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This year’s Qualified Plan Fiduciary Summit connected plan sponsors with retirement industry thought leaders, advisors, recordkeepers, ERISA attorneys, money managers, and other service providers. This month’s newsletter article recaps the key themes from the event and items for plan fiduciaries to consider as we navigate a challenging labor market, an active litigation and regulatory environment, and increased employee needs and expectations.

 

ESG, Crypto, and Cybersecurity Are Hot Topics.  Fred Reish, ERISA attorney and partner at Faegre Drinker Biddle & Reath, delivered a keynote presentation on Fiduciary Developments. He described the Department of Labor’s (DOL’s) proposed regulation intended to “remove barriers to considering” environmental, social, and governance (ESG) factors in retirement plan management. He discussed a Compliance Assistance Release in which the DOL “caution[ed] fiduciaries to exercise extreme care” before considering a cryptocurrency option for a plan’s investment menu. He also addressed the DOL’s three-part cybersecurity guidance that includes tips and best practices for plan fiduciaries, service providers, and participants.

 

Takeaways: At an accelerating pace, participants are asking about the ability to invest in ESG investments and cryptocurrency in their qualified retirement plans. The most appropriate short answer to those questions is probably: we’re looking into it, but not so fast. We anticipate a final ESG regulation may be published later this year, but until then the most prudent approach is for QPA to perform the advance research and await more specific instruction in a final regulation. Similarly, we prefer a patient approach to adding a cryptocurrency option due to the DOL’s “serious concerns about the prudence of a fiduciary’s decision” to make cryptocurrency available within a plan. QPA’s clients have already received a Cybersecurity RFI response from each of our recordkeeper partners, but QPA and plan sponsors must remain on alert for additional opportunities to tighten up data safeguards.

 

Supreme Court Ruling Will Be Impactful. Fred Reish also discussed the United States Supreme Court’s Hughes v. Northwestern University opinion. He confirmed that the Hughes case provided the Supreme Court an opportunity to remind fiduciaries of their responsibilities relating to each and every investment option (which would certainly extend – under heightened DOL scrutiny – to any cybersecurity options).

Takeaways:The Hughes case did not break new ground; it reminded us that the Court had already firmly established its expectations for ongoing prudence. The Court’s reaffirmation of those expectations should help plaintiffs to survive motions to dismiss, which in turn will lead to more discovery and likely more settlements. This should, in turn, lead fiduciaries to remain prudent regarding share class decisions, revenue sharing, and the process for choosing and evaluating investments.

Individualized and Personalized Solutions Are the Present and the Future.  Sarah Simoneaux, president of Simoneaux Consulting Services, set the tone for the day with her emphasis on employee communication and the need for employers to understand what employees – particularly younger ones – need, want, and value. Subsequent presenters from Financial Fitness for Life, Morningstar, Empower, and QPA discussed the many ways in which participants are expecting to receive individualized and personalized solutions through financial wellness programs, advisor managed accounts, and other benefit program options (including HSAs).

Takeaways:  Plan sponsors and service providers are responding to employees’ greater desire for solutions customized to meet their individual needs and priorities. The fastest-growing solution may very well be advisor managed accounts, which allow a plan advisor the opportunity to combine portfolio management, contribution recommendations, and distribution recommendations into one process. The trend toward customization will likely be apparent in communication strategies, more Roth contribution and in-plan Roth conversion opportunities, and broader access to financial coaching relating to the retirement plan, short-term savings, medical savings, budgeting, and other financial wellness needs.

In-plan Income Is Needed, Valued, and Becoming Expected. Matt Wolniewicz, the President of Income America, addressed the growing demand for in-plan guaranteed income. He presented statistics reflecting that demand, the increasing need as fewer employees have defined benefit plan access, and strategies for meeting that need.

Takeaways: The SECURE Act provided a fiduciary safe harbor for the selection and monitoring of in-plan investment vehicles that will provide participants with access to guaranteed lifetime income. The marketplace is beginning to see the fruits of the product innovation stimulated by that safe harbor, which is leading to more talk about the benefits of guaranteed income. However, there are few portable, non-proprietary offerings (like Income America’s 5forLife) widely available. We expect plan fiduciaries to begin to ask: (1) what is available with our current recordkeeper? and (2) how can we gain access to non-proprietary offerings?

Look for the Helpers. Sarah Simoneaux also delivered the Summit’s most poignant comments when she closed by reminding people to “look for the helpers”. If you’ve read this far, the chances are high that you’re in that group. You have chosen a profession that provides you the responsibility and the opportunity to help employees become better prepared for retirement and gain the financial independence they covet. We’re here to help with those responsibilities and to play a role in employees’ futures.

Full Bio Matthew Eickman, J.D. is the director of ERISA services for Qualified Plan Advisors and the branch manager of Prime Capital Investment Advisors' (PCIA) Omaha branch. Matthew provides fiduciary training, Investment Policy Statement oversight, and design and vendor benchmarking. He is also a member of the firm’s Investment Advisory Committee and the QPA Steering Committee. He holds his FINRA series 66 registrations, and his life and health insurance licenses in multiple states.

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