Experts in Personalized Retirement Plan Design & Administration Newsletter 01.18.17

How Much Money Do You Need to Retire? There are several metrics that you can use to determine where you are on your journey to building assets for retirement. Once you evaluate these barometers of building financial independence, you can better chart a path to improving your financial plan. Source:

Be a 401k Match-Maker If your company offers a 401k match and you’re concerned about employees who aren’t contributing enough to meet the full match, consider downloading and sharing this infographic in time for Valentine’s Day. Source:

Small Business Retirement Plans — SEP-IRA vs. Solo 401k One of the best tax deductions for a small business owner is funding a retirement plan. Beyond any tax deduction, you are saving for your own retirement. If you don’t plan for your own retirement who will? Two popular small business retirement plans are the SEP-IRA and Solo 401k. Source:

Why aren’t 401k Plan Sponsors and Participants Asking These Questions? Maybe plan sponsors and plan participants should be more concerned about the questions they’re not asking than the ones they are asking. What are the questions 401k plan sponsors and participants are asking and what are the questions they should be asking? Source: (registration may be required)

“Retirement City” Game Brings Innovation to Participant Education Wells Fargo is broadening its retirement outreach with its new Retirement City game, a virtual world with quizzes and challenges to sharpen retirement knowledge. Participants choose from 40 avatars and enter a variety of challenges to move through the game’s five levels of increasing difficulty, bringing them closer to retirement. Source:

Ten Employee Benefits New Year Resolutions for 2017 There’s still plenty of time to make New Year resolutions. If you sponsor or work with an employee benefit plan, here 10 ideas to keep in mind in the upcoming year. Source:

Can 401ks Get You Where You Want to Go? It seemed like such a great idea. Workers could set aside some of their own money to save for retirement. But now the original advocates of the 401(k) plan say it didn’t work out so well. Source:

How to Make the 401k Better Workplace retirement plans — most often, the 401k — have pros and cons. People who have done well are those workers who have maxed out on their contributions year in and year out. Here’s how financial experts suggest improving 401k plans and changing your own behaviors. Source:

403(b) Plans

403(b) Universal Availability Requirement A 403(b) plan must satisfy the universal availability requirement with respect to elective deferrals. All employees of the employer must be eligible to make elective deferrals if any employee has the right to do so, with certain limited exceptions. Certain part-time employees may be excluded from eligibility to make elective deferrals. Source:

Hospital Target in 403(b) Lawsuit Starts Off the Year Plan participants of Eseentia Health in Minnesota filed a class action lawsuit against the 403(b) plan sponsor claiming that the organization paid excessive fees to their recordkeepers. Experts are predicting an increasing number of lawsuits, especially against 403(b) plans which many consider low hanging fruit. Source:

Last Day of the Remedial Amendment Period for 403(b) Plans Revenue Procedure 2017-18 provides that the last day of the remedial amendment period for Section 403(b) arrangements for purposes of Section 21 of Revenue Procedure 2013-22 is March 31, 2020. Source:

Fiduciary and Plan Governance Material

Six Steps to a 401k Plan That’s Ready for 2017 For many people, the start of a new year means resolutions to get in shape, save money and spend more time with family. For 401k plan administrators, it’s a good time to reflect on the plan’s operation and make tune-ups where needed. Here are six steps you can take to make sure your plan is ready for the new year. Source:

Guide to Commonly Used DC Plan Investment Vehicles This 21-slide presentation provides a better understanding of the various investment vehicles that are commonly used within DC plans, their benefits and drawbacks, and considerations for deciding which structure to use. Source:

Four Traits of the Best Small Business 401k Providers There are thousands of 401k providers. This abundance of choice can make choosing a competent 401k provider with reasonable fees seem overwhelming for small business 401k fiduciaries. Fiduciaries should look for these four traits when shopping for a new provider. Source:

DOL Clarifies Fiduciary Standards on Proxy Voting and Investment Policies In response to concerns that prior guidance has unduly discouraged fiduciaries from exercising shareholder rights, the DOL issued guidance clarifying fiduciary duties on proxy voting and investment policy statements. The guidance also reiterates DOL’s acceptance of applying environmental, social and governance policies to investment strategies. Plan fiduciaries wishing to increase shareholder engagement have room under this guidance to do so. Source:

Insight: Studies, Research and White Papers

Study Demonstrates 401k Plans Are a Crucial Tool for Attracting and Retaining Millennial Talent A study from Fisher Investments 401k Solutions found that eighty percent of millennials say they would prefer to work for a company that offers a 401k plan, dispelling a commonly held belief that millennials are not as interested in 401k plans as other generations. Source:

Spotlight on Fees Is Reshaping DC Plans Callan’s 10th-annual “Defined Contribution Trends Survey” reveals that fees are playing a heightened role in driving plan sponsor decision-making. Reviewing plan fees was cited as a key area of fiduciary focus, both now and for the foreseeable future. Source:

Boosting Retirement Savings Rates a Primary Focus for Employers in 2017 Despite strong participation in employer-sponsored 401k plans, few employers are satisfied with their workers’ current savings rates, per a new report from Aon Hewitt. In response, employers are focused on increasing savings rates and will continue to expand financial wellbeing programs this year. Source:

Mobile and Web Abilities Valued by DC Participants Has Changed Corporate Insight surveyed close to 1,500 participants and found the top-15 features most commonly identified by participants as “very important” or “extremely important” saw a considerable amount of change since the 2013 survey. Source:

Improved Guidance Could Help Retirement Account Owners Understand the Risks of Investing in Unconventional Assets People who invest their retirement accounts in unconventional assets — such as real estate or virtual currency — may be placing their savings at risk. This GAO report recommends that the IRS improve guidance for account owners with unconventional retirement assets and clarify how to annually value such assets. Source:

Denise Appleby’s Employer Retirement Plans Comparison Table for Small Businesses-2017 Plan Year This table provides a comparison of the features and benefits that apply to retirement plans that can be sponsored/adopted by small business owners. Focus on the areas that are important to the business owner to help ensure that the plan chosen is the plan that is most suitable for the business. Source:

Top Issue Currently “Reshaping” 401ks The research and consulting firm Callan Associates is out with its annual “Defined Contribution Trends Survey” and it reveals that (what else?) fees in 401ks are playing a heightened role in driving plan sponsor decision-making. Source:

Disconnect Exist Between Perceptions of Plan Sponsors and Advisors Voya announced the findings of its survey of retirement plan sponsors and plan advisors. The goal of the survey, “Sponsor Perceptions of Retirement Plan Services: Challenges and Opportunities for Advisors,” was to better understand what sponsors want from advisors in terms of services and support, as well as to identify unmet needs and emerging opportunities. Source:

Plan Sponsors Starting to Offer Guaranteed Income Products, but Many Have Questions Guaranteed income products are a hot topic in 401k plans. The Plan Sponsor Council of America conducted a snapshot survey in the fall of 2016 to gauge whether plan sponsors are adding them to their plans, and if not, why. Source:

Small Business Views on Retirement Savings Plans The Pew Charitable Trusts recently surveyed over 1,600 small- and medium-sized business owners or managers to better understand the barriers to — and motivations for — offering retirement plans and to get their views on policy initiatives. The responses, in one of the few such surveys conducted in the past decade, generally show strong support for offering retirement benefits and for various policy initiatives that would boost savings. Source:

The Role of IRAs in US Households’ Saving for Retirement With $7.5 trillion in assets at the end of the second quarter of 2016, individual retirement accounts (IRAs) represented 31 percent of US total retirement market assets, compared with 19 percent two decades ago. Thus, IRAs play an increasingly important role in saving for retirement. This 40-page report breaks down the details. Source:

Items of Special Interest to Service Providers

Fiduciary Standard vs. Suitability Standard: The Gotcha That Won’t Go Away While the DOL’s new fiduciary rule arguably helps define the duties owed by financial advisers who provide investment advice to retirement plans and their participants, from a purely legal standpoint, those duties may already be sufficiently defined regardless of the actions the Trump administration may take. Source:

Titles Advisers Use Are Playing a Bigger Role in Fiduciary Regulation Though uncertainty prevails around the future of the fiduciary rule under a new administration, there are clear indications that the titles financial advisers use will play a bigger role in fiduciary regulation going forward. Even opponents of the DOL rule appear to be zeroing in on titles that cause confusion with the investing public. Source: (registration may be required)

Advisors Should Appreciate Plan Design The coming changes in fee disclosure and the change of fiduciary will require financial advisors to have more of a background in retirement plan issues. But, financial advisors don’t have the time to learn about plan design or fiduciary liability issues. Therefore, they need to work with the experts that do such as a third-party administration firm and an ERISA attorney. Source:

Why Fiduciary Advisors Will Profit Without a Fiduciary Rule If or when the U.S. Department of Labor’s new fiduciary rule gets smothered in its cradle by the incoming Trump administration — as many expect it will be — responsible financial advisors may still end up on top. So says Bob Veres, a leading proponent of fee-only financial advice for the past 30 years. Source:

Recordkeepers Gear Up for Advice Role Several large recordkeepers are expanding their fiduciary duties by providing more advice to defined contribution clients in response to the Department of Labor’s conflict-of-interest rule that is slated to take effect in April. Source: (registration may be required)

Target-Date Funds

Target-Date Funds With Annuities Can Be Prudent Default Investments Target-date funds with annuities can now be considered prudent default investment options, so long as certain liquidity requirements are met, the Department of Labor said in informal guidance. Source: (registration may be required)

Court and Other Legal Issues

Court Orders Fiduciary to Turn Over Cars in Settlement You’re aware of the personal liability that comes with being an ERISA fiduciary. Apparently satisfying that liability can include your Lexus, both of them. Source:

Legislative and Washington DC

Chamber Seeks End to Minimum 401k Distributions The U.S. Chamber of Commerce will be urging Congress this year to end minimum payout requirements from 401ks and IRAs. The effort, along with an effort to spur multiple employer retirement plans, is part of a legislative roadmap for retirement benefits the chamber will roll out February 3rd. Source:

State-Based Retirement Programs

DOL Green Lights Retirement Programs Run by Cities and Counties Recently issued guidance expands the DOL’s state-based retirement safe harbor rule to political subdivisions under specified conditions. As such, cities and counties — in addition to states — now have the DOL’s blessing to require private employers that do not sponsor a retirement savings plan for their entire employee population to facilitate employee participation in a government-run retirement program. Source:

DOL’s Fiduciary Rule

DOL’s Conflict of Interest FAQs (Part II – Rule) Set out here are several FAQs regarding implementation of the conflict of interest final rule. Since the publication of the Rule last April, the DOL has held many meetings with stakeholders to assist in their compliance efforts. Many of the questions they raised related to the various Rule provisions that draw lines between fiduciary and non-fiduciary communications. Like the FAQ the DOL issued in October, this FAQ is focus particularly on specific technical questions raised by financial service providers. Source:

Consumer Protections for Retirement Investors – FAQs on Your Rights and Financial Advisers The DOL’s recently adopted Conflict of Interest Rule protects retirement investors by requiring advisers to adhere to a fiduciary standard and give advice that is in the investor’s best interest. This FAQ provides information about the Rule and related protections so that one can better understand their rights and benefits. At the end of these FAQs is attached a list of questions that a retirement plan investor can ask their financial adviser. Source:

Gauging the Future of the DOL Fiduciary Rule in the Trump Era With the presidential election victory of Donald Trump and the success of Republicans in holding majorities in both the House of Representatives and the Senate, the immediate future of the Department of Labor’s fiduciary rule has been cast into some doubt. A recent analysis explores what its prospects may be. Source:

Compliance and Regulatory

Public Comments on Form 5500 Modernization Proposals The Department of Labor has made available the public comments on its Form 5500 Modernization Proposals. Source:

DOL Revisits, Relaxes Retirement Plan Proxy Voting Guidance While the DOL’s conflict-of-interest guidance is unquestionably the most high-profile fiduciary issue today, it is far from being the only fiduciary consideration to those who sponsor or administer retirement plans. The DOL issued Interpretive Bulletin 2016-1 addresses retirement plan fiduciaries’ responsibilities for voting proxies related to retirement plan investments. Notable in this guidance is the DOL’s affirmation that plan fiduciaries may consider environmental, social, and governance factors. Source:

Missing Participants: Gone but Not Forgotten In light of the more robust efforts being taken by the IRS and DOL in this area, it is best to craft or update procedures to help demonstrate compliance in locating lost participants and the timely payment of plan benefits. Having such procedures in place helps ensure that plan administrators are properly managing their fiduciary liability risk by taking reasonable and prudent steps to protect participants’ and beneficiaries’ rights to plan benefits. Source:

DOL Issues Interpretive Bulletin 2016-1 on Voting of Proxies The DOL issued Interpretive Bulletin 2016-1, which provides the DOL’s supplemental views on the voting of proxies on securities held in employee benefit plan investment portfolios, the maintenance of and compliance with statements of investment policy (including proxy voting policy), and the exercise of other legal rights of plan shareholders. Source:

Internal Controls in a Retirement Plan Controls at the plan sponsor are important because they may help prevent mistakes in plan administration, help prevent fraud within the plan, and help the plan stay in compliance with laws and regulations. Although many plan sponsors are always looking to implement better controls, others are not as willing to strengthen controls, due to lack of time or resources. Source:

Definition of Compensation One of the most common errors submitted to the IRS Voluntary Correction Program involves the Plan’s Definition of Compensation. If the definition used in operation does not match the definition stated in the Plan Document, a failure has occurred. Source:


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