Experts in Personalized Retirement Plan Design & Administration Newsletter 03.20.17

TPA Alpha: A New Approach to Evaluating TPAs  What if TPAs were evaluated for value and performance in a similar manner as mutual funds? If so, determining a TPA’s “Alpha” potential could be a great place to start. The firm that has the highest probability of delivering positive Alpha would be the most obvious and prudent choice. This article reviews how this evaluation could be conducted. Source:

Helping Retirement Plan Participants Prepare for the Future  Selecting an education and/or advice provider is a fiduciary decision and should be made with all the care that any other fiduciary decision is made. By isolating the education process from the investment process, plan participants are receiving sound retirement education stripped of any sales motivation. It’s up to the plan fiduciary to monitor the education program to ensure that it’s not sales driven. Turning to an independent provider substantially reduces this risk. Source:

A New IRA Plan Could Simplify Offerings for Brokers, Employers  If one leading academic has his way, there would be a new acronym to learn in the crowded concoction of employee benefits law and regulation. And his plan could mean a simpler set of guidelines and documentation for employer retirement plans. Source:

Five Things Every New CFO Should Know About the 401k Plan  As the new CFO, you may have a dozen top priorities, and may question whether evaluating the retirement plan should be anywhere near the top of your to-do list. But there are five good reasons to spend some time considering the 401k plan you just inherited. Source:

403(b) Plans

Managing Critical 403(b) Issues Through Proper Allocation of 3(16) and 3(21) Fiduciary Responsibility  Service providers are demonstrating their ability to customize their fiduciary services to their customers’ needs and — just as important — to their own capacity to provide selected services where they feel they can add value. The complex nature of handling 403(b) plans make these plans uniquely suited to customized fiduciary services. Source:

Fiduciary and Plan Governance Material

401k Fees — Frequently Asked Questions by Plan Fiduciaries  If you’re a 401k fiduciary, you don’t want to be in the dark about your plan fees. The potential consequences for paying excessive 401k fees are too great. This FAQ will answer some of the most common 401k fee questions. Source:

Fiduciary Fee Reasonableness  Fee reasonableness is a fundamental and widely discussed fiduciary topic. Despite the importance of the topic, the DOL hasn’t given much insight or guidance as to what is considered a reasonable fee. As a result, much of the interpretation of what is and is not reasonable has come from the courts. As a fiduciary, it is important to turn to litigation for guidance, acknowledge how excessive fee allegations have evolved, and most importantly, to appropriately manage this risk in the future. Source:

The Misperception of Fiduciary Risk and Active Management in DC Plans: A Legal Perspective  Plan sponsors face increasingly complex fiduciary requirements, as well as pressure to provide an optimal plan experience for participants at a reasonable cost. Making investment selection decisions under these conditions can prove challenging. This white paper aims to help fiduciaries navigate the waters of plan investment selection and monitoring processes. Source:

Retirement Plan Best Practices: Plan Design  This 13-page paper helps plan sponsors navigate plan design decisions. It examines the factors that you should consider as a fiduciary when making decisions about plan design, looks at how other plans handle different options, and identifies some best practices. Source:

Put It in Writing! Why Your 401k Plan Should Have Written Policies  Plan fiduciaries worry not only about being a target of class action lawsuits, but also about the possibility of being selected for an IRS or DOL audit. More and more fiduciaries are coming to realize that memorializing a set of carefully-thought-out plan policies and following them can be their best defense in these situations. Source:

Four Questions to Guide Your Fee Evaluation Process  As a plan fiduciary, you have a responsibility to ensure your service providers’ compensation is reasonable relative to the services provided. A fiduciary process for assessing fees can help meet your obligation to provide a plan that operates in the best interest of your employees. Your plan provider or consultant can help you navigate this process by helping you answer four key questions. Source:

Insight: Studies, Research, and White Papers

Shift from DB to DC Resulted in Decline in Income Replacement  Retirement income as a percentage of wealth has declined as the employer-sponsored retirement plan landscape has been moved to mostly DC plans, a study finds. Source:

How Has the Shift to 401k Plans Affected Retirement Income?  This 8-page analysis addresses how the transition from DB to DC plans affected retirement wealth and income. The results show: Total retirement wealth from employer plans was roughly flat, and this wealth is now more skewed toward those with more education; the income produced by each dollar of retirement wealth has declined, despite a tendency for workers to retire later; and, the amount of income relative to a worker’s earnings has declined. Source:

Collective Investment Trusts – A Perfect Storm  Cost advantages and growing regulatory compliance requirements are making Collective Investment Trusts an important investment vehicle in the DC market. The characteristics that differentiated CITs from mutual funds are becoming competitive advantages, and their place in the retirement market is expanding to include even small players. This 28-page white paper can help you understand the increased opportunities CITs present to asset managers seeking a larger share of retirement assets. Source: ALPS

Breaking Down CITs  CITs are often less expensive to create and maintain. They may also be more flexible than their mutual fund counterparts given that they are subject to a different regulatory framework. While this may be a benefit to their fee structure, it can also be challenging because CITs are not broadly understood and often suffer misconceptions when compared to mutual funds. Source:

More Than 40% of Americans Are Wrong About Their Retirement Preparedness  A new study says that more than half of working-age Americans are at risk of seeing their standard of living drop in retirement. No shocker there. Many surveys and studies show that many, if not most, workers are well behind when it comes to preparing for retirement. What is surprising, though, is the number of people the researchers identified who believe they’re on track to a secure retirement, but aren’t. Source:

Items of Special Interest to Service Providers

12b-1 Fees: It Is Time to Bid Them Farewell  Given the 12b-1 fee’s implicit conflicts — and their declining relevance — arguably it’s time to create a more appropriate pricing structure for the realities of today’s investment marketplace. Source:

Ranks of Fee-Based Advisors Expected to Swell  Despite the uncertain fate of the Department of Labor fiduciary rule, we already see advisors changing their business practices. According to Cogent’s “The Future of the Financial Advisor” report, advisors earning at least three-quarters of their total compensation from asset-based fees could comprise half (49%) of all financial advisors by the end of 2017, up from 38% presently. Source:

New Rule, Old Rule – What Should Advisers Do Now?  Now that it seems clear that the applicability date of the new DOL fiduciary rule will be delayed, many advisers (including broker-dealers and RIA firms) may heave a sigh of relief. However, while some feeling of relief is justified, that does not mean that their services are not governed, in many cases, by the “old” fiduciary regulation. Source:

DC Advisors Don’t Feel Support in Wake of DOL Fiduciary Ruling  The DOL fiduciary ruling, despite not being fully enacted, as well as the recent calls for repeal and uncertainty regarding timing, has already altered the financial services industry substantially. Heightened fee scrutiny throughout the retirement industry is causing many DC plan providers to be on the defensive, focusing on ways to avoid the next potential pitfall. And although providers may be trying, half of DC advisors report they are not getting enough support from providers with regard to the new rules and regulations. Source:

Merrill Lynch Outlines Plans for Its 401k Fiduciary Platform  Merrill Lynch outlined plans to transition its defined-contribution-plan business over to a fiduciary model, coming several months after the firm announced similar plans for its retail retirement business and as the implementation deadline for the DOL’s fiduciary rule approaches. Source: (registration may be required)

Will the DOL Fiduciary Rule Kill 401k Plan Referrals?  Many less-experienced plan advisers are expected to refer current or potential 401k clients to more experienced plan advisers, but there’s a catch. The referral may be considered a fiduciary act and questions of whether compensation for those referrals is reasonable will also arise, regardless of the DOL rule, which will make a fiduciary of anyone providing investment advice for a fee in retirement accounts. Source: (registration may be required)

2017 PLANADVISER Micro Plan Survey  Micro-sized DC plans are those with less than $5 million in assets. Taken as a whole, the micro-plan market in many ways is large. This report summarizes provider service ratings in the micro-plan market. Source:

Small-Market Retirement Plan Advisers Face Big-Time Challenges  There are various aspects of a retirement plan that require ongoing review (i.e., plan design, participant communication and education efforts, recordkeeping tools, and services), but investments and fees continue to make headlines. While many of the cases featured in the news involve large plans, smaller retirement plans with less purchasing power face similar challenges. Source: (registration may be required)

Video: The Small 401k Plan Marketplace  Scott Buffington, Founder of and Tim Irvin, Consultant at Cammack Retirement sit down with Jeff Snyder to discuss the small 401kplan marketplace. Source:

Target-Date Funds

Target-Date Fund Unethical Practices  Target date funds are a big deal, and with big deals comes big responsibility. Despite its growing popularity and importance, there is a lot of confusion surrounding target-date funds. Some of this confusion leads to bad decisions that can harm beneficiaries and should expose fiduciaries to legal action. Source:

Court and Other Legal Issues

Safeway Workers Advance Two Challenges to JPMorgan Funds  Grocery giant Safeway can’t escape two proposed class actions challenging the fees and investments in its 401k plan, including its decision to offer JPMorgan target-date funds. Source: (registration may be required)

DOL Alleges Company Failed to Remit Employees 401k Withholdings  According to the complaint, the plaintiff alleges that defendants established a 401k plan and that employees withheld $12,611.85 as plan contributions and $17,966.56 in loan repayments and defendants breached their duty by failing to these remit sums to the plan. Source:

Eighth Circuit Remands Tussey v. Abb, Inc. Back to District Court  Because the district court apparently mistook direction for a definitive ruling on how to measure plan losses, and as a result entered judgment in favor of the ABB fiduciaries despite finding they did breach their duties, on this appeal, the Court vacated the judgment on that claim and remanded the case back to the district court for further consideration regarding whether the participants can prove losses to the plans. Source:

Eighth Circuit Sends Fund-Mapping Case Back to Trial Court to Redetermine Damages  The Eighth Circuit has weighed in again on the fund-mapping portion of this long-running case. Its latest decision affirms the trial court’s determination that a fiduciary breach occurred, but reopens the question of damages because the trial court failed to consider any method for measuring the plans’ losses other than the method suggested by the Eighth Circuit’s previous decision. Source:

Legislative and Washington DC

Labor Secretary’s Nomination Hearing Postponed Again  The Senate Health, Education Labor & Pensions Committee has delayed Labor Secretary Nominee R. Alexander Acosta’s confirmation hearing another week. Source:

A Tax on Retirement Accounts?  A new tax reform proposal has surfaced that would impose a 15% tax on retirement accounts. More specifically, the proposal includes a new 15% tax on interest paid to tax-exempt institutions and retirement plans. Source:

State-Based Retirement Programs

An Update on State-Run Auto-IRA Plans  In this video, Lisa Massena, CFA, Executive Director of OregonSaves, discusses State-Run Auto-IRA program initiatives. Source:

State Retirement Savings Initiatives Do More Than Enhance Retirement Security  This 7-page analysis shows a positive correlation between increased retirement savings, sufficient to remove a percentage of currently vulnerable households from the poverty rolls by the time they retire, and a reduction in Medicaid spending. Source:

DOL’s Fiduciary Rule

ERISA’s Fiduciary Rule at the Crossroads – DOL Puts the Brakes on Enforcement  The DOL issued Field Assistance Bulletin 2017-01. The FAB relates to the DOL’s proposal, which was published in the Federal Register on March 2, 2017, to delay for 60 days the applicability date of the DOL’s new fiduciary “investment advice” rule under ERISA, currently set to begin becoming applicable on April 10, 2017. Source:

The DOL Conflict of Interest Rule Is Already Delivering Benefits: Delay Puts Those Benefits at Risk  These benefits come in the form of promised reductions in the toxic conflicts that encourage harmful advice and reduced costs for both investment products and investment advice. The rule, which is due to be implemented in April, is achieving these beneficial results without sacrificing retirement savers’ access to advice or choice in how to pay for that advice. Source:

DOL Proposes to Delay Fiduciary Advice Rule, Requests Comments on Delay and on Costs, Benefits of the Rule  The DOL published a proposed extension of the effective date of what is commonly referred to as the fiduciary rule. The Rule provides that persons who provide investment advice or recommendations for fees or other compensation with respect to retirement plan assets will be fiduciaries under ERISA. Source:

DOL Issues FAB With Enforcement Relief From DOL Fiduciary Rule  The DOL issued Field Assistance Bulletin 2017-01 addressing notice and compliance issues under the DOL Fiduciary Rule given the uncertainty surrounding the proposed delay of the rule’s Applicability Date. The FAB will permit financial institutions to avoid sending out notices and client communications prior to April 10, 2017. Source:

DOL Issues Temporary Enforcement Relief for Fiduciary Rule Non-Compliance  This article discusses the two scenarios in which the DOL will not take enforcement action for non-compliance with the fiduciary rule during this period of uncertainty. it also provides suggestions on how advisers and financial institutions should proceed while we wait to see what happens with the fiduciary rule. Source:

How the DOL’s Delay Will Help the 401k Fiduciary Rule  This article discusses potential consequences to the DOL’s fiduciary rule, including increased cost of advice, limited access to advice, limited access to retirement services for small businesses and decreased availability for IRA rollovers to plan participants. The delay allows policymakers time to further examine these potential consequences. Source:

As DOL Fiduciary Rule Sits on Ice, Is It Thumbs Up or Thumbs Down for Advisors?  Whether the Department of Labor fiduciary rule continues to be delayed, eventually takes effect, or ends up being repealed, the proverbial beans have been spilled, as many advisors and their respective firms have already taken the actions needed to comply, thus proving some areas of debate true and others false. Source:

BofA, JPMorgan, and the Fiduciary Rule: Will They or Won’t They  WSJ’s Michael Wursthorn has been hot on the trail, looking into whether banks will proceed with transitions to fee-based retirement accounts if the fiduciary rule isn’t implemented. Source:

Citing “Cascade of Consequences,” Fiduciary Rule Foes File for Injunction  A group of plaintiffs in the fiduciary regulation litigation have petitioned the court to maintain the status quo pending their appeal. And, citing “their urgent need for relief,” the plaintiffs have asked the court to issue a ruling on the motion by March 20, 2017. Source:

Compliance and Regulatory

Retirement Plan Examinations and Enforcement Programs on the Rise: Guidance for Plan Sponsors  It’s no surprise that DOL and IRS investigations and audits are on the rise. In 2016, the DOL alone closed 2,002 civil and 333 criminal investigations. This article reviews some steps a plan sponsor can take to avoid or mitigate compliance issues before an audit is initiated. Source:

IRS Views on Self-Certification of Financial Hardship  Many plan sponsors rely upon a self-certification process to document and process 401k distributions made on account of financial hardship. The IRS has recently issued examination guidelines for its field agents for their use in determining whether a self-certification process has an adequate documentation procedure. Source:

IRS Releases Form 5500-EZ and Form 8955-SSA for 2016 Plan Year  The IRS has released the 2016 Form 5500-EZ (Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan) and 2016 Form 8955-SSA (Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits), along with their separate Instructions. Source:

Avoid Overpaying User Fees for Your VCP Submission  The Employee Plans Voluntary Compliance function has noticed an increase in submissions with incorrect user fees. Many of these submissions include user fees higher than what is required. This announcement reviews some ways to avoid the overpayment of user fees. Source:


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