13 Jun 2023

Fall in Love with Section 404(c) All over Again: Mapping Replacement Investments

Some ERISA sections just keep giving. Take Section 404(c). It’s commonly relied on in plans providing for participant-directed investment, like most 401(k) and 403(b) plans. True—following the rules isn’t absolute protection from fiduciary liability, but it provides some protection. Section 404(c)(4) provides a specific safe harbor for “qualified change in investment options” allowing plan administrators to benefit from 404(c) protections where the plan administrator  “maps” participant investment selections in a participant-directed defined contribution plan from an investment option that is going away to another of similar risk/return characteristics—or to a QDIA. This happens where the participant has failed to provide affirmative instruction on how to invest the participant’s account from an investment that is being discontinued.  Blackout notices may be required!

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Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.    

    • ERISA Litigation.   Pharmaceutical company, Eli Lilly, settled with insulin buyers after six years of litigation, plaintiffs having alleged civil conspiracy for high-priced insulin, Eli Lilly agreeing to pay $13.5 million and continue to apply a $35/month cap on users’ out-of-pocket costs for four years. Following court approval of the settlement, expect plaintiffs’ attorneys to subpoena large pharmacy benefit managers (PBMs) and large retail pharmacies to gather transactional data and verify settlement claims.
    • Retirement Plans. IRS provides interim guidance on expansion of its EPCRS program as provided under the SECURE 2.0 Act (Pub. L. No. 139-22, Div. T. SECURE 2.0 expanded IRS’ self correction program (SCP) to permit plan sponsors to self-correct “eligible inadvertent failures” unless the plan or plan sponsor is under IRS examination and has not demonstrated a commitment to self-correct it (outside of insignificant failures). IRS Notice 2023-43.
    • Health and Welfare Plans. DOL issues an opinion letter   clarifying FMLA leave calculation when an employee takes intermittent leave during a holiday week, emphasizing that the term “workweek,” under the FMLA is the employee's normal schedule (hours/days per week) prior to the start of FMLA leave. DOL Opinion Letter 2023-2-A.

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