PLANADVISER - July/August 2022 - 7

PBGC's Final Union Pension
Relief Rule
On July 6, the Pension Benefit Guaranty
Corporation issued the final rule
implementing the American Rescue
Plan Act of 2021's Special Financial
Assistance program.
Many retirement industry practitioners
had long been lobbying for the
program, which is designed to provide
financial relief to the most severely
underfunded union pension programs
across the country. Final acceptance
of the rule benefits hundreds of thousands
of union pensioners and their
families who stood to lose as much
as 40% of
their promised pension
payments.
While the program had been operating
on an interim basis, sources
agree that the rule's finalization is a
critical step for it and its beneficiaries.
Additionally, the final rule includes
significant changes compared with the
rule that created the interim program,
and while the vast majority of stakeholders
view the updates favorably,
others have raised
questions
that
warrant consideration.
According to the PBGC, there are
multiple important policy differences
between the interim final rule and the
final rule. For example, one change
addresses the amount of special
financial assistance needed to better
achieve the goal of allowing plans to
remain solvent until 2051.
Initially, the interim final rule
applied a single rate of return, included
in the statute, that is higher than could
be expected for SFA funds, given they
were required to be invested exclusively
in safe, but low-return, investment-grade
fixed-income products.
The final rule uses two different rates
of return for SFA and non-SFA assets,
respectively, so the interest rate for
SFA assets is more realistic, given the
investment limitations on these funds.
Another change in the final rule
allows up to 33% of SFA to be invested in
return-seeking assets that are projected
to allow plans to receive a higher rate of
return on their investments than under
the interim final rule, subject to certain
protections. Namely, this portion of
plans' SFA funds generally must be
invested in publicly traded assets on
liquid markets to ensure responsible
stewardship of federal funds. These
return-seeking
investments
include
equities, equity funds and bonds.
The other 67% of SFA funds must be
invested in investment-grade fixedincome
products.
The third major change, the PBGC
said, is meant to enable plans to confidently
restore both past and future
benefits and enter 2051 with rising
assets. The agency designed the final
CommonSpirit employer-sponsored
401(k) plan and allowed for unreasonable
expenses to be charged for investment
management services and the
plan's administration.
In particular, the complaint named
the Fidelity Freedom Funds, a suite of
13 funds that are actively managed
by Fidelity fund managers, as having
higher operating costs than Fidelity's
passively managed index funds.
The complaint alleged that, while the
expense ratio for the passive index
Final acceptance of the rule benefits
hundreds of thousands of union
pensioners and their families who
stood to lose as much as 40% of their
promised pension payments.
rule with the goal of ensuring that
no " MPRA plan " was forced to choose
between restoring its benefit payments
to previous levels and remaining
indefinitely solvent; an MPRA plan is a
group of fewer than 20 multiemployer
plans that remained solvent by cutting
benefits pursuant to the Multiemployer
Pension Reform Act of 2014. The final
rule, instead, aims to ensure that all
MPRA plans avoid this dilemma and
supports them with enough assistance
that they can both restore benefits and
be projected to remain indefinitely
solvent through at least 2051.
Fidelity Freedom Funds Suit
The 6th U.S. Circuit Court of Appeals
has ruled in favor of the defendants in
an Employee Retirement Income Security
Act lawsuit targeting CommonSpirit
Health, a large not-for-profit
corporation that provides hospital
services across the U.S.
The plaintiffs had appealed the
matter out of the U.S. District Court
for the Eastern District of Kentucky,
after that court ruled in favor of the
CommonSpirit defendants. The basic
claims in the case are that the defendants
provided an inadequate selection
of investment options in the
suite was as low as 0.08%, the expense
ratio for the active suite funds ranged
from 0.42% to 0.65% for the K Share
class, which the plan used until 2018.
The plan has since updated to the
K6 share class, with expense ratios
ranging from 0.37% to 0.49%.
In its dismissal, the District Court
said the plaintiff had failed to " allege
facts showing that the recordkeeping
fees exceeded those of comparable
plans or were excessive in relation to
the service provided. " The court also
stated that the plaintiff had " failed
to identify another recordkeeper that
would have been willing to conduct
the same service as Fidelity " at a
reasonable rate. On the claim that
CommonSpirit Health had breached
its duty of loyalty, the court found
that the complaint did not differentiate
between the defendant's alleged
violations of the duties of prudence
and loyalty, as required when alleging
disloyalty under ERISA. As a result, it
also dismissed this claim.
The text of the appellate ruling
runs to just 13 pages, and it sides firmly
with the District Court's conclusions.
The ruling states that, just as the
kinds of retirement plans available to
employees have changed over the past
planadviser.com July-August 2022 | 7
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PLANADVISER - July/August 2022

Table of Contents for the Digital Edition of PLANADVISER - July/August 2022

Balancing Act
Greater Access
Previewing Plan Features
A Different Way to Save
Next-Level Options
New Territory for Income?
Compliance for Wealth Managers
If Caught Off Guard by A Failure
Larry E. Crocker
PLANADVISER - July/August 2022 - C1
PLANADVISER - July/August 2022 - FC1
PLANADVISER - July/August 2022 - FC2
PLANADVISER - July/August 2022 - C2
PLANADVISER - July/August 2022 - 1
PLANADVISER - July/August 2022 - 2
PLANADVISER - July/August 2022 - 3
PLANADVISER - July/August 2022 - 4
PLANADVISER - July/August 2022 - 5
PLANADVISER - July/August 2022 - 6
PLANADVISER - July/August 2022 - 7
PLANADVISER - July/August 2022 - 8
PLANADVISER - July/August 2022 - 9
PLANADVISER - July/August 2022 - 10
PLANADVISER - July/August 2022 - 11
PLANADVISER - July/August 2022 - 12
PLANADVISER - July/August 2022 - 13
PLANADVISER - July/August 2022 - 14
PLANADVISER - July/August 2022 - 15
PLANADVISER - July/August 2022 - Balancing Act
PLANADVISER - July/August 2022 - 17
PLANADVISER - July/August 2022 - 18
PLANADVISER - July/August 2022 - 19
PLANADVISER - July/August 2022 - Greater Access
PLANADVISER - July/August 2022 - 21
PLANADVISER - July/August 2022 - 22
PLANADVISER - July/August 2022 - 23
PLANADVISER - July/August 2022 - Previewing Plan Features
PLANADVISER - July/August 2022 - 25
PLANADVISER - July/August 2022 - 26
PLANADVISER - July/August 2022 - 27
PLANADVISER - July/August 2022 - A Different Way to Save
PLANADVISER - July/August 2022 - 29
PLANADVISER - July/August 2022 - 30
PLANADVISER - July/August 2022 - 31
PLANADVISER - July/August 2022 - Next-Level Options
PLANADVISER - July/August 2022 - 33
PLANADVISER - July/August 2022 - 34
PLANADVISER - July/August 2022 - 35
PLANADVISER - July/August 2022 - New Territory for Income?
PLANADVISER - July/August 2022 - 37
PLANADVISER - July/August 2022 - Compliance for Wealth Managers
PLANADVISER - July/August 2022 - If Caught Off Guard by A Failure
PLANADVISER - July/August 2022 - Larry E. Crocker
PLANADVISER - July/August 2022 - Cover3
PLANADVISER - July/August 2022 - Cover4
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https://www.planadviserdigital.com/planadviser/industry_leader_awards_2022
https://www.planadviserdigital.com/planadviser/march_april_2022
https://www.planadviserdigital.com/planadviser/january_february_2022
https://www.planadviserdigital.com/planadviser/november_december_2021
https://www.planadviserdigital.com/planadviser/september_october_2021
https://www.planadviserdigital.com/planadviser/july_august_2021
https://www.planadviserdigital.com/planadviser/may_june_2021
https://www.planadviserdigital.com/planadviser/march_april_2021
https://www.planadviserdigital.com/planadviser/january_february_2021
https://www.planadviserdigital.com/planadviser/november_december_2020
https://www.planadviserdigital.com/planadviser/september_october_2020
https://www.planadviserdigital.com/planadviser/july_august_2020
https://www.planadviserdigital.com/planadviser/may_june_2020
https://www.planadviserdigital.com/planadviser/march_april_2020
https://www.planadviserdigital.com/planadviser/january_february_2020
https://www.planadviserdigital.com/planadviser/november_december_2019
https://www.planadviserdigital.com/planadviser/september_october_2019
https://www.planadviserdigital.com/planadviser/july_august_2019
https://www.planadviserdigital.com/planadviser/may_june_2019
https://www.planadviserdigital.com/planadviser/march_april_2019
https://www.planadviserdigital.com/planadviser/january_february_2019
https://www.planadviserdigital.com/planadviser/november_december_2018
https://www.planadviserdigital.com/planadviser/september_october_2018
https://www.planadviserdigital.com/planadviser/july_august_2018
https://www.planadviserdigital.com/planadviser/may_june_2018
https://www.planadviserdigital.com/planadviser/march_april_2018
https://www.planadviserdigital.com/planadviser/january_february_2018
https://www.planadviserdigital.com/planadviser/november_december_2017
https://www.planadviserdigital.com/planadviser/september_october_2017
https://www.planadviserdigital.com/planadviser/july_august_2017
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