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BPP401k.com Newsletter 04.16.18

Retirement’s Future Could Rest With Digital Tools When a chatbot and text messages, as well as targeted e-mails, are combined with the principles of behavioral economics — specifically, nudging people into certain actions — the effects on retirement savings can be substantial. Source: Voya.com

Strategies to Help HCEs Maximize 401k Contributions When employees aren’t participating in the 401k or saving enough, non-discrimination testing can severely limit how much highly compensated employees can contribute. Limits imposed by non-discrimination testing are tough to overcome, but far from impossible. This article walks you through three highly effective strategies for overcoming these limits and acing your non-discrimination tests. Source: Forusall.com

The Benefits of Helping Employees Set a Retirement Budget In order to understand how much to save, the starting point should be determining a retirement budget. Not only will such an exercise help employees better plan for the future, it may well give them a greater understanding of and appreciation for their employer-sponsored savings program and improve their financial wellness. Source: Benefitscanada.com

Assessing the Value of Financial Wellness for Your Employees Given the low unemployment rate in the United States and competition for talented, committed workers, companies are offering financial wellness initiatives that include traditional benefits. To get the most out of financial wellness programs, business leaders should make sure their initiatives follow five criteria reviewed in this article. Source: Workforce.com

Little-Known 401k Trick Can Open the Floodgates to Roth IRA Savings The Roth IRA has very low contribution limits, while those in high-income groups may not qualify to contribute to the account. One strategy to make the most of the account’s tax benefits is the backdoor option, which allows clients to make nondeductible contributions to a traditional IRA or contribute after-tax money to a 401k plan and then convert the funds into a Roth. Source: Fool.com

Your Long Life Could Be the Death of Your Retirement Savings A key part of retirement planning is estimating your life expectancy. It’s a tough thing to think about. On the one hand, you hope to live a long and healthy life. But what if you live too long? Will you have enough money saved to take care of yourself until the end of your life? Source: Washingtonpost.com (registration may be required)

Fiduciary and Plan Governance Material

TCJA Participant Loan Changes Compel Review of Uncomfortable Loan Fiduciary Obligations The Tax Cuts and Jobs Act’s participant loan changes (which delay the account offset on loan defaults related to unemployment or plan termination) trigger something we would all rather not look at: the “uncomfortable” manner in which ERISA’s fiduciary rules apply to loans and their administration. Source: Asppa.org

Missing Retirement Plan Participants — Employer Risk Former employees will often have account balances or benefits due them under an employer’s retirement plan and are still considered to be participants. Regulatory guidance makes it clear that distributing the retirement accounts and accrued benefits of former employees is the employer’s responsibility. Employers who maintain retirement plans are required to have procedures in place for finding missing participants. Source: Stevenslee.com

Do Your Plan Fees Outperform? The increased number of 401k lawsuits over the past several years has shaken fiduciary confidence. Most of the litigation involves claims of excessive plan fees. However, a fiduciary can keep their confidence steady by ensuring they’re providing a top-performing plan. Source: Pension-Consultants.com

Insight: Studies, Research, and White Papers

Boomer Expectations for Retirement – 2018 Study Baby boomers — even the youngest of whom are just a decade or so away from retirement age — are in large measure unprepared for retirement, having failed both to plan adequately and save enough, according to this 26-page study released by the Insured Retirement Institute. Source: Myirionline.org

Impact of Plan Size on Workers’ Retirement Income Adequacy One apparent result of plan sponsor’s focus on fees has been that 401k plan fees have declined overall: by 14 basis points between 2009 and 2015. This reduction has translated into a four percent jump in net retirement savings surplus when they retire. While a four percent increase in retirement income adequacy is good, participants can experience significantly greater increases by simply benefiting from the economies of scale of large versus small plans. Source: Ebriorg.wordpress.com

For Retirement, Employees Prefer Steady Paycheck over Managing Their Own Investments The role a company plays in its employees’ retirement security has shifted tremendously in recent decades, as employees take on more responsibility in the planning and saving for their retirement. Yet many Americans prefer predictability and a guarantee in their retirement planning, when asked if they would rather have their employer provide a set retirement paycheck for life or provide them with money to invest themselves, the steady paycheck wins by 58% to 42%. Source: Businesswire.com

Who Participates in Retirement Plans Increasing the share of workers who participate in retirement plans has been a primary focus of retirement policy. As the retirement industry and policymakers try to increase participation, it is important to understand which workers currently participate in employer-sponsored retirement plans and why certain employers offer, and certain employees desire, compensation in the form of retirement benefits. This 32-page report uses newly available 2014 data to analyze participation in employer-sponsored retirement plans. Source: Ici.org

Could “Tontines” Expand the Market for Longevity Insurance? Tontine is a fancy word for betting on how long you’ll live, in a good way. Here’s the concept in a nutshell: many people pool their money in return for guaranteed regular payouts for life, similar to an annuity. This 6-page paper takes a close look at an idea that is tossed around among finance experts: modifying tontines to use them as a source of retirement income. Source: Bc.edu

Retirement Income to Last a Lifetime Many approaches may be needed to help future retirees secure lifetime incomes to provide them with the security and dignity of personally managing their retirement. Possible approaches consist of reevaluating federal retirement policies, emphasizing financial literacy and education, and refocusing retirement plan designs. Source: Actuary.org

Plan Automation

Advances in Auto-Services: Reenrollment Despite progress, the first wave of 401k plan auto-services had one inherent flaw: They were only implemented on newly hired, or newly eligible, employees. From a benefits perspective, plan sponsors were still viewing retirement plan participation/enrollment as a point-in-time decision. Several new and more effective auto-services are being discussed by advisors and implemented by plan sponsors. Two of these new services can be used to help optimize employee savings and investment behavior periodically after the point of eligibility. Source: Troweprice.com

Target-Date Funds

More Critical Target-Date Trends to Consider Mercer is out with topical info on target date products, reminding all involved that the fact that so many participants simply default into TDFs does increase the importance of the plan sponsor’s selection of the TDF provider. Source: 401kspecialistmag.com

TDF Analysis Highlights Passive Growth, Home Equity Bias In its discussions with TDF managers, Mercer has found many managers say they have not aligned with the ACWI, and have continued with portfolios that display home equity bias for a number of reasons; the research also shows strong growth in passive TDF market share. Source: Planadviser.com

Court and Legal

Case Filed Against Home Depot for Alleged Abuses in 401k Plan The suit alleges “that Home Depot violates basic fiduciary duties under ERISA and abuses its employees’ trust by mismanaging their 401k retirement plan. According to the complaint, Home Depot has selected multiple poorly-performing funds for its 401k plan, allowed investment advisers to charge its employees unreasonable fees, and turned a blind eye to a kickback scheme between an investment adviser and the plan’s recordkeeper.” Source: Prnewswire.com

Legislative and Washington DC

Like It or Not, Annuities Are Coming to Retirement Plans Some would argue that annuities and 401k plans should never mix. Brace yourselves, because legislation is being considered in Congress that could clear a path for more employers to offer annuity products in their retirement plans. Source: Investmentnews.com (registration may be required)

Fiduciary Rule

Court Ruling Throws Out DOL Fiduciary Rule The rule, which became effective June 9 of last year, was due to be fully implemented on July 1, 2019. While a good amount of retirement advisors have expressed dissatisfaction with many of the bureaucratic hurdles contained in the new rule, the fact that the entire rule was struck down is a surprising development in what seemed a foregone conclusion. Source: Frenkelbenefits.com

SEC Announces Open Meeting on Fiduciary Issues The Securities and Exchange Commission has announced plans for an open meeting to consider the agency’s long-awaited and much anticipated fiduciary proposal. Source: Asppa.org

The Future of the ERISA Fiduciary Rule The future of the Fiduciary rule is uncertain, particularly considering the Fifth Circuit’s decision vacating the rule. Although recent developments do not require action at this time, plan fiduciaries should continue to keep apprised of the necessity of complying with the Fiduciary rule and, accordingly, continue to monitor the efforts of their service providers who provide investment advice to their retirement plans and plan participants. Source: Pillsburylaw.com

Compliance and Regulatory

401k Loans: Considerations for a Plan Your retirement account is sacrosanct…until it isn’t. Sometimes a rainy day arrives before retirement, and the seemingly untouchable is a tempting source of short-term support and relief. Recent discussions about 401k loans look at the scale of the practice, the consequences and what a plan may consider concerning a policy for them. Source: Asppa.org

No Stone Unturned: Locating Missing Participants Under PBGC’s Expanded Program for Terminated Plans The PBGC’s missing participants program has been expanded to defined contribution plans, multiemployer defined benefit plans and small professional service defined benefit plans that end on or after January 1, 2018. The revised program provides a helpful alternative for plan administrators of terminating defined contribution plans, and also includes welcome clarifications that enhance the program available to defined benefit pension plans. Source: Mwe.com

What to Do With Missing Participants and Required Minimum Distributions Issues related to missing and nonresponsive retirement plan participants are causing more problems and creating more uncertainty for plan sponsors and administrators. RMDs and missing participants aren’t going away any time soon. This article provides an overview and search steps. Source: Penchecks.com

 

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