Experts in Personalized Retirement Plan Design & Administration Newsletter 08.02.17

Why Millennials Should Embrace Roth 401ks  Does your 401k have a Roth account option? More employees, especially younger ones, are choosing to contribute to Roth accounts, according to two recent industry reports. What do these savvy Millennials know? Source:

Simple IRA vs 401k  Although there are benefits to a Simple IRA plan, there are also trade-offs associated with these plans that need to be understood and considered when a small employer is deciding which type of plan to implement. Source:

Switching From a SEP to a 401k  While a SEP may be the perfect plan type for some situations, many employers who start with a SEP later realize that a 401k plan may actually help the owners better meet their objective of maximizing contributions to themselves at a lower contribution obligation for the employees. Source:

How to Know If You Are Getting Good Investment Advice  It is not necessary for plan sponsors to offer the best performing funds in their 401k plans. Rather, they should be more concerned that the process used to select and monitor the investment options offered is compliant and sound. Outlined in this article are ways a plan sponsors can tell if they are receiving good investment advice. Source:

Absurd Things About 401k Plans That Are Actually True  When it comes to retirement plans, there are absurd things that make no sense, but are actually true. The problem is that a plan sponsors don’t know about these things before it’s too late. This article is about those absurd things about 401k plans that are actually true. Source:

Moving Your Retirement Plan Money: Defining Terms  This article defines some basic terms associated with moving funds into/out of/within a retirement plan. Source:

403b Plans

New 401k Pre-Approved Document Rules Suggests Path to Address 403b Document Challenges  Buried in that Rev Proc 2017-41 is something we have been looking for in the 403b space, which actually would help alleviate some of the concerns document drafters have with these long-standing plans. Source:

Why Do I Need to Restate My 403b Plan Document?  All organizations sponsoring 403b plans must now “restate” their plan documents onto an IRS approved document by March 31, 2020. Restatement on an IRS pre-approved plan gives the sponsoring organization reliance that the provisions in the pre-approved plan are compliant with IRS rules and regulations and that the plan assets are protected from taxation. Source:

Fiduciary and Plan Governance Material

Still Think Your Retirement Plan Is Only About the Investment Menu?  Reviewing investment menus and making changes to menus tends to be the primary focus of “fiduciary review meetings.” While this is of obvious importance, the investment menu should be a “tab” during the review and should not be the primary topic of every meeting. Source:

Retirement Plan Fees: Top Three Questions Answered  With retirement plan fees serving as the centerpiece of fiduciary breach lawsuits, it is no wonder that this is the leading topic of interest with retirement plan fiduciaries. Source:

Missing Participants — Part One  There are widespread reports of Department of Labor audits focusing on plan procedures with respect to “missing participants.” The DOL is treating the failure to adopt and follow adequate missing participant search procedures as a fiduciary breach and a possible prohibited transaction. This article reviews current rules and practice with respect to missing participants. Source:

Defining Expense Accounts  What is a Plan Expense Account (also known as an ERISA Account, ERISA Budgets Account, or Revenue-Sharing Account)? This 5-page white paper deals with what they are, who are they for, how they work, why they exist, and how they are handled. Source:

Insight: Studies, Research, and White Papers

How Canadian Employers Can Benefit From the Trend Towards Delayed Retirement  The trend towards delayed retirement isn’t going away any time soon, so finding ways for employers to take advantage of it may be an unexplored opportunity that could yield positive results for both the business and employees. Source:

Frequently Asked Questions About 401k Plans: Updated  The Investment Company Institute has updated their FAQ on 401k retirement plans. Some of the questions covered include: What is a 401k plan and how does it work? How have 401k plans grown since their introduction? What are the benefits of investing in a 401k plan? Is there a limit to how much an employee and employer can contribute to a 401k plan? Source:

2017 Defined Contribution Plan Sponsor Survey Findings  This 28-page report confirms that the evolution of DC plans continues. Plan sponsors and their organizations are transitioning from a traditional view of their DC plans — for example, to attract and retain employees — to a sharper focus on achieving the ultimate retirement outcome: helping as many employees as possible reach a financially secure retirement. This focus is evident in plan sponsors’ stated philosophies, objectives and, most important, actions. Source:

How Millennials Are Building Better 401k Accounts Than Older Workers  Millennials lag older workers in certain key measurements of 401k account usage. For one, only 59.4% of millennials have an account vs. 63.6% of Gen Xers and 66.1% of baby boomers. But millennials are leaders in what may be the single most important trait. As a group, they are on track to replace a higher portion of their pre-retirement income once they retire. Source:

Millennial Retirement Tips  Trends revealed by the Vanguard’s latest yearly 401k profile report point to several methods of improving your retirement plan, especially ways that millennials and Gen Xers can boost their odds of being financially prepared. Source:

Who Participates in Retirement Plans  Increasing the share of workers who participate in retirement plans has been a primary focus of retirement policy. As the retirement industry and policymakers try to increase participation, it is important to understand which workers currently participate in employer-sponsored retirement plans and why certain employers offer, and certain employees desire, compensation in the form of retirement benefits. Source:

The Influence of DC Plan Design on Retirement Outcomes  This 16-page paper highlights where the 401k system is working well and where it could be improved, and identifies initiatives, behaviors, policies, and approaches that may either boost or diminish retirement readiness among American workers. Source:

2017 Plan Wellness Scorecard  While overall participation increased modestly, employee account balances, contributions, and contribution rates all saw significant increases. Complementing these enhanced levels of employee engagement, employers are making it easier for employees to take more control of their finances by continuing to simplify retirement plan design and expanding the benefits they offer to include Roth 401ks and Health Savings Accounts. Source:

Commonly Cited Participation Gauge Misses the Mark, Study Says  A new study finds a higher rate of workplace retirement plan participation, and claims that a widely cited measure of participation understates reality by about five percentage points. Source:

Plan Sponsors Using Plan Design and Other Tools to Increase Employee Engagement  Employers are making it easier for employees to take more control of their finances by continuing to simplify retirement plan design and expanding the savings solutions they offer to include Roth 401ks and health savings accounts (HSAs), according to the latest Bank of America Merrill Lynch Plan Wellness Scorecard. Source:

New Retirement Readiness Resources Embody Industry Trends  The proliferation and evolution of retirement readiness resources continue to be of the most prevalent trends within the digital retirement space. As more and more recordkeepers introduce new and upgrade current resources, the selections of retirement readiness tools and calculators available on participants have become increasingly user-friendly and comprehensive. Source:

DC Plan Innovation Moves Down Market  Smaller plans traditionally have lagged behind large plans when it comes to embracing best practices under ERISA, but survey data shows the picture is changing. Source:

Black Millennials Lack Retirement Plan  The retirement forecast for Black millennials could prove catastrophic if better financial planning, saving and curbing unnecessary spending are not taken seriously. Source:

Items of Special Interest to Service Providers

Investment Manager and Recordkeeper Changes Driven by Fees  Plan sponsors’ desire to reduce plan costs is substantially impacting their approach to investment menu design and their relationships with defined contribution plan investment managers, according to findings from “Retirement Planscape,” an annual Cogent Reports study by Market Strategies International. Source:

To Reach DC Plan Sponsors, Tap the Wall Street Journal  Plan providers courting new business often turn to trade publications and websites to tout their recordkeeping capabilities among a targeted audience. Yet when we asked plan sponsors which print publications they read over the past six months, specifically for 401k best practices or 401k service providers, nearly half (49%) cite The Wall Street Journal. Source:

Advisers Can Help Plan Sponsors Save on Fees  Advisers have the ability to reduce a retirement plan’s fees by as much as 50%, says Julie Ward, vice president, consulting at NFP’s retirement division in Aliso Viejo, California. Source:


How Hybrid QDIAs Could Be Beneficial to Participants  There are different ways the industry is defining hybrid qualified default investment alternatives. Whether structured as a hybrid QDIA or not, experts agree managed accounts can be complementary to TDFs in a DC plan’s investment menu. Source:

Court and Other Legal Issues

The Supreme Court Indirectly Stiffens a Fiduciary Breach Time Limit  The Supreme Court appears to have barred equitable tolling under ERISA Section 413’s six-year statute of repose for fiduciary breach claims, subject only to well-pled allegations and proof of fraud or concealment. Source:

Plan Sponsor Admits to Stealing From 401k  The owner of PCI, a commercial janitorial company that contracted with area school districts, and CDM, a company that performed construction and property management services in a metro area in Kansas, has pleaded guilty to theft from an employee benefit plan. Source:

Voya’s Win in 401k Fee Suit Bodes Well for Other Recordkeepers  The dismissal of a lawsuit against Voya Financial for its relationship with 401k robo-adviser Financial Engines could be a harbinger of success for other major retirement-plan recordkeepers locked in similar legal battles. Source: (registration may be required)

Franklin Templeton 401k Challenge Gets Class Treatment  Participants in the Franklin Templeton 401k Retirement Plan who sued the company over the plan’s in-house mutual funds got permission to move forward as a certified class. Source: (registration may be required)

Legislative and Washington DC

Trump Administration Ends myRA Retirement Savings Program  Although many providers have used online, participant self-certification to process hardships, serious questions remain whether this process is adequate and the employer, not the provider, remains responsible for any improper hardships. Recent changes to IRS audit guidelines for its examiners indicate the IRS may be more flexible than in the past if certain notice and documentation requirements are met. Source:

Treasury Announces Steps to Wind Down myRA Program  The U.S. Department of the Treasury today announced that it will begin to wind down the myRA program after a review by Treasury that found it not to be cost effective. Source:

Cybersecurity Issues

Three Tips for Better 401k Plan Cybersecurity  With trillions of dollars in assets to safeguard, the retirement services industry is now intensely focused on the issue of cybersecurity. This article provides three tips retirement plan participants use to protect their retirement savings. Source:

State-Based Retirement Programs

Many DC Plan Sponsors Likely to Move From DC Plan to State Plan  Several states have acted to provide state-run plans for private-sector workers that may not have access to a retirement plan. However, a study finds some employers that offer defined contribution plans to their employees may discontinue those in favor of government-run plans. Source:

Oregon Rolls Out Retirement Savings Program  On July 1, 2017, the state of Oregon rolled out its new pilot program OregonSaves to help those who do not have access to employer-sponsored retirement plans. The remainder of the program will be rolled out in phases. Source:

DOL’s Fiduciary Rule

Further Delay of Full Applicability of the Fiduciary Rule Would Cost Retirement Savers  The Economic Policy Institute estimates that the delays the DOL has already instituted under the new administration mean that retirement savers will lose $7.6 billion over the next 30 years. Each year of further delay will cost retirement savers an additional $7.3 billion dollars over the next 30 years. Source:

DOL May Be Saying Au Revoir to BIC Exemption’s Restrictions on Arbitration  On July 3, 2017, in a brief filed before the United States Court of Appeals for the Fifth Circuit, the DOL and DOJ announced that the Government would no longer defend the restrictions on arbitration in the Best Interest Contract Exemption, and opined that the conditions should be vacated and severed from the exemption. The move marks a stunning shift in the DOL’s defense of its fiduciary rulemaking, which has been vigorous and marked by a string of litigation victories. Source:

Fiduciary Rule Causing DC-Plan Recordkeepers to Reassess Business With Insurance Agents  Independent insurance agents have been among the most affected by the DOL’s fiduciary rule, and it appears some defined contribution plan recordkeepers have been contributing to that upheaval. Source: (registration may be required)

Compliance and Regulatory

Top Five Tips for 401k Loan Program Design  Here are five plan design ideas for plan sponsors who want to allow employees to borrow against 401k accounts and, at the same time, ensure the loan is repaid and add some retirement security protections. Source:

Computation of Maximum Loan Amount in the Case of Multiple Loans  After issuing guidance earlier this year, the IRS has issued superseding guidance to agents on calculating the maximum loan amount in the event of multiple loans. Source:

IRS Revamps Pre-Approved Qualified Plan Program  In new IRS Rev. Proc. 2017-41, the IRS revamps its pre-approved plan program. Many of these changes appear to be designed to make pre-approved plans more attractive and usable in place of individually designed plans. This 4-page article highlights keys aspects of the new guidance. Source:

401k Hardship Distributions: Do They Have to Be So Hard?  Although many providers have used online, participant self-certification to process hardships, serious questions remain whether this process is adequate and the employer, not the provider, remains responsible for any improper hardships. Recent changes to IRS audit guidelines for its examiners indicate the IRS may be more flexible than in the past if certain notice and documentation requirements are met. Source:


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