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BPP401k.com Newsletter 04.15.15

Self-Employed Individuals — Calculating Your Own Retirement Plan Contribution If you are self-employed (a sole proprietor or a working partner in a partnership or limited liability company), you must use a special rule to calculate retirement plan contributions for yourself. Retirement plan contributions are often calculated based on participant compensation. Here is an overview with examples. Source: Irs.gov

Retirement Readiness Challenges for Successful Employees Plan sponsors may not be aware of the retirement readiness gap facing well-paid, key managers who are not top executives. Despite their relative affluence, these individuals are unlikely to be able to save enough for a comfortable retirement. Source: Captrustadvisors.com

Why Isn’t 401k Fee Disclosure Working? It’s been more than two years now since the DOL required 401k plan fees to be disclosed in participant statements. Yet, at least one study says one in five employees still think they get their 401k for free. Author explores why fee disclosure may not be working. Source: Fiduciarynews.com

2015 Best in Class 401k Plans Recipients of the 2015 Best in Class 401k Plans designation were selected from more than 4,500 plans responding to PLANSPONSOR’s annual Defined Contribution (DC) Survey. 401k plans were evaluated and scored on more than 30 criteria related to plan design, oversight/governance, and participant outcomes. Source: Plansponsor.com

SIMPLE IRAs vs. Safe Harbor 401k Plans: What are the differences? Savings Incentive Match Plans for Employees (SIMPLE’s) are frequently mentioned as a low cost alternative to 401k Safe Harbor Plans for providing employees the opportunity to save for retirement. This chart compares the differences between SIMPLE IRAs and Safe Harbor 401k Plans. Source: Consultrms.com (PDF File)

Ten Steps to Achieve Your Retirement Goals Everybody wants to be safe from the buffeting that life can inflict upon retirement plans, to have the financial resilience to bounce back when things go awry. For starters, here are 10 mistakes to avoid in retirement planning. Source: Aarp.org

403(b) Plans

403(b) vs. 401k: What are the differences? 403(b) plans are generally subject to fewer technical requirements and less administrative burdens than 401k plans. This two page chart compares 403(b) and 401k plan types in a columnar format. Source: Consultrms.com (PDF File)

Change Management: A Framework for Higher Education Retirement Plans The path from the 403(b) plan of yesterday to a modern retirement benefit program is complex. This article applies a change management framework to guide plan sponsors through understanding the drivers of change for higher education retirement plans. Source: Captrustadvisors.com

Seeking Contract Clarity for 403(b) Decision-Makers If investment experts cannot identify all the actual costs and beneficial relationships in a 403(b) contract, how can decision-makers at school districts ever do so? W. Scott Simon, a principal at Prudent Investor Advisors, explores this question. Source: Morningstar.com (registration may be required)

Fiduciary and Plan Governance Material

Company Stock in Retirement Plans: Where the Line Between Prudent and Imprudent Conduct? How can it possibly make any sense to have company stock holdings in a 401k plan or to have company matches to retirement savings be in the form of company stock? The author’s answer is it doesn’t. So, if it doesn’t make any sense from the perspective of a participant, then how can it ever be a prudent decision for a fiduciary? Source: Bostonerisalaw.com

Managing a Plan Vendor Change Whatever the reason to consider a change, once the decision is made to move the plan to a new recordkeeper, the plan sponsor must understand the process for implementing and managing the transfer and the timing requirements for the various notices that are used to communicate the change to the plan participants. Article reviews the process. Source: Consultrms.com

A Fiduciary Planning Guide for Plan Sponsors This 15 page guide was developed by MassMutual’s ERISA Advisory Services team. It contains some key dates DB and DC plan fiduciaries should be aware of related to plan filings, notices, distributions, testing and reporting requirements. The calendar is divided into calendar year quarters and topics for both calendar year and non-calendar year plans. Source: Massmutual.com (PDF File)

Best Practices in Retirement Plan Recordkeeper Searches Plan sponsors have a fiduciary obligation to undertake a prudent process for selecting a competent recordkeeper. This article provides an outline of the RFP process, along with best practices for conducting the project smoothly and efficiently. Source: Fiallc.com (PDF File)

Vendor Monitoring: Going Beyond the Determination of Reasonableness As a responsible plan fiduciary, ERISA requires you under Section 408(b)(2) to ensure that arrangements with your service providers are “reasonable” and that only “reasonable” compensation is paid for their services. This short article lists some questions you will want to ask your recordkeeper to help you make informed decisions about the services they provide to your plan. Source: Pension-Consultants.com

Insight: Studies, Research and White Papers

Benefits of Collective Investment Trusts Why do consultants, advisers and plan fiduciaries select CITs? This one page overview explores some of the benefits that make these investment funds increasingly popular in the retirement marketplace. Source: Ctfcoalition.com (PDF File)

15th Annual Transamerica Retirement Survey Compendium Transamerica Center for Retirement Studies released this “Compendium of Findings About American Employers” from its 15th Annual Retirement Survey. This comprehensive new report provides an in-depth 127-page overview of employers’ perspectives on retirement benefits, plan sponsorship rates, adoption of specific plan features, and their perceptions of their employees’ retirement preparedness. The report also offers detailed comparisons between small and large companies as well as a five-year trend analysis on selected survey questions. Source: Transamericacenter.org (PDF File)

Market Timing Among Costliest Participant Mistakes During a recent research briefing with J.P. Morgan Asset Management, some of the firm’s top retirement strategists highlighted a stark statistic about the impact of emotional decision-making on portfolio returns: ill-timed trading can easily cut 50% or more of participant wealth if not identified and prevented. Source: Planadviser.com

Can Neuroeconomics Improve 401k Decision-Making? A recent white paper describes the challenges most of us face when attempting to make good financial decisions. Using the science of neuroeconomics, the authors state that many of us hamstring ourselves by maintaining various bias’ and emotional connections which end up resulting in bad investment decision-making. Article outlines these tendencies. Source: Benefitnews.com

Plan Sponsors Eying New Set of DC Investment Providers As defined contribution plan sponsors continue to refine their investment lineups, there is a sizable shake-up among the top 10 DC investment managers plan sponsors think of when considering a change to their lineups. Source: 401khelpcenter.com

Retirement Coverage Expanded: UK vs US With the U.K. program now reaching half of all the workers targeted, it seems to be validating what the retirement experts already know works — participants are automatically enrolled (unlike the US’s MyRA program) and have the freedom to opt out of their employer’s NEST plan. Source: Bc.edu

Items of Special Interest to Service Providers

SEC’s Commitment to Tougher Broker Rules Questioned The Institute for the Fiduciary Standard said Thursday it has doubts about the SEC’s ability to formulate a fiduciary standard that will protect the interest of Americans trying to save for retirement. Source: Benefitspro.com

Captrust Accelerates Roll-Up Plans With a Liberal Structure in Pensionmark Deal Fielding Miller faced a brutal choice between power and control as he pondered how to add the next $160 billion of assets under advisory to his 401k-specialized $160-billion RIA. He recognized many deals didn’t comport with his preference for total control. Such was the case with Pensionmark Retirement Group. Source: Riabiz.com

What Type of 3(16) Services Will You Offer? There are significant differences in the types of 3(16) services currently available. If you are considering becoming a 3(16) administrator, you must decide what type of 3(16) administrator you will be, what type of services you will offer, and how much liability you are willing to take on. Source: Tparesources.com

Advisor Support for Retirement Plan Fiduciary Duty Increasing, Says Survey There’s more support among financial advisors for the DOL to impose a fiduciary duty on those advisors who work with retirement plan participants. The number supporting such a move increased to 74 percent last year from 61 percent the year before, according to a survey released today by fi360 and FiduciaryPath, software and consulting companies. Source: Fa-mag.com

Industry Professionals Voice Strong Support for Fiduciary Standard Brokers and Investment advisers indicate strong support for the DOL ERISA fiduciary standard, according to the report on the 2015 fi360 Fiduciary Standard Survey from fi360 and FiduciaryPath, “Seeking Trusted Advice for Individual Investors.” Source: 401khelpcenter.com

Target-Date Funds

Seventh Annual Target-Date Fund Study Released by Morningstar Morningstar announced findings from its 2015 Target-Date Fund Landscape Report. This release provides key findings about the industry’s performance and growth in the past year. Source: 401khelpcenter.com

Target-Date Fund Costs Continue Decline Target-date fund expense ratios continued their steady decline, falling to 78 basis points in 2014 on an asset-weighted basis vs. 84 basis points in 2013, according to the latest annual survey of target-date funds published by Morningstar. Source: Investmentnews.com (free registration may be required)

Plan Automation

Automatic Enrollment: Separating the Hyperbole From the Helpful Articles have regularly extolled the virtues and almost every new retirement-related bill introduced in Congress that has included some provision designed to encourage greater adoption of automatic enrollment in 401k plans. Unfortunately, with that much attention comes a certain amount of hype. This article attempts to separate hyperbole from helpful. Source: Rpgny.com

Legislative and Washington DC

Oregon’s Great Retirement Debate Since the beginning of this year, a handful of the state’s most powerful political organizations banded together and formed a pair of coalitions dedicated to sounding an alarm about the fact that less than half the state’s workers have saved more than $20,000 toward their eventual retirements. Source: Bendbulletin.com

Court and Legal

Settlement Reached in 401k Stock-Drop Case A class of former LandAmerica Financial Group employees agreed to a $5 million settlement of stock-drop claims arising from LandAmerica’s 2008 bankruptcy, and have submitted the agreement for court approval. Source: Erisapracticecenter.com

Compliance and Regulatory Related

IRS Eases Correction Rules for Missed Elective Deferrals The IRS has just given sponsors of 401k and 403(b) plans a number of additional options for correcting a failure to honor an employee’s election to defer a portion of his or her pay. These new options, as announced in Revenue Procedure 2015-28, will be particularly helpful to sponsors of plans that provide for automatic enrollment. Source: Benefitsinbrief.com

IRS Modifies Retirement Plan Correction Procedure The IRS has modified its retirement plan correction procedure, responding to the practical needs of employers trying to keep their retirement plans in operational compliance without excessive cost for the plan sponsor or imposing undue hardship on plan participants. Source: Shrm.org

IRS Relaxes Correction Requirements for Elective Deferral Failures Under EPCRS The new guidance provides relief from the current standard EPCRS correction method for elective deferral failures. Also, in an effort to facilitate the adoption of automatic contribution arrangements and prompt correction of failures, the IRS has established favorable safe harbor correction methods for elective deferral failures. Source: Erisapracticecenter.com

Documentation for Loans and Hardship Withdrawals Must Be Retained Most sponsors of defined contribution plans rely on a third-party administrator to handle participant loans and hardship withdrawals — typically through the TPA’s website. However, in guidance issued last week, the IRS cautions that the sponsor — not the TPA or the participant — is responsible for maintaining documents proving that those transactions comply with the law. Source: Benefitsinbrief.com

SEC Examining 12b-1 Fees SEC officials signaled this week that the agency is revisiting the rules regarding annual 12b-1 fees in mutual funds. Source: Benefitspro.com

DOL on ERISA Fidelity Bonds This article provides an overview of the fidelity bonding requirements. It highlights key elements that employers and other plan sponsors should know about ERISA’s fidelity bonding requirements. The questions and answers provide general information to help you understand the law and the fidelity bonding requirements. Source: 401khelpcenter.com

IRS Rev. Proc. 2015-28 – Revisions to EPCRS IRS Revenue Procedure 2015-28 added two safe-harbor correction methods to the Employee Plans Compliance Resolution System effective April 2, 2015. Source: Erisapedia.com

ICI Letter to OMB About Data Used in DOL Re-Proposal of Fiduciary Rule In this letter to the US Office of Management and Budget, the Investment Company Institute expresses concern about the data the Department of Labor used as justification for its re-proposal of rules redefining the term “fiduciary” under ERISA. Source: Ici.org (PDF File)

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