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Pooled Employer Plans (“PEPs”): Putting a little PEP in a 401k retirement plan could help to protect your Portfolio Companies

Set against the backdrop of the continuing wave of ERISA litigation that is being brought against employers who sponsor retirement plans, Pooled Employer Plans (“PEPs”) are emerging in the US retirement plan marketplace as an alternative that may limit employers’ risk of retirement plan-related litigation. There have been over 220 ERISA class action suits filed in connection with retirement plans since 2018, and the top ten ERISA settlements for 2021 alone totaled $840 million in the aggregate. Since ERISA litigation is a serious and relevant concern, many plan sponsors, including private equity sponsors and their portfolio companies, would benefit from evaluating whether a PEP is a viable retirement plan solution for them.

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Department of Labor Announces New Enforcement Policy Following Fifth Circuit’s Fiduciary Rule Decision

Time to Read: 1 minutes Practices: ERISA

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On May 7, 2018, the U.S. Department of Labor (the “DOL”) announced a new temporary enforcement policy in anticipation of the Fifth Circuit Court of Appeals issuing a mandate to vacate the DOL’s fiduciary rule. Field Assistance Bulletin 2018-02 (the “FAB”) is intended to address the “uncertainty about fiduciary obligations and the scope of exemptive relief” following the Fifth Circuit’s actions, by providing that financial institutions may continue to rely on the temporary enforcement relief policy that the DOL adopted under Field Assistance Bulletin 2017-02. As a result, the DOL will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the impartial conduct standards for transactions that would have been exempted under the BIC Exemption or Principal Transactions Exemption, or treat such fiduciaries as violating the applicable prohibited transaction rules, even following the Fifth Circuit’s mandate to vacate those exemptions. In addition, the DOL acknowledged that “some financial institutions have devoted significant resources to comply with the BIC Exemption and the Principal Transactions Exemption and may prefer to continue to rely upon the new compliance structures,” and it extended this transition relief to future reliance on those exemptions by institutions pending further guidance. The FAB also confirms that the Treasury Department and the IRS will follow a similar non-enforcement policy.

The FAB raises important questions regarding the future of the DOL’s fiduciary definition, including whether new exemptions may be created to mirror the relief provided under the BIC Exemption and other exemptions/carve-outs that were included in the fiduciary rule and what (if any) further transition relief will be provided to fiduciaries. We will continue to monitor developments in this area, will issue further alerts as new guidance is released.

For details on the Fifth Circuit Court’s decision on the fiduciary rule, please see our prior Alert. Further information on the rule and the transition period requirements can be found in our Alert on the Final Rule and our Alert on the Transition Period FAQs.

If you would like to discuss the impact that the DOL’s guidance may have on any aspect of your business, or if you have any other questions about the rule, please feel free to reach out to any of the attorneys listed below.

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