary responsibilities with regard to the options available to plan participants.
Indeed, the allegations in this case weren’t all that different from the litany transgressions outlined in any number of such cases over the years—but in making their case to be heard by the nation’s highest court the plaintiffs’ attorneys (the aforementioned law firm)—had noted (complained?) that suits “with virtually identical” claims were being dismissed out of hand, while other courts were allowing them to go to trial. This they claimed was “…not a factual disagreement about whether the specific allegations at issue clear the pleading hurdle,” but rather “a legal disagreement about where that hurdle should be set.”
Consequently. some clarity as to how, and how much, must be established by those who file the suits before they get to take the issue(s) to trial is timely, to say the least. Or, said another way, how much is “enough.”
Rather, the court had merely determined that there were some prudent alternatives on the menu, and that the participants could choose them if they had an issue with those that (allegedly) weren’t as expensive and that, for that district court, was enough.
per Brian Graff who has spent 25 years at ASPPA and got some recognition for it at the end of this session.
Hispanic and Black coverage in 401(k) plans is low and if this situation it does not improve private sector plans could be eliminated in favor of a government option as in Australia. States (first Oregon, then CA, and 8 others) are setting up their own plans and forcing companies to be in it if they don’t have their own plans. This is good for us in that companies do not want to give their money to states (especially in CA and NJ) so they set up their own plans that need to administered by us.
Proposal that may be effective in 2023 is requiring all companies with at least six employees in the last two years to set up a 401(k) plan with auto-enrollment at 6% going up to 10%. Pie would increase by 62 million participants (from 95 million now) and 600,000 plans (on top of 800,000 now).
Mega-Roth, backdoor IRAs and large retirement account balances would be limited under legislation approved Sept. 15 by the House Ways and Means Committee.
In a near party-line vote of 24-19, the changes were approved as part of the $3.5 trillion Build Back Better Act reconciliation recommendations that address everything from implementing infrastructure development and green energy incentives, to expanding Medicare, offering paid family and medical leave, and extending Trade Adjustment Assistance.
These revenue-raising retirement proposals are included in Subtitle I, “Responsibly Funding Our Priorities,” along with a host of other individual and corporate tax increases. The Joint Committee on Taxation estimates that these tax changes would raise approximately $2.1 trillion over 10 years to help pay for the fiscal year 2022 budget reconciliation bill. (For a more detailed description of the retirement-based revenue proposals, click here.)
Author(s): Ted Godbout
Publication Date: 16 Sept 2021
Publication Site: American Society of Pension Professionals & Actuaries
Contribution Requirements. Callan expects that higher discount rates and longer periods for shortfall amortization probably will reduce pension plan sponsors’ contribution requirements. Further, they expect that effect to be greatest for plans with smaller normal costs and/or larger funding shortfalls. Callan continues that if smoothing is ever fully phased out, they anticipate contribution requirements would increase as discount rates “finally decline from historical highs to match market conditions,” but they also add that the longer amortization period “does provide a permanent reduction in annual cash requirements.”
The changes to the minimum funding requirements, Cheiron says, will result in lower minimum funding requirements. They will not affect segment rates used for other purposes such as calculation of lump sum benefits and the maximum deductible limit.
2021 Levels. For purposes of the WEP [windfall elimination provision], the amount of substantial earnings in covered employment or self-employment needed for a year of coverage (YOC) is adjusted annually by the growth in average earnings in the economy, provided a cost-of-living adjustment is payable. In 2021, the amount of substantial earnings in covered employment or self-employment needed for a YOC is $26,550.
For people with 20 or fewer YOCs who become eligible for benefits in 2021, the WEP reduces the first factor from 90% to 40%, resulting in a maximum reduction of $498 (90% of $996 minus 40% of $996). For each year of substantial earnings in covered employment or self-employment in excess of 20 years, the first factor increases by 5%. For example, the first factor is 45% for those with 21 YOCs. The WEP factor reaches 90% for those with 30 or more YOCs and at that point is phased out.
If the recommendations of the Wisconsin Retirement Security Task Force are followed, the Dairy State could join others that have implemented a state-run plan to provide coverage for workers whose employers do not offer a retirement plan.
The task force, headed by Wisconsin State Treasurer Sarah Godlewski, issued its report on Feb. 10. The task force makes a variety of recommendations, including establishing a state-run program dubbed “WisconsinSaves.” Gov. Tony Evers (D) had signed Executive Order 45 on Sept. 16, 2019, creating the task force to address retirement security in the state.
“Wisconsin is in trouble when it comes to retirement security,” says the report, adding that “even before the COVID-19 pandemic, our retirement system was not working for a significant number of Wisconsin workers.” It notes that in 1983, traditional pension plans covered 62% of employees in Wisconsin, but that by 2016, that had shrunk to 17% of them. In addition, the task force says, AARP found that:
Legislation before the House Ways & Means Committee plans to help pay for a multiemployer plan bailout by utilizing a budget “gimmick” that would freeze retirement plan contribution limits—though not for collectively bargained plans.
More specifically, the Butch Lewis Emergency Pension Plan Relief Act of 2021, included as subtitle H of a nine-part package that the committee plans to mark up this week, would impose a cost-of-living freeze on:
the Code Section 415(c) annual contribution limit for defined contribution plans;
the Section 415(b)(1)(A) annual defined benefit limit; and
the Section 401(a)(17) annual compensation limit.
This appears to be designed to fill a budget hole in the 10-year scoring window—and as such would freeze these limits starting in calendar year 2030. Ironically, it’s scored to lose money in the years leading up to the effective date, apparently anticipating that individuals will be inclined to increase contributions before the limits are imposed.