Nevin's Data "Points"

Has an index fund become a presumption of prudence? You may remember that no so very long ago, courts had determined that the holding of employer stock in Employee Stock Ownership Plans (ESOPs) was entitled to a presumption that their fund management was prudent under a “presumption of prudence” standard. That standard was rejected by the U.S. Supreme Court in 2014 in favor of a new one that required plaintiffs to articulate alternatives that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it. Last October a federal appeals court overturned a district court decision regarding an excessive fee suit brought against Putnam Investments by participants in its 401(k) plan regarding the prevalence of proprietary funds in its own plan menu. The district court had ruled that the plaintiffs failed to identify any specific circumstances in which the company and its 401(k) plan put their own interests ahead of the...

A month ago, when we wrote about the 61 st  Annual Survey of Profit Sharing and 401(k) Plans from the Plan Sponsor Council of America (PSCA), there were several key points highlighted – but there are some interesting findings you might have overlooked. Perhaps the most significant finding of that survey – the longest running of its kind – was a record employer contribution rate (5.1% of pay) and a total savings rate in excess of 12%, the highest percentage ever recorded in the history of the survey. Also noteworthy was that nearly three-fourths (73.1%) of plans now retain an independent investment advisor to assist with fiduciary responsibilities – up from 69.5% in 2016. But here are some findings from the survey of plan sponsors that you might have missed. There’s less ‘waiting.’ Once upon a time, the norm was to have participants wait a year before letting them participate in the 401(k) plan. There was administrative logic in that decision – after all, tur...

This is the time of year when resolutions for the cessation of bad behaviors and the beginning of better ones are in vogue. Here are four for plan fiduciaries to keep in mind all year long. Find your plan document(s) – and read them. One of the key guiding principles for plan fiduciaries is something called the plan document rule, which says the fiduciary must follow the plan unless the terms of the plan contradict the rules of ERISA. So, first and foremost, I’m not sure how you follow the terms of the plan document if you haven’t read the plan document. It’s incredibly easy in this hectic day and age for certain practices to take root and become part of “the way we’ve always done” things, and yet be at odds with the actual plan language. Indeed, while a plan document is a legal document, and often uses language that seems designed to undermine a clear and practical application of its terms, I’m always amazed in my random queries to plan sponsors how many haven’t...