Experts in Personalized Retirement Plan Design & Administration Newsletter 04.05.17

Are You Getting the Right Return on Your Retirement Plan Investment? According to data from Willis Towers Watson, the average employer-provided value in a DC plan in Canada is 6.3%, assuming employees take advantage of the full company match available. It’s a significant number for most organizations, so how can an employer measure if the retirement plan is providing the right return on the company’s investment? Source:

Should 401k Plans Offer Only Index Funds? A number of retirement plan experts believe that 401k plan participants should only be allowed to invest in index funds. They say the additional cost that participants pay for actively managed mutual funds is not justified by better performance. Some 401k plan sponsors have agreed, offering only index funds in their fund lineups. Is that a good idea? Source:

Why You Shouldn’t Stick With Your 401k Plan’s Default Settings The default 401k savings rate and investment might not be ideal for every employee, and it probably won’t allow you to claim the entire 401k match or all the tax breaks you are eligible for. Here’s why you should reconsider whether to accept your 401k plan’s default settings. Source:

The Unfortunate Truth About Your SPD When it comes to benefits, Summary Plan Descriptions should be one of the most valuable tools participants have. All too often, however, SPDs are difficult to understand and hard to use. Treating your SPD as the communication tools they were originally intended to be, rather than a mechanism to protect your plan in the event of a lawsuit, can increase the value of your SPD and your benefits to you and your plan participants. Source:

403(b) Plans

IRS Issues Guidance to Correct Defective 403(b) Plans The IRS recently issued guidance permitting employers to retroactively self-correct 403(b) plan document failures through March 31, 2020. In short, employers sponsoring 403(b) plans have until March 31, 2020, to “clean-up” any plan document failures that occurred during the RAP, retroactive to January 1, 2010. Source:

Fiduciary and Plan Governance Material

Plan Sponsors Want Help With DOL Fiduciary Duties Plan sponsors worry about participants suing over inferior investment choices or high fees. At the same time, they’re anxious about the Labor Department or Internal Revenue Service finding fault with their plan design or processes. They want advisors who are experts on the intricacies of the laws governing retirement plans, as well as a partner to share the stressful liability. Source: (registration may be required)

Investment Management Merger and Acquisition This article explores investment manager M&A and provides some topics that plan sponsors should consider if or when their investments have been affected by either a fund or firm-level merger. Source:

Why the Fiduciary Standard Matter to Clients Advisors speak out on why they formed their RIA, the differences between brokers and advisers and avoiding as opposed to accepting and disclosing conflicts, and what this means for their clients. Source:

Insight: Studies, Research, and White Papers

Smallest Companies Have Highest-Performing 401k Plans, Study Finds ALM Intelligence has published the results of the second annual 401k Plan Benchmark Report from its benefits unit, Judy Diamond Associates. This in-depth analysis from Judy Diamond Associates examined active 401k plans. Source:

Callan DC Index up 8% in 2016 The Callan DC Index ended 2016 with a return of 7.99%, its best year since 2013. The Index reflects the performance, asset allocation, and cash flows of more than 90 large defined contribution plans representing approximately $150 billion in assets. Source:

401k Benchmark Report This 32-page report examines approximately 500,000 active 401k plans. This data comes from the 2015 plan year and represents the most recent data available at the time of writing. These plans cover about 53 million eligible workers and account for about $4.1 trillion in plan assets. The goal of this research is to provide an objective, data-oriented view of different industries, how their collective 401k plans are performing, and how that compares to other industry groupings. Source:

Passive Investment Train Overtakes Active in Corporate DC Plans The never-ending fight for lower fees and the fear of fee-related lawsuits have pushed passive investments ahead of active management among large defined contribution plans, the first time since Pensions & Investments began tracking data from the 100 biggest corporate plans. Source:

The 2017 Retirement Confidence Survey The 2017 Retirement Confidence Survey finds that the share of American workers who are very confident in their ability to afford a comfortable retirement remains low, and some workers report that preparing for retirement is emotionally or mentally stressful. However, among retirees, confidence in their ability to afford a comfortable retirement continues to be comparably high. Source:

CITs: In the Sweet Spot for Improving DC Plans Once the initial setup, with the trust company of the CIT is done, they trade and act very similarly to mutual funds, and in fact, they have all the operational efficiencies of mutual funds, with many of the pricing advantages of separate accounts. Source:

2017 Best in Class 401k Plans Two years ago, PLANSPONSOR introduced its “Best in Class 401k Plan” designation, given to 401k retirement plan sponsors that meet a standard of excellence as defined by the PLANSPONSOR research and editorial teams. The 34 recognized this year were selected from the nearly 3,400 401k plans that responded to the 2016 PLANSPONSOR Defined Contribution Survey. Source:

Retirement Assets Total $25.3 Trillion in Fourth Quarter 2016 Total US retirement assets were $25.3 trillion as of December 31, 2016, up 1.4 percent from the end of September and up 6.1 percent for the year. Retirement assets accounted for 34 percent of all household financial assets in the United States at the end of 2016. Source:

Three Things to Know About DC Plan Participants Under Here are three critical findings from recent J.P. Morgan research on the attitudes toward saving and investing among the youngest members of the U.S. labor force. Source:

Items of Special Interest to Service Providers

Metamorphosis of DCIO Wholesalers Financial services wholesalers, especially with defined contribution investment-only firms, are facing some harsh realities, as are retail mutual fund wholesalers. Are we finally at a point where selling investments in defined-contribution plans will change dramatically, and what does that portend for DC advisers and the industry overall? Source: (registration may be required)

Despite Uncertainty, DOL Fiduciary Rule Upends 401k Biz Even though its fate is unclear, the Department of Labor’s fiduciary rule is upending the retirement plan adviser market, which spans the adviser spectrum from “dabblers” to defined contribution “specialists.” Observers say such changes began taking root prior to the promulgation of the rule last year but are being accelerated by the DOL regulation. Source: (registration may be required)

Tax Reform Proposals Causing Anxiety for Retirement Industry The fiduciary rule and President Donald Trump’s tax reform efforts were the big topics addressed Sunday during the opening of the NAPA 401k Summit. But the big takeaway for employers is that tax reform may inhibit employees’ ability to save for retirement. Source:

Retirement Market Needs 401k Generalist Advisers, Not Just Specialists Generalist 401k advisers, or those who don’t specialize in retirement plan business, are essential to a well-functioning retirement plan market, which shouldn’t be served only by so-called specialists, say industry executives at the National Association of Plan Advisors’ annual conference. Source: (registration may be required)

401k Plan Sponsors Want Financial Advisers to Better Know Their Businesses Employers sponsoring 401k plans want advisers to challenge their assumptions and commit to knowing their specific company and their industry, a panel of plan sponsors said Monday at the National Association of Plan Advisors annual conference. Source: (registration may be required)

Court and Other Legal Issues

Bank of America Prevails in 401k Asset Transfer Case Bank of America prevailed against employees who challenged a $3 billion transfer from the company’s 401k plan to its cash balance defined benefit plan. Source: (registration may be required)

Legislative and Washington DC

Legislation to Help Small Business Retirement Plans Introduced Bipartisan legislation has been introduced in the U.S. House and Senate to make it easier for small businesses to offer retirement plans, or at least easier to file Form 5500. Source:

DOL’s Fiduciary Rule

Texas Judge Shoots Down Latest Effort to Halt DOL Fiduciary Rule Opponents of the Department of Labor’s fiduciary rule were dealt another blow Monday when Chief Judge Barbara M.G. Lynn of the U.S. District Court for Northern Texas denied the financial trade association plaintiffs’ motion for an injunction to stop the regulation. Source: (registration may be required)

How Will You Offer Value Under the Fiduciary Rule? In the brave new world of fee transparency that has emerged, advisors are forced to be specific about the value they offer, even as technology rears its threatening head in the form of robo-advisors. How can advisors add value and thereby justify their fees? Source:

Acosta Won’t Commit to Supporting Fiduciary Rule Labor secretary nominee Alexander Acosta wouldn’t commit to supporting the DOL’s fiduciary rule when under fire from Sen. Elizabeth Warren during his confirmation hearing March 22. Source: (registration may be required)

Compliance and Regulatory

The Paradox of Participant Loans in Default Keeping two sets of books often means that someone is hiding something from the taxing authorities. However, keeping two sets of books is sometimes a legitimate practice, required precisely to comply with IRS rules that regulate different aspects of each set of books. For example, the difference between deemed distributions of loans in default and the actual loan offset requires a double set of books. Source:

401k Automatic Contribution Arrangements — General Annual Participant Notice This Snapshot discusses the general notice requirements for automatic contribution arrangements in 401k plans that are neither a qualified automatic contribution arrangement (QACA) nor an eligible automatic contribution arrangement (EACA). Source:

Changes to Note on the Form 5500 for 2016 The DOL, IRS, and the Pension Benefit Guaranty Corporation have recently released copies of the Form 5500, Form 5500-SF and related schedules for the 2016 tax year. Overall the form structure and content remain similar however with a few slight changes. Source:

Use of Electronic Medium to Furnish Participant Documents, Notices and Elections In this age of electronic communication, the ability to deliver participant documents, notices, consents and election options through electronic medium can be a great convenience and cost savings to plan sponsors. Both the Treasury and the DOL recognize this and each has its own regulation for use of electronic media. Source:

IRS Responds to Increase in User Fee Overpayments for VCP Submissions The IRS has noticed an increase in plan sponsors paying user fees that are higher than the amount required for their submissions under the Voluntary Correction Program. In response, the IRS website has been changed to remind plan sponsors that, beginning in 2016, VCP user fees are no longer included in the revenue procedure for the Employee Plans Compliance Resolution System. Source:

Deadline to Submit Qualification Amendments With the Puerto Rico Treasury Fast Approaching Plan sponsors or participating employers using the calendar year as the tax year that have adopted “qualification amendments” during 2016, must submit such amendments with the Puerto Rico Treasury on or before April 15, 2017, or, by July 15, 2017, if an extension request was timely filed. Source:


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