November 2020 Medicare drug pricing rules: What do you need to know?
The two final rules that were released on November 20 will have sweeping impacts to Medicare Part D and Medicare Part B drug pricing.
The number of employers offering employer stock as an option in 401(k) plans and the percentage of plan assets invested in employer stock are both on the decline. Why is employer stock included as an investment option in a 401(k) plan? Why are some employers continuing to offer this option while others are moving away?
There are many reasons a plan might offer employer stock as an investment option:
These factors may be compelling. However, increased risk of litigation has caused many employers to reconsider the decision to offer employer stock as an investment option. There have been numerous participant claims regarding participant stock in employer-sponsored plans. Potential claims include the following:
Even if the employer stock is entirely appropriate from the viewpoint of fiduciary requirements as a plan investment, the employer and the plan are not fully protected from risk of a lawsuit and the negative consequences deriving from such a course of action regardless of the outcome. In many cases, employers are able to prevail in suits alleging the investment in company stock was improper. However, the win is often accompanied by significant legal expense, organizational distraction, disgruntled employees, and bad press. None of these is a win for the employer.
Employers that elect to continue offering employer stock in 401(k) plans may find the following initiatives can mitigate these concerns:
Employers that elect to remove their 401(k) plan’s employer stock option typically follow an extended process during which they lay the groundwork for such elimination as follows:
Regardless of the decision to maintain or discontinue offering employer stock as an investment option, employers are well-advised to discuss the legal issues with competent plan counsel and to review the investment issues with a trusted financial adviser.