Plan Sponsor

Investment refresh is an optional extension to automatic enrollment whereby participants would be notified that, as of a certain date, their current investment allocation will be transferred to the plan’s qualified default investment alternative (“QDIA”) investment. The QDIA is frequently an age/risk appropriate target date fund (“TDF”). Any participant may opt out of this action prior to or at any time after the transfer date.

The coronavirus relief includes a “temporary rule preventing partial plan terminations” for plan sponsors of defined contribution retirement plans. The provision specifically states, “A plan shall not be treated as having a partial termination (within the meaning of 4119(d)(3) of the Internal Revenue Code of 1986) during any plan year which includes the period beginning on March 13, 2020 and ending on March 31, 2021, if the number of active participants covered by the plan on March 31, 2021 is at least 80 percent of the number of active participants covered by the plan on March 13, 2020.”

Department of Labor (DOL) enforcement recoveries are on the rise. A recent DOL report indicates that DOL recoveries have doubled since 2018 and tripled since 2016 (https://www.investmentnews.com/dol-retirement-plan-recoveries-198660). As a result, fiduciary liability premiums have increased 35% since last year (https://www.investmentnews.com/fiduciary-insurance-costs-401k-litigation-198407).

Stock markets abhor uncertainty. Currently, investment prognosticators are interpreting the election results to create a relatively “stagnant” legislative environment. This opinion is based primarily on the assumption that the Senate will remain in Republican control while the presidency will now be Democratic. The anticipated stagnation connotes a more predictable investment environment. Clearly, the stock market has recently responded overwhelmingly positive (as of 11/10/20), to the reduced potential of increased taxation along with the greater likelihood of additional COVID-19 aid and economic stimulus.

Election years, with their uncertainty and increased emotions, cause anxiety for investors. Certainly, there may be short-term market volatility around elections, but history suggests that over the long-term the economy and markets move higher regardless of election outcomes.