As interest rates rise, so has interest in pension risktransfer (PRT)—and litigation.  Nevin & Fred take a look at what’s underlying (and undermining) that focus, aswell as a new suit alleging aggressive participant marketing.

Pension risk transfer is an aptly named process undertakenby an organization that wants to transfer its pension obligations to another entity, typically an insurance company. The process itself is a fiduciary decision requiring carefulconsideration of the entity to which those obligations are transferred—and therein lies the basis of a recent spate of litigation regarding those choices (and during a period of time in which PRT volumes have been setting records). 

For those not familiar with the underpinnings of the pensionrisk transfer (PRT—because we need another acronym), IB 95-1, issued by the Department of Labor in 1995 (in the wake of the Executive Life collapse), outlines the fiduciary standards to be used in selecting an annuity provider for a pension risk transfer. That includes considerations of the provider’s investment portfolio, size relative to the annuity contract, level of capital and surplus, liability exposure andavailability of state government guaranty associations.

In 2024, and in accordance with the provisions of the SECURE2.0 Act of 2022, the Labor Department basically concluded that while it was open to, and still considering, potential updates to Interpretive Bulletin 95-1, it felt that that document “continues to identify broad factors that are relevant to a fiduciary’s prudent and loyal evaluation of an annuity provider’s claims-paying ability and creditworthiness.” Additionally, EBSA found it “desirable for guidance in this area to remain principles based.” 

In this episode, Nevin (Adams) and Fred (Reish) talk about the trends and issues here.  They also look at a new lawsuit that brings up an old issue—a recordkeeper’s access toparticipants and alleged promotion of their offerings. 

Episode Resources:

Another Pension Plan Popped by Pension Risk Suit

Verizon Pension Risk Transfer Challenged in Court

Fiduciary Duty a Factor in Pension Risk Transfers

New ERISA Suit Alleges High Fees, Low Performance, Improper Forfeitures

A “new” entrant to the forfeiture reallocation suit “suite”—and a decision in favor of fiduciary defendants.  Nevin & Fred review the latest developments.

Yet another 401(k) forfeiture fiduciary breach suit has beenfiled—but there are some key differences:

• The plaintiffs are represented by the law firm of Schlichter Bogard, LLC.
• The plan involved was the largest targeted by this type of litigation to date (nearly $8 billion).
• The plan document language prohibited use of forfeitures to offset employer contributions before offsetting administrative expenses (at least according to the suit).

And then there is a case that has been through severalrounds of adjudication—and though winning, has had to keep going back to court.  But HP finally prevailed, and though the actions regarding the application of forfeitures were seen as fiduciary decisions—well, there was a bit of a “new” twist in how the judge viewed them.

In this episode Nevin (Adams) & Fred (Reish) examine theissues and potential implications, as well as a quick review of some recent updates.

Episode Resources

Schlichter Targets Massive 401(k) Plan With Forfeiture Suit

401(k) Fiduciaries Fend Off Forfeiture Reallocation Suit

Some “new” News:

DOL Pushes Pause on 401(k) Fiduciary Rule Suits

Breaking News: White House Nominates Next EBSA AssistantSecretary

Supremes Hear ERISA Burden of Proof Case

Could plan fiduciaries violate their duty of loyalty to plan

Participant-plaintiff (and pilot) Bryan P. Spence filed suit in the U.S. District Court for the Northern District of Texas in June 2023 against Defendants American Airlines, Inc., American Airlines Employee Benefits Committee, Fidelity Investments Institutional, and Financial Engines Advisors, LLC (he subsequently dropped the latter two). 

The suit alleged that they “breached their fiduciary duties

And now—following a four-day bench trial during which there was “testimony from multiple witnesses and examined numerous exhibits,” a review of the record in its entirety and where the Court “has observed the witnesses to assess their credibility and weigh their testimony”—that same Judge O’Connor has now determined what appears to be an unusual divergence. 

So, what’s going on with this case, and what does/should it

Episode Resources:

Judge Says American Airlines 401(k) Fiduciaries ‘Blinded’ by

With apologies to Charles Dickens, Nevin & Fred have

Several weeks back Brian Brashaw issued a challenge (of sorts) to the podcasters of the retirement industry.  Specifically, he expressed an interest in that unique and special group doing a podcast “visited by three spirits: ghosts of 401k past, present and future.”

To date, we’ve seen interest, but no “takers” – but here’s

 Episode Resources

An ‘Unintended’ Consequence - https://www.napa-net.org/news/2024/11/talking-points-an-unintended-consequence/

4 Things You Need to Know About Default Funds https://www.napa-net.org/news/2019/2/4-things-you-need-know-about-default-funds/

How to SECURE 'Better' Retirements  https://www.napa-net.org/news/2024/6/talking-points-how-secure-better-retirements/

It’s the holiday season, and Santa isn’t the only one making

Let’s face it, SECURE 2.0 has a LOT of good, interesting—and

What happens if you forget? What happens if the business is

And then, there’s the so-called fiduciary rule (also known

There are also some “nice” things in SECURE 2.0 with regard

In this engaging episode, Nevin (Adams) & Fred (Reish)

P.S.  Oh, and Fred Reish has gotten some AI assistance in composing a song about retirement (lyrics below)!  

Episode Resources:

A Country and Western Retirement lyrics:  https://fredreish.com/the-last-rodeo/

Things I Worry About:

SECURE 2.0 automatic enrollment requirements https://fredreish.com/things-i-worry-about-2-automatic-enrollment/

How automatic enrollment requirements will be applied:  https://fredreish.com/things-i-worry-about-2-automatic-enrollment/

Automatic Enrollment corrections:  https://fredreish.com/things-i-worry-about-3-automatic-enrollment-3/

The SEC Requirements for Rollover Recommendations  https://fredreish.com/best-interest-standard-of-care-for-advisors-97/

Staff Bulletin: Standards of Conduct for Broker-Dealers and

IRS Issues Guidance on Expansion of EPCRS  https://www.napa-net.org/news/2023/5/irs-issues-guidance-expansion-epcrs/

How to Correct Enrollment Errors for Long-Term, Part-Time

IRS Releases Q&A Guidance on Key SECURE 2.0 Provisions  https://www.napa-net.org/news/2023/12/breaking-irs-releases-qa-guidance-key-secure-20-provisions/

On October 21, the dynamic podcasting duo of Nevin (Adams) & Fred (Reish) brought their engaging, informative, and occasionally alliterative discussion to ASPPA Annual.

As one might expect from a crowd composed of the nation's leading recordkeepers and third party administrators (and a bunch of experts that help them succeed), the discussion was, as always, wide-ranging, including constantly compelling topics like:

Latest Lessons from the Litigation Landscape – fending off fiduciary forfeiture suits

Fiduciary Faux Pas, Pitfalls and Best Practices

Scary stuff from SECURE 2.0 – implications of

Things I Worry About: Automatic Enrollment (1)  https://fredreish.com/things-i-worry-about-automatic-enrollment-1/

Nevin & Fred: Forfeiture Litigation, Meeting Minutes and

What Expenses Can Be Paid from Plan Assets? 

7 Steps to Reduce Fiduciary Exposure  

DOL Successfully Sues Employer for Misuse of Forfeitures  

Limiting Fiduciary Liability (Costs)  

IRS Proposes Regs to Clarify Timing and Use of

Expert Opinions  

The Forfeiture Suits to Date  

In a “live” version of the Nevin & Fred podcast at the

In recent months, the plaintiffs’ bar has “discovered” a new litigation target:  the use of forfeitures to offset employer contributions, rather than to offset plan fees

And—on a related topic—what should/shouldn’t be included in committee meeting minutes!

Episode Resources

What Expenses Can Be Paid from Plan Assets?  https://www.asppa-net.org/news/2018/10/what-expenses-can-be-paid-plan-assets/

IRS Proposes Regs to Clarify Timing and Use of Forfeitures  https://www.napa-net.org/news/2023/2/irs-proposes-regs-clarify-timing-and-use-forfeitures/

Expert Opinions  https://www.napa-net.org/news/2019/2/expert-opinions/

The forfeiture suits to date.  https://www.napa-net.org/header/search/?q=forfeitures

ERISA Advisory Council testimony by: 

Bonnie Treichel - https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/about-us/erisa-advisory-council/2024-qdia-treichel-written-statement-07-10.pdf

Tom Clark:  https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/about-us/erisa-advisory-council/2024-qdia-clark-written-statement-07-10.pdf

The so-called fiduciary rule has been stayed—and legal

About a month ago two separate federal judges put a hold on the effective date (09/23) of the Labor Department’s new fiduciary rule—indefinitely.  n ordering the stay, United States District Judge Jeremy D. Kernodle explained that “the 2024 Fiduciary Rule suffers from many of the same problems” that were found in the version vacated by the Fifth Circuit back in 2018.

On the other (unrelated) hand, the number of suits alleging a fiduciary breach in the use of forfeitures to offset employer contributions is increasing—and most recently those charges have been appended to the more

In light of those trends, what should plan fiduciaries

Episode Resources:

Staff Bulletin: Standards of Conduct for Broker-Dealers and Investment Advisers Account Recommendations for Retail Investors  https://www.sec.gov/tm/iabd-staff-bulletin

Fiduciary Rule

Federal Judge Slams Brakes on Fiduciary Rule  https://www.napa-net.org/news-info/daily-news/breaking-news-federal-judge-slams-brakes-fiduciary-rule

Another Federal Court Slams Fiduciary Rule  https://www.napa-net.org/news-info/daily-news/another-federal-court-slams-fiduciary-rule

Department of Labor Releases Final Investment Advice

Forfeiture Reallocation Litigation

Major Forfeiture Fiduciary Breach Suit Gets Green Light https://www.napa-net.org/news-info/daily-news/major-forfeiture-fiduciary-breach-suit-gets-green-light

Another Excessive Fee Suit (Also) Claims Forfeiture Use a

Nordstrom Nailed With Massive Allegations in 401(k)

Future Live Appearances:

Strategic Retirement Partners:  https://www.srpretire.com/

NAPA 401(k) Summit:  https://napasummit.org 

With far-reaching implications—likely including the Labor

While the full implications will take time to emerge, it’s

Why It Matters

Since 1984, courts have adopted a review framework for

Under the new Supreme Court decision, those administrative agency perspectives can, but do not have to, be considered in deciding the case. In sum, courts will no longer be required to defer to the judgement of

The SECURE 2.0 Act of 2022 included dozens of new OPTIONAL plan design choices for plan sponsors. Nevin (Adams) and Fred (Reish) explore the findings of a new survey of which plan design choices plan sponsors are most likely to adopt.

To gain a better understanding of which optional provisions of the SECURE 2.0 Act plan sponsors are most likely to adopt, Fidelity Investments recently invited more than 2,000 clients to participate in a survey, and from that derived the top-five-ranked optional provisions.  In this episode, Nevin (Adams) and Fred (Reish) talk about

In this episode we also talk about some of the big defined contribution plan trends captured in Vanguard’s annual

If you’re looking to know what’s going on—and what’s coming up—you won’t want to miss this episode of Nevin & Fred!