yahoo news | What the Department of Labor's new 401(k) proposal means for advisors

The Department of Labor is proposing a rule that would give 401(k) plan fiduciaries a clear, process‑based “safe harbor” for evaluating a broader range of investment options, including private equity and private credit. According to the Employee Benefits Security Administration, the framework would require fiduciaries to objectively and analytically assess performance, fees, liquidity, valuation, benchmarks and complexity, while remaining neutral across asset classes. Labor Secretary Lori Chavez‑DeRemer framed the rule as a way to reduce “regulatory overreach and litigation abuse,” stressing that plans should be judged on the prudence of their decision‑making process rather than on hindsight outcomes.

For advisors like Jim McGowan of Apollon Financial, the safe‑harbor provision is a surprise because it offers legal protection to plan sponsors that follow the stipulated process, potentially easing the fear of costly ERISA lawsuits that have plagued the industry. The proposal arrives as the retirement‑plan market, projected to exceed $10 trillion in assets by the end of 2025, looks to diversify beyond public equities. However, the shift also raises concerns about transparency, especially with private‑equity and private‑credit products that historically have faced scrutiny over fees and performance metrics. Advisors are cautioned to ensure that any pooled funds or target‑date funds incorporating these alternatives conduct rigorous due diligence and maintain safeguards for participants.

The timing coincides with heightened scrutiny of private‑credit markets, where recent fund redemptions and sector‑specific exposure—such as to software borrowers—have highlighted liquidity risks. While the DOL’s rule could encourage employers to consider alternatives like infrastructure funds or even cryptocurrencies, adoption is likely to be incremental. For wealth managers, the key takeaway is to keep a balanced menu: offer private‑market options where due diligence is solid, but also preserve traditional, lower‑risk choices for clients who remain uncomfortable with higher‑volatility exposures. Maintaining both pathways will help advisors meet client expectations while navigating the evolving regulatory landscape.

Read more: https://www.investmentnews.com/retirement-planning/dol-proposes-new-401k-rule-aimed-at-broadening-investment-menus/265898

#departmentoflabor #401(k) #erisa #privateequity #privatecredit

Plaintiff tries to bring a class claim for mismanagement of ERISA funds. Defendant corporation moves for individual arbitration. Sixth Circuit says that whole point of ERISA is group claims, so arbitration provision with class action waiver is invalid.

#law #contracts #arbitration #litigation #ERISA #ClassActions

https://lawprofessors.typepad.com/contractsprof_blog/2025/03/erisa-claims-a-chink-in-the-armor-of-class-action-waivers.html

Financial professionals should be required to handle our retirement money with the utmost care, putting investors’ interests first.
But that type of care comes in degrees, and deciding exactly how far advisers should go has been the center of heated debate for nearly 15 years,
pitting financial industry stakeholders, who argue their existing regulatory framework is enough,
against the U.S. Labor Department, the retirement plan regulator, which says there are gaping holes.

The issue has re-emerged as the department prepares to release a final rule that would
require more financial professionals to act as #fiduciaries
— that is, they’d be held to the highest standard, across the investment landscape, when providing advice on retirement money held or destined for tax-advantaged accounts, like individual retirement accounts.

Most retirement plan administrators who oversee the trillions of dollars held in 401(k) plans are already held to this standard, part of a 1974 law known as #ERISA, which was established to oversee private pension plans before 401(k)s existed.
But it doesn’t generally apply, for example, when workers roll over their pile of money into an I.R.A. when they leave a job or retire from the work force.
Nearly 5.7 million people rolled $620 billion into I.R.A.s in 2020, according to the latest Internal Revenue Service data

https://www.nytimes.com/2024/03/26/business/fiduciary-rule-retirement.html?smid=nytcore-ios-share&referringSource=articleShare