Experts in Personalized Retirement Plan Design & Administration Newsletter 04.12.17

The Perfect Concoction for a Successful 401k Plan How do you make your 401k plan stand out to potential employees, boost retirement savings for participants, and keep your 401k plan provisions competitive? Here is a list of a few plan ingredients to include in your own plan. Source:

Why Arguments of a Broken Retirement System Are Misguided The notion of widespread retirement shortfalls obscures the fact that the US retirement system works well for the majority of households, and deflects attention from those groups at risk in retirement, such as those retiring early because of poor health and those with limited work histories. Source:

Can 401k Financial Wellness Be Effectively Graded? Interesting idea, and Boston-based investment big Fidelity Investments is going to try. It’s out with its Fidelity Financial Wellness Score “for people to measure their financial health, identify the areas where they need help and how they can improve.” Source:

Helping Employees Retire Well: Here’s What Works Best Building, maintaining, and administering a retirement plan is complex. There are many decisions — big and small — to consider carefully, especially given your fiduciary responsibility as plan sponsors. Some decisions that should rise to the top of that list given their potential to do incredible good for employees saving for retirement. Source:

Auto Portability Could Boost Nation’s Retirement Savings Wealth by $2T EBRI has joined the Bipartisan Policy Center in calling for a national, private-sector clearinghouse that could seamlessly handle rollovers from one plan to another. Source:

‘Save Our Savings’ Coalition Launches The American Retirement Association has joined as a founding member of the Save Our Savings (SOS) Coalition, an alliance dedicated to protecting Americans’ retirement savings. The SOS Coalition will work to ensure Americans continue to have access to the private sector retirement system and to meaningful savings incentives. Source:

Should the U.S. Raise the Age for Required Distributions? Investors who reach age 70 1/2 are generally faced with a requirement: Start taking annual withdrawals from tax-sheltered retirement accounts such as IRAs and 401ks, and pay taxes on those assets. Many have started to wonder if the age for those required minimum distributions, or RMDs, should be raised — or even eliminated — to give seniors more control of their retirement assets. Source:

The 10 Biggest 401k Plan Misperceptions Here are the most common and noteworthy 401k misperceptions and your plan participants really believe some of the things. Source:

Bridge Your Engagement Gap — Go Mobile The impact of mobile technology in every industry is profound and those of you in HR will see a significant impact on your field as well. Mobile technology is quickly being embraced by organizations to engage their workforce. Source:

403(b) Plans

IRS Approves DATAIR 403(b) Pre-Approved Plan Document The document is a volume submitter format and is designed to accommodate both ERISA and non-ERISA plans as well as church plans and plans for governmental entities. Source:

Fiduciary and Plan Governance Material

PODCAST: Assessing and Improving Practices Regarding Investment of Retirement Plan Assets Verrill Dana Employee Benefits attorneys Eric Altholz and Chris Lockman provide a brief update on class action lawsuits alleging various breaches of fiduciary duties under ERISA pending against a dozen major universities. About 16-minutes. Source:

Fiduciary vs. Investment Manager: What’s the Difference? In an environment of increased fiduciary litigation, advisors and other service providers have ramped up their marketing efforts to provide risk management services to plan sponsors. Such efforts have resulted in plan sponsor confusion as to the type of services that are being offered, as well as the type of services that are preferable. Source:

Insight: Studies, Research, and White Papers

Putting the Pension Back in 401k Plans The US Department of the Treasury recently launched an initiative to provide firms and employers “more options for putting the pension back” into private sector defined contribution plans. This 38-page paper develops a realistic life-cycle model to quantify the potential impact of this new policy for a range of retiree types, differentiated by sex, educational level, and preferences. Source:

Fee Study of 525 401k Financial Advisors: Why Trump Can’t Reverse Tide of Fiduciary Advice Following several high-profile excessive fee lawsuits, more 401k plan sponsors than ever are hiring fiduciary-grade financial advisors to lower their liability. The kicker? Their impartial advice is often cheaper than potentially-conflicted, non-fiduciary advice. Source:

Baby Boomer Expectations for Retirement 2017 The Insured Retirement Institute released its latest report on the Baby Boomer generation’s expectations and readiness for retirement. As they move into their pre-retirement and retirement years, most Boomers report insufficient retirement savings, and have not taken appropriate steps to plan effectively for their sunset years. Source:

Work Redefined: A New Age of Benefits The enjoyment of life is beginning to take back its rightful place in the lives of employees. Today’s employees put increased focus on happiness at work. They change jobs more often, their careers take unexpected twists and turns, and personal satisfaction can be as important as the numbers on their paycheck. Employers recognize these changing priorities, by investing in employee engagement, culture, and team development. Source:

A Closer Look: What’s Working in Workplace Financial Education This 26-page report has three sections beyond this introduction. Section II provides key findings. Detailed findings on the impact of workplace financial education and factors influencing financial education success are presented in Section III. Section IV concludes with practical recommendations for organizations to consider based on the results of the study. Source:

What Makes Workplace Financial Education Work? According to a recent survey, a workplace financial education program is likely to be more successful the longer it is in place. Results from the survey showed that it takes more than five years to be reported as successful. Source:

Patience Needed With Financial Education Programs A study found programs running for at least 10 years are more successful than those that have only been carried out for one to two years and suggests this may be because employers analyze the success of these programs and adapt it as they see fit. Source:

DC Investors Continue Shift to Target-Date Funds, Away From Equity Mutual fund assets held by defined contribution plans were approximately $3.9 trillion as of the end of 2016. About 46% of those assets were invested in U.S.-equity focused funds and just more than a quarter were invested in hybrid funds, primarily target date and lifestyle. Source:

Items of Special Interest to Service Providers

NAPA Interactive Black Book: Recordkeepers Recordkeepers are perhaps in the strongest position of all providers since they control the technology and, perhaps more importantly, the data that runs DC plans. This interactive list, you’ll be able to view and sort by primary market(s) served, the number of plans served, the number of participants served, and services available to advisors. Source:

Target-Date Funds

DOL’s Best Interest Standard Uplifts Target-Date Funds The Best Interest Standard of DOL’s Fiduciary Rule will benefit target-date fund participants immensely. This 6-page article identifies specific applications of the Standard to TDFs. Source:

Target-Date Funds: Can Employers Get Lost in Space? Target-Date Funds are as diverse as the universe. Plan sponsor fiduciaries — who must exercise prudence and demonstrate expertise in selecting the investments that will be offered to plan participants — must understand the unique features of their workforce as well as the features of each TDF series they consider before making their selection. Failure to do so “as an expert” can result in potential personal liability for fiduciaries. Source:

Target-Date Funds: Embracing Open Architecture DC plan-level best practices call for an open-architecture, or multimanager, lineup of investment offerings, but that line of thinking rarely extends to target-date portfolio construction. If open architecture is important, then more target-date funds should be open. Source:

Court and Other Legal Issues

Peabody Energy Cleared in ERISA Challenge to Stock Losses Peabody Energy Corp. isn’t liable to employees who allegedly lost retirement savings by investing in the bankrupt coal company’s stock, a federal judge ruled. Source: (registration may be required)

American Airlines Loses Round Over Mutual Fund Fees American Airlines Inc. can’t escape a proposed class action challenging the affiliated mutual funds in its 401k plan. Source: (registration may be required)

Court Finds Intel Alternative Investment Suit Time-Barred The lawsuit claimed the defendants breached their fiduciary duties by investing a significant portion of the plans’ assets in risky and high-cost hedge fund and private equity investments through custom-built target-date funds. Source:

Jackson National Target of DC Plan Self-Dealing Suit The lawsuit says disclosures show the proprietary funds used in the DC plan lineup were far more expensive than comparable funds and underperformed their benchmarks. Source:

BlackRock Accused of Self-Dealing With 401k Plan BlackRock Inc. and its subsidiaries are accused in a new lawsuit of loading the company’s $1.56 billion 401k plan with its “expensive and poor-to-mediocre” in-house investment options. Source: (registration may be required)

Judge in Putnam 401k Suit Deals Potential Setback to Plaintiffs Using Vanguard as Fee Benchmark A federal judge has seemingly dealt a blow to plaintiffs bringing claims against financial services companies for excessive retirement plan fees, following a recent ruling in a self-dealing lawsuit involving Putnam Investments’ 401k plan. Specifically, the judge shot down arguments that Putnam received excessive management fees from their proprietary mutual funds, saying plaintiffs’ comparison of Putnam fund fees to those of Vanguard Group’s passively managed funds was “flawed.” Source: (registration may be required)

Putnam Prevails in 401k Self-Dealing Suit Before ultimately finding plaintiffs’ claims were time-barred, a judge found Putnam’s mutual fund fees were reasonable and a comparison to Vanguard funds was “apples to oranges.” Source:

Legislative and Washington DC

Acosta Nomination Heads to Senate Alexander Acosta, President Trump’s nominee to head the Labor Department, was approved March 30 by the Senate Health, Education, Labor and Pensions Committee. The full Senate will now vote on his nomination, though a date has not yet been set. Source:

Senate, House Introduce Bills Mandating Lifetime Income Disclosures for 401k Plans Bipartisan legislation was introduced today in the Senate and House of Representatives that would require employers to provide 401k participants with a projection of monthly income at retirement, based on their current account balance. Source: (registration may be required)

State-Based Retirement Programs

Congress Set to Lift DOL ERISA Exemption for State Plans The DOL ERISA exemption for State Plans granted to state auto-IRA plans looks likely to be lifted after both the House and Senate following party lines voted to override the rule. Will lifting the ERISA exemption for State Plans cause employers to be reluctant to jump into these plans and do state plans pose more problems than they solve? Source:

DOL’s Fiduciary Rule

DOL Releases Final Rule Delaying Fiduciary Implementation The DOL released a final rule Tuesday delaying the implementation of its fiduciary duty regulation. Under the delay measure, which was posted on the Federal Register website, the fiduciary rule’s April 10 applicability date is pushed back to June 9. Source: (registration may be required)

DOL Releases Final Extension of Applicability Date On April 4, 2017, the DOL released for public inspection its final regulation extending the applicability date of the Fiduciary Rule from April 10, 2017 to June 9, 2017 as well as providing additional transition relief through the end of the year. While the final extension offers some relief, it is a mixed bag. Source:

Breaking News on Rollovers: What DOL Really Did on April 5 The DOL fiduciary rule is delayed until June 9th and further examination of various provisions will happen throughout 2017. So, what will really happen on June 9th? Something very important. Any rollover advice will now have to be provided under the new fiduciary standard and Impartial Conducts Standard. Source:

Compliance and Regulatory

Compensation of Self-Employed Participants for Purposes of Qualified Retirement Plans Often, there is confusion regarding what compensation is used to determine contributions to the company’s qualified retirement plan on behalf of members of the LLC. This article is a discussion of the basic rules for determining the compensation for self-employed individuals (sole proprietors, partners in a partnership, and members of an LLC taxed as a partnership). Source:

How to Deal With Canadian DC Pensions in an M&A Transaction In the course of a merger or acquisition, there are a number of balls to juggle, not the least of which are the changes to employees’ benefits packages. The article discusses some of the key considerations when it comes to defined contribution plans. Source:

EPCRS: Participant Loan Corrections Plan failures related to participant loans can be corrected using either Voluntary Correction Program (VCP) or Correction on Audit. Since plan loan failures are not operational failures, they cannot be corrected using the self-correction method. Source:

IRS: Self-Certification Permitted for Hardship Withdrawals From Retirement Accounts Employees no longer routinely have to provide their employers with documentation proving they need a hardship withdrawal from their 401k accounts, according to the Internal Revenue Service (IRS). Employees do, however, need to keep source documents, such as bills that resulted in the need for hardship withdrawals, in case employers are audited by the IRS, the agency said. Source:

Considerations When a Merger Affects DC Plan Investments Cammack Retirement’s Tom Ferrara cites merger and acquisition (M&A) activity of firms and individual funds as an additional force that has a great impact and discusses matters to consider when a merger has taken place and has affected a DC plan’s investments. Source:


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