Hole in the Bottle … Protecting Against 401(k) Cybersecurity Leakage

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by Alex Smith

Both the Department of Labor (DOL) and plaintiffs’ lawyers have taken an interest in retirement plans’ cybersecurity in recent years. Last year, the DOL issued guidance on the cybersecurity considerations plan fiduciaries should be mindful of. In addition, cyber theft in recent years has led to multiple lawsuits. A specific recordkeeper involved in many of these lawsuits is currently being investigated by the DOL with respect to cybersecurity incidents that have impacted certain of its retirement plan clients. Read more

You Spin Me QPAM Baby QPAM: DOL’s Proposed QPAM Rule May Mean Changes to Collective Trust Agreements for Plan Sponsors

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by Bret F. Busacker

The DOL published on July 27, 2022 a proposed change to the QPAM Exemption (“Proposed QPAM Amendment”) that may require retirement plan sponsors to update their collective trust agreements in order to satisfy the new DOL requirements.  Collective trusts have become an increasingly common way for qualified retirement plan committees/plan sponsors to achieve lower investment expenses for some of the investment options in their plans.

These collective trusts are managed by investment managers who often engage other financial institutions to execute trades involving the pension assets held by the collective trust. These trades involving retirement plan assets may at times be executed by a financial institution that is also providing services (such as recordkeeping services) to the same retirement plan.  Absent an exemption, these sorts of related party transactions may violate the ERISA prohibited transaction rules.   Read more

Every Little Thing … Considerations Before Adding Crypto to a 401(k) Plan

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by Alex Smith

Fidelity Investments recently announced that it will offer its 401(k) plan clients the opportunity to offer bitcoin as a 401(k) plan investment option later this year.  While this may sound intriguing to some plan fiduciaries and participants, plan fiduciaries should proceed with extreme caution.

Based on the Department of Labor’s (DOL) public pronouncements, it appears the DOL has serious doubts about whether 401(k) plan fiduciaries who include cryptocurrency among their 401(k) plan’s investment options comply with their ERISA fiduciary duties.  In March, the DOL issued Compliance Assistance Release No. 2022-01, in which it expressed “serious concerns” about the prudence of 401(k) plan fiduciaries including cryptocurrency as a 401(k) plan investment option and announced it plans to conduct an investigative program related to cryptocurrency investments by 401(k) plans.  For more information on Compliance Assistance Release No. 2022-01, please see our prior blog post Can’t Touch This … DOL Discourages Plans From Investing in Cryptocurrency.  Following Fidelity’s announcement, a DOL official expressed “grave concerns” about the offering and indicated that the DOL intends to meet with Fidelity to discuss its concerns in comments to the Wall Street Journal. Read more

What Doesn’t Kill You Makes You Stronger… New Audit Requirements for Retirement Plans

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by Bret F. Busacker

For many retirement plan sponsors, Form 5500 preparation season is underway.  Plan sponsors should be aware that things have changed with the Form 5500 audit requirements and procedures.  These changes push more responsibility to plan sponsors and require plan sponsors to better understand the representations they are making to the auditors as part of the 2021 plan audit (and beyond). So what has changed?

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What Happens in a Small Town Stays in a Small Town … Until the DOL Doubles Down on Mental Health Parity Compliance

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by Alex Smith

The Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of Treasury (collectively, the Departments) recently issued their joint report to Congress regarding their Mental Health Parity and Addiction Equity Act (MHPAEA) enforcement activities as required under the MHPAEA and the Consolidated Appropriations Act, 2021 (CAA). The report contained insights regarding the DOL’s enforcement of the new MHPAEA reporting and disclosure requirements related to non-quantitative treatment limitations (NQTLs) established by the CAA. For additional information about the CAA’s new MHPAEA reporting and disclosure requirements, please see our previous blog post (as well as earlier blog posts). Read more

Here Comes the Sun: The DOL Intends to Shine the Light on Mental Health Parity

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by Bret F. Busacker

We previously blogged about the new Mental Health Parity and Addiction Equity Act (MHPAEA) reporting and disclosure requirements established by the Consolidated Appropriation Act, 2021 (CAA).

As a refresher, employers and carriers that sponsor group health plans are now required to provide upon request a full analysis of the process followed by the plan in establishing non-quantitative treatment limitations (NQTLs) for the plan and the impact these NQTL’s have on mental health and substance use disorder (MH/SUD) benefits provided by the plan.  This disclosure requirement went into effect on February 10, 2021.

The DOL has recently signaled its intent to focus on MHPAEA issues in filing suit against United Healthcare Insurance Company (“UHIC”) and United Behavioral Health (“UBH”).   Read more

Are You Ready to Provide Your MHPAEA Disclosure?

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DOL and HHS FAQs Provide Important Insights

by Bret F. Busacker

We previously blogged about the new Mental Health Parity and Addiction Equity Act (MHPAEA) reporting and disclosure requirements established by the Consolidated Appropriation Act, 2021 (CAA). As a refresher, employers and carriers that sponsor group health plans are now required to provide upon request a full analysis of the process followed by the plan in establishing non-quantitative treatment limitations (NQTLs) for the plan and the impact these NQTL’s have on mental health and substance use disorder (MH/SUD) benefits provided by the plan. This disclosure requirement went into effect on February 10, 2021. Read more

One Last Time: The DOL Returns to the Fiduciary Rule for Retirement Plans

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by Bret Busacker

The Department of Labor has returned to the Fiduciary Rule once again with its third attempt to provide a regulatory framework that protects retirement investors while not imposing unnecessary burdens on investment advisors and consultants. 

Plan sponsors of 401(k) plans should be aware that the DOL will once again apply the historical “five-part-test” in evaluating whether 401(k) advisors are plan fiduciaries.  The return of the five-part-test is the result of the Fifth Circuit invalidating the DOL’s 2016 version of the fiduciary rule, which had temporarily replaced the five-part-test.  Under the “new-again” five-part-test, an investment advisor to a 401(k) plan or plan participant is deemed to be a plan fiduciary if the advisor makes investment recommendations on a regular basis pursuant to an agreement or understanding with the 401(k) plan or plan participant and the advisor’s recommendations serve as the primary basis for making the decision to invest in specific investment options.  A 401(k) plan advisor determined to be a fiduciary under the five-part-test cannot receive variable compensation tied to a 401(k) participant’s investment decision (generally, referred to as conflicted compensation).

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[Don’t] Tell Me Lies, Tell Me Sweet Little Lies … or the SEC will charge you with fraud

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by John Ludlum

Many private companies assume that if valid federal and state exemptions from registration are available for private company securities that there is little risk of problems with the Securities Exchange Commission (SEC).  While it is rare for the SEC to take an interest in private company transactions, many SEC Rules apply to private company securities and transactions.

In one example, Stiefel Labs (Company) maintained an Employee Stock Bonus Plan (Plan) with Company contributions funded, at least in part, by shares of Company stock.  As a private company, repurchases by the Company were the only way for employees to receive liquid funds for their shares.  The Company engaged independent accountants to perform fiscal year end valuations and made this valuation information available to Plan participants and used this value for repurchases for the next year. 

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