Experts in Personalized Retirement Plan Design & Administration Newsletter 05.10.17

Which 401k Strategies Work Best — Abstract: The most effective tools in retirement savings are not bells and whistles. They are simple, quiet and consistent. The Vanguard Group recently identified three powerful best practices that make a difference in 401ks. Source:

Helping Small Businesses and Their Workers Save for the Future — Abstract: A workplace retirement savings plan is an effective and easy way for a small business owner and his or her employees to save for a secure retirement. And there are many retirement savings options available for small business owners to choose from. Source:

401k Myths You Can’t Afford to Believe — Abstract: Most of the positive PR about 401k plans is warranted. But don’t believe everything you hear. Falsehoods — and even following fact-checked 401k rules of thumb in every situation — can steer savers off course. Here are five 401k rules worth further scrutiny. Source:

Infographic: Five Ways to Motivate Millennials Through Employee Communication — Abstract: According to Gallup, Millennials make up close to 40% of the United States workforce. However, less than one-third of them are engaged at work. Encouraging Millennials to take action concerning their employee benefits can be a difficult task. This infographic highlights five of tactics. Source:

It’s Hard to Spend Down Your 401k in Retirement — Abstract: At a recent conference, retirement experts concluded that the lack of an easy drawdown mechanism in 401k plans was the major challenge facing the 401k system. Source:

Fiduciary and Plan Governance Material

Fiduciary Sudoku — Comprehending ERISA 3(16), 3(21) & 3(38) — Abstract: Vendors who service retirement plans will use the terms 3(16), 3(21) and 3(38) to describe their service offering. The terms have often been taken for granted, and sometimes abused by service providers looking for a marketing edge. This article offers some clarification and understanding regarding the terms. Source:

A Guide to 401k Fees and Fee-Related Liabilities for Retirement Plans — Abstract: The topic of 401k fees has dominated the headlines for the better part of this decade. Running a company 401k plan is an arduous task. Navigating fiduciary responsibilities is also a potential minefield of liability as ambitious law firms aggressively attempt to exploit the subjective regulatory frameworks of the IRS and the DOL. Nowhere in a 401k plan is there more potential liability than with regard to the subject of fees. Source:

The Tiered Investment Menu: A Behavior-Based Approach to Menu Design — Abstract: The marketplace is trending towards a redesign of the investment menu. This is being done through investment menu segmentation into behavior-based levels or tiers. Many plan sponsors and financial educators are finding this new tiered menu approach easier to communicate and simpler for employees to understand how to select investment options that may be most suitable for them. Source:

Insight: Studies, Research, and White Papers

Pre-retirees Who Work With an Advisor Are Twice as Likely to Feel Well Prepared for Retirement — Abstract: A new LIMRA Secure Retirement Institute study finds 43 percent of U.S. pre-retirees (ages 50-75) who work with an advisor feel well prepared for retirement, compared with just 21 percent of pre-retirees who do not work with an advisor. Source:

DC Plan Report: Targeting the Right ‘Glidepath’ — Abstract: Retirement readiness in the US is low at a time when the over-65 population cohort is expanding. Target-date funds have rapidly become the most popular investment option in defined contribution plans, serving as the default option in many. Now DC plan sponsors are evolving/shelving TDFs from recordkeepers in favor of more flexible options while adding financial wellness counseling to boost the productivity of participants. Source:

401k Regaining Importance as Future Income Source — Abstract: Half of nonretirees expect 401k to be a major income source in retirement. This is up from a low of 42% in April 2009, but still below earlier highs. Planned reliance on Social Security is near a 17-year high. Source:

2017 PLANADVISER Top 100 Retirement Plan Advisers — Abstract: Chart highlights the quantitative standouts according to the dollar value of qualified plan AUA as well as the number of plans under advisement. The qualification standards continue to rise, as specialist advisers and consultants build their practices. Source:

Items of Unique Interest to Service Providers

Death of the ‘Blind Squirrel’ 401k Adviser Greatly Exaggerated — Abstract: Over the last decade, many experts have been predicting less experienced advisers will be forced out of the 401k market. With the Department of Labor’s conflict-of-interest rule set to create more fiduciary advisers, those same experts are even surer. But they’re wrong. Source: (registration may be required)

Target-Date Funds

Are Your Target-Date Funds Making You a Target? — Abstract: Although participants’ entire accounts may be invested in these funds, all too many TDFs are selected by fiduciaries simply because it is convenient, or there is some incentive, to offer their provider’s funds. This makes them an easy target for class action lawyers. Custom TDFs, which are designed for an employer’s specific participant group, are also vulnerable if they don’t include appropriate investments. Source:

Court and Other Legal Issues

District Court Dismisses Allegations That Stable Value Fund is Too Conservative — Abstract: A district court in Rhode Island dismissed claims by participants in the CVS Employee Stock Ownership Plan that plan fiduciaries imprudently invested plan assets in the plan’s stable value fund. Source:

At the Intersection of the NFL Draft, ERISA, Divorce, Venue and Spousal Benefits — Abstract: Judge Woodlock, in the United States District Court for the District of Massachusetts, just issued an order on venue and QDROs in ERISA litigation that is a “must read” as a tutorial on a number of ERISA issues. Source:

R.J. Reynolds Cleared Again in Nabisco 401k Stock Dump — Abstract: R.J. Reynolds Tobacco Co. once again escaped liability for losses suffered by its 401k plan when the company sold off the stock of its Nabisco subsidiaries. Source: (registration may be required)

Starwood Hotels Can’t Escape ERISA Lawsuit Over 401k Fees — Abstract: Starwood Hotels must defend a proposed class action accusing it of violating federal benefits law by allegedly mismanaging the company’s $1.2 billion 401k plan. Source: (registration may be required)

Fourth Circuit Upholds Ruling in Tatum v. RJR Pension Investment Committee — Abstract: The district court ruled that the defendant’s breach of its duty of procedural prudence, occurring when the plan sold non-employer stock funds, did not cause the substantial losses in the retirement plan. Source:

Legislative and Washington DC

Bill Would Address Loan Repayments and Savings After a Hardship Withdrawal — Abstract: The Shrinking Emergency Account Losses (SEAL) Act would allow employees to continue to contribute to their DC plans during the six months following a hardship withdrawal, among other things. Source:

White House Blog Reiterates Protection for Retirement Savings — Abstract: In a White House blog entry posted late on April 26, National Economic Council Director and chief economic advisor to President Trump Gary Cohn reiterated his earlier comments that retirement savings will be protected as tax reform proceeds. Source:

Washington Is Making It Tougher to Retire — Abstract: Americans face two big problems as they get older: a shortage of retirement savings and the skyrocketing cost of health care. Both may be about to get worse after two narrow votes in Congress this week. Source:

CHOICE Act Targets Fiduciary Rule, Dodd-Frank Rollback — Abstract: Passage of the CHOICE Act by the House Financial Services Committee could signal a further blow to conflict of interest regulations adopted by the Obama administration. Source:

State-Based Retirement Programs

Reaction to State Auto-IRA Plan a Hint of Things to Come? — Abstract: A new study examines what small business owners in Connecticut think about the state’s new retirement plan and how well they grasp it. With other states putting similar plans in place and still more considering them, the results may offer a look at what other states may anticipate, and questions and concerns they may face. Source:

Senate Repeals State-Sponsored Retirement Plans — Abstract: The Senate repealed an Obama-era regulation that allowed states to auto-enroll private sector workers in government-run 401ks and IRAs for those who lack retirement plan access. Source:

Presentation Slides: State-Run Retirement Plans, What Labor Allowed — Abstract: Partner Andrew Liazos presented insights and strategies for retirement, health and executive compensation plans. He addresses the various state retirement plan approaches, such as auto enrollment IRAs, state marketplaces, prototype plans and Medical Expenditure Panel Surveys. Source:

Oregon Board Adopts Final Rules to Implement Retirement Savings Program — Abstract: The Oregon Retirement Savings Board adopted final rules to implement the Oregon Retirement Savings Program. OregonSaves establishes a state-sponsored payroll deduction retirement savings plan requiring Oregon employers that do not offer retirement plans to their employees to make payroll deductions from their workers’ wages into the state’s program. Despite these final rules, OregonSaves’ future still remains uncertain due to the Trump administration’s likely rollback of state savings arrangements. Source:

DOL’s Fiduciary Rule

DOL Bucking Trump on Fiduciary Rule? Former Officials Say No — Abstract: Critics of the Department of Labor’s fiduciary rule claim that by letting some portions of the rule take effect in June, the department is standing in the way of President Donald Trump’s directive to review the rule. But former DOL officials interviewed by Bloomberg BNA say these accusations are greatly exaggerated and ignore how the agency and rulemaking works. Source: (registration may be required)

Despite Fiduciary Rule’s Delay, DOL’s Measure Has Spurred Changes — Abstract: Despite the delay, analysts say the mere threat of the federal rule going live — along with a decade of class action litigation — already has wrought changes to an industry more in the public view than ever before. As the attorneys who represent companies parse the fine print to ensure legal compliance should the rule stand, some observers predict many companies will adopt stricter standards for a simpler reason: good business. Source:

Why the Fiduciary Rule Applies to IRAs but Not Non-ERISA 403(b)s — Abstract: Aren’t IRAs exempt from ERISA and thus any of ERISA’s fiduciary provisions? And what about the many 403(b) plans that are also not subject to ERISA? If the fiduciary does not apply to those plans, why would it apply to IRAs? Source:

DOL Fiduciary Rule: Good for Business but Opposed by the U.S. Chamber — Abstract: The DOL’s fiduciary rule is also pro-business by making it easier for 401k plan sponsors to meet their fiduciary responsibilities and lower their plan expenses. The author writes, “While I understand the COC is representing the interests of the financial services industry by opposing the Fiduciary Rule, I think their position is myopic — they should be supporting the rule to better represent their much bigger constituency of 401k plan sponsors.” Source:

Compliance and Regulatory

Administrative Check-Up on Participant Plan Loans — Abstract: The IRS just issued a memo to its auditors approving two different methods for calculating the statutory limitation on available loan amounts when a participant takes a new loan within 12 months of having paid off another loan or is obtaining a new loan with another loan outstanding. In addition to verifying your recordkeeper is properly utilizing one of the two approved methods, it is also a great time for an overall plan loan check-up. Source:

Five Things People Get Wrong About ERISA Fidelity Bonds — Abstract: One of the most important and least understood aspects of plan administration is the requirement that those who handle plan funds and other property be covered by a fidelity bond. Here are five things you may not know about ERISA fidelity bonding and may be getting wrong. Source:

The DOL’s Assessment on the Quality of Financial Statement Audits: The Aftermath — Abstract: It has been almost two years since the DOL released the results of its study of the quality of work performed by independent qualified public accountants (IQPAs). This article succinctly summarizes the quantifiable aspects of their study. Source:

Protecting Your Qualified Retirement Plan Now That the IRS Determination Program is (Mostly) Closed — Abstract: A lot has been written over the last few months about what to do now that the IRS has closed its determination letter program for ongoing individually designed tax-qualified retirement plans. Most of the focus seems to have been on fear: as time passes, how will we know whether a retirement or 401k plan is still qualified? Source:

Use of Forfeitures in Safe Harbor 401k and 403(b) Plans — Abstract: The IRS issued proposed regulations stating Qualified Non-Elective Contributions (QNECs) and Qualified Matching Contributions (QMACs) will be considered non-forfeitable at the time allocated to participant accounts. Source:


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