Experts in Personalized Retirement Plan Design & Administration Newsletter 02.08.17

It’s Time for 401k Plans to Become Part of the Sharing Economy  Over the last few years there have been those of us in the industry who have advocated for a better way. One that eliminates the fiduciary dysfunction we currently see in the small employer market. The better way is the aggregation of the plans of unrelated 401k plan sponsors into single plans called multiple employer plans. Source:

Ten Reasons Why It’s Better to Rollover Your 401k Into an IRA  There are any number of reasons to get your money out of an old employer’s 401k plan. Here are 10 of them. Source: (registration may be required)

Five Steps to Setting up a Canadian DC Pension Plan  You’ve decided to launch a defined contribution pension plan for your employees, but you don’t know where to begin. What’s the answer? How do you decide what’s right for your organization? This article takes a five-step approach. Source:

How to Cope With Student Loan Debt in Retirement  Carrying student loan debt into your 60s or older can make it especially difficult to pay for retirement. Those who default on federal student loans might even see their tax refunds and part of their Social Security benefit withheld to repay the loan. Here’s how to deal with student loan debt as you approach retirement. Source:

Fiduciary and Plan Governance Material

Retirement Plan Investment Programs Harbor Newly Revealed Risks  Investment advisor conflicts of interest can cause participants to overpay for investment related services, which reduces their net investment returns and exposes their employers to fines and class action lawsuits. The DOL points out that the organizations that sponsor the plans, not the investment firms, are accountable for any excessive fees paid from plan assets. If you’re unsure of where your plan’s investment program aligns with the DOL’s revelations, here’s what to look for. Source:

With Change on the Horizon, Advice for DC Plan Sponsors in 2017  With a new president and a new party now in charge, change is in the air and on everyone’s mind. But the wheels of government generally turn slowly. For sponsors of defined contribution pension and savings plans, 2017 could be relatively quiet. This lull gives DC plan fiduciaries the chance to proactively focus on certain issues that might need attention. Source:

Not All Fiduciaries Are Created Equal  There are different kinds of fiduciaries, and some offer more layers of protection than others. So make sure you understand the nuances behind the designations. Source:

403(b) Plans

Long Awaited IRS Guidance on Initial 403(b) Remedial Amendment Period  The IRS has announced that the initial remedial amendment period for 403(b) plans to correct plan document defects in form will be open until March 31, 2020. This indicates that the first round of IRS advisory and opinion letters for 403(b) pre-approved plans will be coming out soon. Source:

403(b)’s ‘Limitation Year’ Rules Demonstrate their ‘Individual’ Nature  Even now, as we hear rumblings that a “universal 401k” arrangement may once again be in the wings under any tax reform package considered by the new Congress, we again are reminded of how ingrained the differences are between the various types of retirement plans. There are reasons these plans, and the differences between them, exist. One of the most unusual differences, and hidden, differences between 403(b) plans and 401k plans is the striking fact that the 415 limit is an individual limit, not a plan level limit. Source:

Insight: Studies, Research, and White Papers

Top 10 Small Business 401k Providers  The top 10 401k providers ranking have been stable for the past two years, with only one new provider making it into the top 10 list for defined contribution plans under $10 million in assets. Source:

Employers Key to Retirement Saving, Study Says  Employer-provided retirement plans remain key to retirement saving to a healthy proportion of the employee population, and interest in some aspects of those plans is especially strong, says a recent study. Source:

The Keys to the Kingdom: Employees Look to Employers for Answers  American Century Investments finds that employees continue to look to their employers for guidance in saving and investing for retirement. A sentiment that has been expressed in past surveys, the expectation for employer support is increasingly evident in the 2016 study. Source:

Retirement Preparations in a New Age of Self-Employment  Study provides research-based insights from 15 countries spanning Europe, the Americas, Asia, and Australia, and outlines recommendations for improving the long-term financial security of the self-employed. Source:

The Effect of Job Mobility on Retirement Timing by Education  Job-changing among late-career workers increased steadily from the 1980s through the mid-2000s before declining somewhat in recent years. This 26-page paper asks how the rise in job-changing affects retirement timing and whether this effect varies by a key measure of socioeconomic status or educational attainment. Source:

401k Balances, Contributions and IRAs End 2016 at Record Levels  Fidelity Investments today released its 401k and Individual Retirement Account analysis for the fourth quarter of 2016, which reveals a record average 401k balance. Source:

Eight Concerns 401k Sponsors Have About DC Plan Administration  Sponsors of large and mega 401k plans are continuing to step up oversight of retirement plans and in many cases are taking a more paternalistic approach to plan design. Fee consciousness and heightened oversight are key themes. Source:

401k Savings Hit Record Numbers  Record investing in 401k accounts is yielding impressive results for retirement savers. That’s because people have recently been socking more money away. Workers in 2015 saved 6.8% of their salaries in 401k and profit-sharing plans, versus 6.2% in 2010. Source:

Items of Special Interest to Service Providers

Betterment for Business Eager to Challenge Major Recordkeepers  Shifting regulations, evolving consumer demands and a strong response from established providers are real challenges, but low-cost automated 401k platform providers remain committed to DC industry disruption. Source:

How Retirement Plan Advisers Can Help Clients With Compliance  Retirement plans are complicated, and employers often find themselves too busy to give them appropriate attention. So, it seems pretty natural that over the years an investment adviser’s role has evolved into one that, ideally, helps ensure compliance and minimize risk, which has become of utmost importance, especially as 401k litigation has increased. Source: (registration may be required)

Exploring the Impact of the DOL Fiduciary Ruling on the DC Marketplace  This 9-page research paper explores the DOL fiduciary ruling’s impact on the DC market. The paper begins by looking at how DC advisors see the ruling changing their businesses and how it’s shifting their priorities. Then it turns to the participant view, examining their awareness of the ruling and how it alters their perceptions of financial advisors and the industry overall. Then, it looks at DC advisor satisfaction with the support they are receiving from financial providers. Source:

Target-Date Funds

Target-Date Funds: What’s Under the Hood?  While nearly 60 percent of new 401k participants have savings in target-date funds, little research has looked under the hood of this investment vehicle. This analysis uses a unique dataset with extensive information on the underlying mutual funds that TDFs hold. Source:


DOL: Lifetime Income Can Be Part of Prudent QDIA  The DOL issued an information letter that indicated employer plan sponsors are entitled to use lifetime income products as a part of a prudent qualified default investment alternative (QDIA), even if the products contain certain liquidity and transferability restrictions. Source:

Managed Accounts: The Future of Default Options in DC Plans?  Commenting on the dramatic growth of target-date funds, the head of retirement research for Morningstar blogging in the Wall Street Journal asks the obvious question: when will we move to more customized solutions? Managed accounts offer that option, but barriers include costs and engagement. Source:

Court and Other Legal Issues

Edward Jones’ Self-Dealing Suit Permitted to Proceed  Defendants unsuccessfully argued that the breach of fiduciary claims should be dismissed because they fulfilled their duties by offering an array of investment options. Source:

Aon Hewitt Sued Over Fee Scheme in Caterpillar’s 401k Plan  Aon Hewitt Financial Advisors is the latest retirement services company accused of violating ERISA by entering into a fee-sharing agreement with online investment adviser Financial Engines Inc. Source: (registration may be required)

Fee Litigation Update: Moving Beyond Allegations of Self-Dealing  In 2016, we saw a considerable uptick in the number and variety of excessive fee lawsuits commenced against plan fiduciaries of defined contribution plans. Article looks at these filings, many of which have advanced novel theories of imprudence that are not dependent on allegations of self-dealing. The article also identifies affirmative steps that plan fiduciaries may take to prevent these types of claims from succeeding. Source:

Legislative and Washington DC

DOL Nominee Puzder’s Hearing Again Delayed  The Senate Health Education, Labor and Pensions Committee’s confirmation hearing for Andrew Puzder, President Trump’s nominee for Secretary of Labor, has been delayed again. Source:

Is the Revised Form 5500 the Next Big Thing?  On July 11, 2016, the Department of Labor issued proposed forms and regulations that would significantly overhaul the Form 5500 again. These changes would apply to 2019 and later plan years. So is this change to a government form “the next big thing”? Very likely, yes. Source:

State-Based Retirement Programs

State Auto-IRAs: The Wrong Answer  According to this 20-page paper, states considering mandating automatic enrollment payroll deduction Individual Retirement Accounts are likely to hurt the very workers they think they are helping. The reason is simple, state autoIRAs are a poor substitute for employer-provided plans. Source:

DOL’s Fiduciary Rule

DOL Fiduciary Reform Effort Losing Steam  The DOL’s fiduciary rule reform effort, more than a decade in the making, seems more likely than ever to finally stall, according to a variety of industry experts called upon to interpret the likely impact of a Trump Administration and the Republican-controlled Congress on the employer-sponsored retirement planning market. Source:

Justice Department Continues to Defend DOL Fiduciary Rule in Court  The Department of Justice continues to defend a Labor Department investment-advice rule in a lawsuit in a Texas federal court almost two weeks after President Donald Trump was sworn into office. Some experts anticipate the Trump administration will abandon the rule in court. Source: (registration may be required)

DOL Fiduciary Rule Not Yet Caught up in Trump Maelstrom  What Mr. Trump has not touched is the DOL’s fiduciary rule. Speculation is mounting as to what is taking the administration so long to act. Is President Trump waiting for his DOL secretary nominee to be approved? Or is he finding it harder to repeal than expected? Source: (registration may be required)

DOL Fiduciary Rule Compliance: SEC Says Brokers Can Impose Their Own Commissions on Sales of ‘Clean’ Fund Shares  the SEC staff issued a no-action letter to Capital Research and Management Company in which the staff confirmed that the restrictions of Section 22(d) of the 1940 Act do not apply to a broker-dealer when, as agent on behalf of its customers, the broker-dealer charges its customers commissions for effecting transactions in “Clean Shares” of a fund. Source:

Safe Harbors and Exclusions in the DOL’s Fiduciary Rule  Some communications are not deemed by the fiduciary rule to be a “recommendation,” so they’re not “investment advice.” This article takes a closer look at the safe harbor exceptions/exclusions. Source:

Disclosure of Noncash Compensation and Third-Party Payments in Response to the DOL Fiduciary Rule  New resource from ICI working groups explore how fund intermediaries can fulfill disclosure requirements under the DOL fiduciary rule. Source:

What You Need to Know About Trump’s Plan to Halt DOL Fiduciary Rule  The DOL is being directed to examine the fiduciary duty rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice. As part of this examination, the DOL is expected to prepare an updated economic and legal analysis concerning the likely impact of the rule. Source: (registration may be required)

Trump Tackles Fiduciary Reg Just Short of its “Go” Line  The President signed a memorandum to the Secretary of Labor that pushes back the April 10 implementation deadline by 180 days. In his daily press briefing, White House press secretary Sean Spicer described the rule as “a solution in search of a problem,” charged the Obama Department of Labor with exceeding its authority in promulgating it, and remarked that the rule represents the “kind of regulatory overreach that President Trump was elected to stop.” Source:

Text of the Presidential Memorandum on Fiduciary Duty Rule  This is the text of the Presidential Memorandum on Fiduciary Duty Rule issued by President Thump on Friday, February 03, 2017. Source:

What Trump’s Action on Advisor Rule Means for Retirement Savers  Trump’s directive puts consumer protections that were on the way for traditional and Roth IRAs, 401ks and some health savings accounts into question. At minimum, this means consumers must do their own due diligence before hiring financial advisors and brokers. Source:

Final Trump Memo Lacks Explicit Directive to Delay DOL Fiduciary Rule  The final version of a memo sent by President Donald Trump on Friday to the Department of Labor directs the agency to review a sweeping investment-advice rule but does not contain an explicit delay of the April 10 implementation date. Source: (registration may be required)

Halt of Fiduciary Rule Means More Work for Plan Sponsors  Industry experts have opined that the rollback of the DOL fiduciary rule will actually put more pressure, not less, on plan sponsors to ensure they are meeting their own required duties. Source:

Preliminary Analysis of Trump Memorandum on the DOL Fiduciary Rule  Finding No. (i) would be subjective and require the DOL to determine the regulation causes “harm.” Finding No. (ii) would similarly be subjective and require it to conclude that the regulation “adversely” affects investors or retirees. Finding No. (iii), however, is objectively a slam dunk. There is no question that if there are millions of written BICE agreements in circulation, it will necessarily increase the number of potential breach of contract claims filed by investors, particularly after a significant market correction. Source:

Compliance and Regulatory

Updated Publication 560 — Retirement Plans for Small Business  This is the newly updated 28-page IRS Publication 560 which covers retirement plans can set up and maintain for Small Businesses. Includes SEP, SIMPLE, and Qualified Plans. Source:

Updated Publication 575 — Pension and Annuity Income  This is the newly updated 43-page IRS Publication 575 discusses the tax treatment of distributions from pension and annuity plans and also shows how to report the income on a federal income tax return. Source:

Record Retention Requirements Applicable to Employee Benefit Plans  Presentation details the general rules of ERISA and then discusses several specific recordkeeping requirements for employee benefit plans and a number of general requirements that imply a duty to retain records, for example general fiduciary duties, plan distribution requirements, COBRA requirements and qualified medical child support requirements. Source:

ADP Test Basics  The tax code governing 401k plans was written to prevent qualified retirement plans from overly favoring Highly Compensated Employees. A series of non-discrimination tests were devised to measure whether a plan’s design or operation lends to favoring the HCEs over the Non-Highly Compensated Employees. This a review of the tests. Source:

Puerto Rico 2017 Retirement Plan Limits  The Puerto Rico Treasury Department (Hacienda) has announced 2017 benefit limits for retirement plans qualified under Puerto Rico’s Internal Revenue Code. Source:

Correcting ADP Test Failures  New resource from ICI working groups explore how fund intermediaries can fulfill disclosure requirements under the DOL fiduciary rule. Source:


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