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Experts in Personalized Retirement Plan Design & Administration

BPP401k.com Newsletter 04.06.16

Millennials’ New Retirement Number? $1.8 Million  Millennials have more than enough financial worries. Now they can add about 2 million more to their list. That’s how much many might need to save to retire. Source: Usatoday.com

Jerry Schlichter Video Interviews  401k Specialist Magazine recently published this series of video interviews with Jerry Schlichter, plaintiffs’ lawyer for Tibble v. Edison. Each is from three to four minutes long. Source: 401khelpcenter.com

403(b) Plans

403(b) — Is It the Wild, Wild West?  The 403(b) market was the “wild, wild West” of retirement plans in 2005. It’s now 2016, while products and providers are better, there is plenty of room for improvement. Some suggest we improve the offerings by inviting more regulation. In Western parlance, we’d call this introducing a sheriff to bring more governance. But is the ERISA sheriff the answer? Source: Aspireonline.com

Fiduciary and Plan Governance Material

How the DOL Fiduciary Rule Will Affect Plan Sponsors  While aimed at financial advisors, the Department of Labor’s fiduciary standard rule will impact compliance obligations and costs for plan sponsors as well. Article reviews several areas that HR people need to stay on top of. Source: Shrm.org

401k Plan Reviews Often Miss the Mark in Terms of Frequency and Focus  Many financial advisors neglect to review the effectiveness of retirement plans with plan sponsors as often as many sponsors want and, when reviews do take place, they often fail to focus on what’s most important, according to research from MassMutual Retirement Services. Source: 401khelpcenter.com

Some Retirement Plan Recordkeepers Resort to Aggressive Sales Tactics With Proprietary Products  Financial services firms with both recordkeeping and asset management units often will discount their recordkeeping services if a 401k plan uses their proprietary funds, typically a target date or stable value fund, advisers say. There isn’t anything inherently wrong with discounting, as long as it doesn’t run afoul of solid fiduciary management and due diligence. Source: Investmentnews.com (registration may be required)

Insight: Studies, Research and White Papers

Helping Women Achieve Retirement Security  Women may face particular challenges in saving for retirement and research shows they are less financially well prepared for retirement. For women who haven’t started saving, myRA could be a great option to get started on the path to retirement security. Source: Treasury.gov

Most Americans Want Advisors Legally Required to Provide Non-Conflicted Advice  Americans tend to have a tough time determining if their investment advisor is on their side, but they clearly want their advisor in their corner, according to a new survey from Financial Engines. Seventy-seven percent of those surveyed said they would support legally requiring all financial advisors to put their clients’ best interests first when providing retirement investment advice. Source: 401khelpcenter.com

Is Tibble the End of Revenue Sharing?  This article summarizes the evolution of revenue sharing over the past ten years and examines its future through the lens of the recent U.S. Supreme Court decision in Tibble v. Edison and the subsequent uptick in 401k fee litigation. Source: Mwe.com

401ks: An Employer-Employee Disconnect  A survey throws a new spotlight on the employer-employee disconnect over 401ks that has also been well-documented in research studies. The survey of 1,000 employees reveals that workers lack confidence in their ability to navigate basic aspects of their retirement plans, while the 200 employers also surveyed have a more optimistic view of how workers are doing. Source: Bc.edu

2016 U.S. Retirement Environment Index Report  The 2016 Retirement Environment Index is a holistic ranking of all 50 states and the District of Columbia on their retirement desirability for pre-retirees between the ages of 45 and 64. State of Virginia retains its No. 1 spot in the annual holistic ranking. This 9-page report was prepared by LPL Financial Research. Source: Lpl-research.com

Items of Special Interest to Service Providers

Conflicts in a Rapidly Changing Fiduciary Landscape: Dually Registered or “Hybrid” Challenges  Dual registration and hybrid models have become increasingly popular because they have a great deal of flexibility in serving client needs. This 12-page paper takes a close look at some of the unique concerns confronting the growing number of individuals and firms that have adopted dual registration or hybrid approaches to serving client needs. Source: Pershing.com

Conflicts in a Rapidly Changing Fiduciary Landscape: Broker-Dealer Challenges  While the outcomes of the Dodd-Frank mandate and the DOL’s proposal remain uncertain, for the foreseeable future, broker-dealer firms are likely to experience increasing pressure to demonstrate that they have policies and procedures that identify and prevent conflicts of interest. This 8-page paper discusses some of the common broker-dealer practices that the authors believe to be potential conflicts. Source: Pershing.com

Distribution and Rollover Education  Fred Reish write here, “A reporter recently asked me to explain why people are saying that, under the DOL’s fiduciary proposal, an adviser should not recommend that a participant take a distribution and roll over to an IRA, but instead should provide distribution education. Here’s my answer.” Source: Fredreish.com

Court and Other Legal Issues

BP Deepwater Stock Drop Suit Gets DOL and SEC Consideration  The complicated litigation Whitley v. BP PLC is just the latest stock drop case to be impacted by the big-ticket Supreme Court decision in Dudenhoeffer v. Fifth Third Bancorp, this one earning “friend of the court briefs” from both DOL and SEC. Source: Planadviser.com

Merrill Lynch Beats Lawsuit Over Clifford Chance 401k  A federal judge dismissed the claims against Merrill Lynch on March 25, after finding that the litigator — who represented himself without outside counsel — didn’t show that Merrill Lynch acted as a fiduciary under the Employee Retirement Income Security Act when it provided recordkeeping, administrative and investment services to the Clifford Chance plan. Source: Bna.com

Merrill Lynch Cleared of Wrongdoing in Excessive Fee Case  The U.S. District Court for the Southern District of New York has found that Merrill Lynch was not acting in a fiduciary capacity under ERISA by presenting a roster of funds from which 401k plan trustees could choose to offer in the plan. Source: Plansponsor.com

Fifth Third Bancorp Settles Stock Class Action for $6M  Fifth Third Bancorp will pay $6 million to settle a class action lawsuit brought by employees claiming the company’s retirement plan lost tens of millions of dollars by investing in the financial services firm’s own stock in 2007 despite its risky subprime lending. Source: Law360.com

Fidelity Challenged for Keeping Float Income in 401k Plans  The DOL’s central issue is not whether the float is a plan asset, but whether Fidelity unilaterally used its fiduciary authority to transfer 401k assets to the disbursement account in order to generate income for itself without permission. Source: Ipbtax.com

State-Based Retirement Programs

State Savings Initiatives: Lessons From California and Connecticut  Eighteen states are considering retirement savings initiatives. To date, just two states — California and Connecticut — have completed “feasibility studies” to determine whether their initiatives can generate sufficient account balances and employer support to be successful. This 8-page paper focuses on lessons learned from these two states. Source: Bc.edu

DOL’s Re-Proposed Fiduciary Rule

DOL Fiduciary Rule Expected April 6  For weeks, rumors have swirled as to when the Labor Department would unveil its new fiduciary regulation, but that long wait could be coming to an end. Published reports in Politico and The Wall Street Journal citing unnamed sources both say that Secretary of Labor Thomas Perez will unveil the much-anticipated regulation at an as-yet-unannounced event on April 6 at the Center for American Progress. Source: Asppa.org

DOL’s Fiduciary Rule Conflicts With Securities Laws  A recent report by the Senate Government Affairs Committee indicates that the DOL, ignored, disagreed with, and argued forcefully with the SEC staff over its proposed fiduciary rule. According to the U.S. Chamber, here are a few of the problems with in the rule centered around securities law. Source: Uschamber.com

Nobody Should Oppose the DOL’s Proposed Investment Fiduciary Regulations  The author of this opinion piece states, “why do I write that nobody should object to the proposed regulations? Because it simply is the honest and the only right thing for financial institutions to do. Moreover, it shall level the playing field for those advisors who take advantage of vulnerable employers and IRA owners, and those who want to do right by them.” Source: Erisalawgroup.com

Sen. Warren Calls for SEC Probe of DOL Opponents  Sen. Elizabeth Warren is calling on the Securities and Exchange Commission to investigate several critics of the DOL’s fiduciary rule, claiming they misled investors through duplicitous statements. In a letter to SEC Chairwoman Mary Jo White, Warren noted that the companies — Lincoln National, Jackson National, Prudential and Transamerica — claim the proposed rule is “unworkable” and will have a dire impact on their businesses. Source: Insurancenewsnet.com

Compliance and Regulatory

Will Your Forfeiture Account Disqualify Your 401k Plan?  The basic rule is that forfeitures must be allocated on an annual basis. Forfeitures should not be held over into later years. Failure to comply with this requirement can result in disqualification of the plan or potential penalties imposed by the DOL. Source: Benefitslawadvisor.com

Boomerang Employees and 401k Considerations  A recent survey by staffing firm Accountemps indicated that nearly all (98%) of human resources managers would welcome back a returning employee who left on good terms. When it comes their 401k plans, employers who do rehire former employees should keep in mind the four considerations outlined in this article. Source: Retirementplanblog.com

April 30, 2016 Deadline for Updating Many Retirement Plan Documents  Many 401k and profit sharing plans are stated in pre-approved documents and, thus, must be restated by the end of April. For pre-approved volume-submitter plans in which the employer has modified the pre-approved language, the deadline to submit the plan to the IRS for a favorable determination letter (if desired) is also April 30, 2016. Source: Bsk.com

Don’t Let These Common Retirement Plan Mistakes Hurt Your Business  When it comes to saving for retirement, your employees trust you to help get their finances in order. Don’t undermine their trust by making mistakes that could have been easily avoided by taking a proactive approach to plan management. Article reviews several mistake-prone areas you should be paying more attention to. Source: Deardrebit.com

Ten Things Plan Sponsors Can Do to Keep Their 401k Plan On Track  An annual checkup can help you proactively monitor the plan’s health, wealth, and goals by identifying things that are going well and areas that need improvement. Three-page article outlines 10 items to review to make sure your 401k plan remains on track throughout the year. Source: Wellsfargomedia.com

 

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