Experts in Personalized Retirement Plan Design & Administration Newsletter 09.13.17

What Kind of Relief May Employers Offer to Affected Employees of Hurricane Harvey and Irma? Employers with employees and operations impacted by the recent hurricanes are asking what type of compensation, employee benefits, and tax relief may be available to them and their affected employees. This is a 7-page review. Source:

Retirement Account Loan Strategies You May Not Have Thought About Taking a retirement plan loan may be considered taboo in some cultures, primarily because it can be detrimental to your retirement preparedness. That said, not all retirement plan loans are bad. If you are considering a loan, here are a few tips and strategies to make it less costly and more beneficial for you now, and in the future. Source:

Did the 401k Really Kill the Pension Plan? The myth persists that the 401k plan killed the pension. Is this true? The article identifies three macroeconomic trends that slayed the pension plan, once the giant among all retirement plans. Source: (registration may be required)

Addressing Disasters & Emergencies: Giant, Large, Medium, Small, Individual Plan sponsors must have the skills of an acrobat — balancing business needs, employee concerns, legal and compliance requirements — and sometimes they must do this against a backdrop of emergencies and natural disasters. Source:

403b Plans

Can 403b Plans Now Invest in Collective Investment Trusts? The University of California becoming the first 403b non-church plan sponsor to offer collective investment trusts in its 403b plan. This development was somewhat surprising, given the fact that non-church 403b plans are generally restricted to investing in 403(b)(1) fixed/variable annuities and 403(b)(7) custodial accounts, and most CITs are neither. Source:

Fiduciary and Plan Governance Material

Participants’ Best Interests May Not Be Served by the “Race to the Bottom” While lawsuits and investigations have served a purpose in lowering plan fees, a side effect is that many plan sponsors, in their concern to meet compliance standards, have made a search for the lowest fees such a priority that they have unwittingly overlooked the best way to serve plan participants. Source:

Employer Stock in a 401k Plan The 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. Employers that elect to continue offering employer stock in 401k plans may find a initiatives can mitigate these concerns. Source:

Do We Need a ‘Harmonized’ Fiduciary Standard? Any efforts to “harmonize” the fiduciary standard of conduct between those who must legally place the interests of their principals above those of their clients — stockbrokers and insurance agents — and those who are legally required to place the interests of their clients before their own — fiduciary registered investment advisors — are therefore doomed from the start. That’s why all such SEC efforts to date have failed. Source: (registration may be required)

Five Factors to Consider Before Adding Newer Investments When selecting investments for fiduciary accounts, it’s critical to use prudent selection criteria. Some of the most widely used criteria require three years of live history before they are calculated. While the three-year history is used as a gating factor for many, there may be instances where it’s prudent to select newer investments for fiduciary accounts. Source:

Insight: Studies, Research, and White Papers

Saving for Retirement Not Feasible for Many Women Saving for retirement is not economically feasible for 44% of middle-income women, MassMutual found in a survey. By comparison, this is the case for only 14% of men with annual household incomes of between $35,000 and $150,000. Source:

Do Older Americans Have More Income Than We Think? Being prepared not just for a rainy day but for years — perhaps many — of post-workforce life drives strategies and safety nets. And analyses often warn that all the effort is insufficient. But panelists at a recent discussion concerning studies on retirement income suggest that the prospects for many are really quite good. Source:

Seven-Year Streak of Falling Corporate DC Plan Fees Ends Investment consulting firm NEPC’s annual defined contribution plan and fee survey reported that recordkeeping, trust and custody fees remained flat over the past year, the first time it hasn’t declined since 2010. Source:

Low Returns and Optimal Retirement Savings Lifetime financial outcomes relate closely to the sequence of investment returns earned over the lifecycle. Higher return assumptions allow individuals to save at a lower rate, withdraw at a higher rate, retire with a lower wealth accumulation, and enjoy a higher standard of living throughout their lifetimes. However, at the present bond yields are historically lower and equity prices are quite high, suggesting that individuals will likely experience lower returns in the futureThe implications are higher savings rates, lower withdrawal rates, the need for a larger nest egg at retirement, and a lower lifetime standard of living. Source:

Retirement Saving and Decumulation in a Persistent Low-Return Environment This paper addresses two related topics: first, how have households responded to the current low interest rate environment and second, are there alternative responses or investments which households might do well to consider? Source:

Helping Employers Become Age-Ready This paper examines how living longer is likely to influence working longer, how the nature of changes to work itself will influence future generations of work, workers and workplace, and ultimately, the paper will dive deeply into what employers can do to achieve a competitive advantage from the changing demographics. In short, how do employers become age-ready? Source:

Items of Special Interest to Service Providers

401k Services Market Heating Up Fees are top of mind for defined contribution plan sponsors in 2017. A recent Callan survey shows that 26% of sponsors expect to conduct a search for a new recordkeeper this year. Therefore, it’s important to closely evaluate what you’re getting for your plan dollars when shopping around for new vendors. Source:

Court and Other Legal Issues

DST, Ruane Cunniff Sued Again Over Valeant Stock in 401k Plan Investment firm Ruane Cunniff & Goldfarb Inc. and DST Systems Inc. face a third lawsuit over the alleged imprudent investment of DST’s 401k plan assets in Valeant Pharmaceuticals stock. Source: (registration may be required)

Recent Plan Fiduciary Victories in ERISA Single-Stock Fund Litigation Over the last few months, there have been a significant number of court decisions ruling against plaintiffs alleging ERISA breach of fiduciary claims related to single-stock funds. These recent decisions suggest a new era in the ongoing saga of ERISA single-stock fund litigation, and one that may bode well for ERISA plan fiduciaries. Source:

Proving Loss Causation in Breach of Fiduciary Claims — The Split Widens Most circuit courts of appeals agree that ERISA requires that causation between the alleged breach and the claimed loss must be established before any liability may be imposed upon a breaching fiduciary. The courts are split, however, as to whether an ERISA plaintiff or the defendant-fiduciary bears the burden of proving the causal link between breach and loss. Source:

Edison International Agrees to Pay $13.2 Million in 401k Fee Lawsuit Parties in the landmark Tibble v. Edison lawsuit have agreed the defendant, Edison International, will pay more than $13 million in damages to cover allegations of excessive 401k fees. Source: (registration may be required)

State-Based Retirement Programs

State Sponsored Retirement Savings Plans: New Approaches to Boost Retirement Plan Coverage This 37-page paper describes and evaluates models and features used in emerging state-sponsored retirement saving plans such as Auto IRAs, open Multiple Employer Plans and Marketplaces. These plans have enormous potential to raise the number of Americans with access to payroll-deduction retirement saving plans. Source:

DOL’s Fiduciary Rule

DOL Proposes 18-Month Fiduciary Rule Delay; Issues New Guidance The DOL announced additional delays to major aspects of its fiduciary rule by proposing to extend certain transition period deadlines and applicability dates by 18 months. If finalized, full compliance with the rule’s chief prohibited transaction exemptions would not be required until July 1, 2019. Source:

DOL Conflict Rule – 401k Plan Sponsors Need to Step Into the Serve As in the game of tennis, plan sponsors face the strong serves of advisers vying for their business and for more revenue. Plans sponsors need to step into these serves. This means they must vigorously examine their sales collateral, their promises, their agreements, and their direct and indirect compensation. Source:

Congress Likely to ‘Push Down’ the Priority of Killing DOL Fiduciary Rule A main congressional opponent of the Department of Labor’s fiduciary rule said Thursday that Capitol Hill’s swelling political agenda will decrease the priority level of taking up legislation to kill the rule. Source: (registration may be required)

Compliance and Regulatory

What Would a Government Investigation Reveal About Your Retirement Plan? Many plan sponsors don’t revisit the plans to ensure they are staying in compliance with ERISA and federal regulations, or do not consider governmental policy changes. A DOL investigation can uncover problems with retirement plans and subject employers to costly penalties. There are a number of steps employers can take before they are given notice of any investigation to reduce the risk of penalties. Source:

Hurricane Harvey Affects Retirement Plan Administration The arrival of Hurricane Harvey in August significantly affected individuals and businesses in Texas. Recognizing this impact, the IRS, DOL, and the PBGC have granted extensions of certain deadlines for both plan sponsors and participants directly affected by this disaster. The IRS has also provided special rules for plan sponsors that want to offer hardship distributions or plan loans to employees or former employees that have been affected by Hurricane Harvey. Source:

Significant Changes Proposed for Employee Benefit Plan Audit Reports AICPA Auditing Standards Board has proposed changes to the reporting standards for annual audits of employee benefit plans that are covered by ERISA. The proposal, which was issued in April 2017, was in response to a request from the U.S. Department of Labor to re-examine the current audit reporting model for employee benefit plans. Source:

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