Experts in Personalized Retirement Plan Design & Administration Newsletter 05.30.17

Transforming the Participant Experience  Retirement communications have reached a tipping point and leading plan providers are looking to embrace a new path. They see converging trends: changing workplace demographics, technological innovations, evolving participant demands, increasing margin pressure, low savings rates, and added regulatory scrutiny. Any one of these trends would be challenging to manage. Taken together, they require fresh perspectives to find opportunities. Source:

Fiduciary and Plan Governance Material

Duty, Opportunity, Mastery: Investment Committee Best Practices  The purpose of this 21-page paper is to provide investment committee members with practical guidance on meeting their fiduciary responsibility through proper debate and documentation, constructing their committee thoughtfully with well-vetted leaders and members with diverse skills and backgrounds, conducting well-structured and productive meetings, and anticipating and resisting counterproductive behaviors. Source:

Five Best Practices for Investment Committees  Maintaining an institutional investment program, including the oversight and responsibilities of acting as fiduciary, can be daunting to even the most seasoned investment committees. With so much involved in managing an investment portfolio, it’s easy for committees to get lost in the details and lose sight of the big picture. The most successful investment committees support their organizations by using five best practices. Source:

Fiduciary Update  This article provides an update on the DOL’s conflict of interest rule expansion and compliance, deathbed beneficiary changes, required minimum distribution, and other fee-related litigation. Source:

Insight: Studies, Research, and White Papers

Millennials Are Investing Less and Saving More Than Previous Generations  Millennials are investing less and handling finances more conservatively than previous generations, according to a recent Revere Bank study. The study surveyed millennials aged 18-39 on their financial habits and future financial preparations. Source:

People With Student Loans Have Trouble Saving for Retirement  A crushing load of student debt is preventing young people from saving for retirement, buying a home or even deciding to start a family, Prudential Financial found in a survey of 2,369 people last September. Source:

2017 TIAA Transition to Retirement Survey  The survey offers new insights into people who are on the verge of retirement. Many are making plans for where they will live and travel, and what they will do with their time. At the same time, they are looking at how they will pay for their life in retirement. Source:

Agency Predicts $224 Trillion Retirement Gap (Seriously)  The World Economic Forum predicts a coming retirement funding shortfall of an eye-popping $224 trillion deficit by 2050 in the world’s largest pension systems. The obvious inference is that demographic changes in longevity mean defined benefits can no longer get it done, and it makes the case (again) for 401k-style defined contribution plans. Source:

Items of Special Interest to Service Providers

How to Not Be a Low Hanging Fruit for Litigation Attorneys  On June 9, anyone advising on retirement assets (including rollovers) effectively becomes an ERISA fiduciary, subject to one of the strictest legal standards every devised. If you are without a documented prudent process, you could become the low hanging fruit for litigation attorneys. Source:

Knowing How to Satisfy the Best Interest Standard  The new transition exemptions soon will apply to recommendations for IRAs. Fred Reish looks at how to prepare for that shift. Source:

SEC Issues Ransomware Risk Alert Highlighting Cybersecurity Best Practices  The SEC published a Risk Alert regarding the “WannaCry” ransomware worm that infected hundreds of thousands of computers in over 150 nations earlier this month. The Alert provides background and resources and additionally highlighted cybersecurity best practices. Source:

Alignment of Wealth and Health…The 401k and HSA  One recent trend that is getting a significant amount of attention is the alignment of wealth and health – specifically 401k Plans and HSAs. How does this impact the role and opportunity for financial advisers? Source:

Target-Date Funds

DOL’s Fiduciary Rule Improves Target-Date Funds  The DOL Fiduciary Rule goes into effect June 9, 2017, despite expectations of a cancellation. Most believe the Rule is for the retail investor, but it will also help target-date fund beneficiaries immensely. This article discusses the four TDF fiduciary practices that will need to improve to meet the Best Interest Standards. Source:

Court and Other Legal Issues

University of Chicago Latest College Hit With Retirement Plan Suit  The University of Chicago is accused in a new lawsuit of carrying high fees and offering a poor selection of investment funds in its two retirement plans ( Daugherty v. The University of Chicago). Source: (registration may be required)

Princeton Joins List of Schools Sued Over Retirement Plans  Princeton University is the latest college to be hit with a proposed class action challenging the fees and investment options offered through the school’s retirement plans. Source: (registration may be required)

Another Bundled 401k Provider Sued by Employees  T. Rowe Price has become the latest bundled 401k provider accused of self-dealing in their 401k plan. A former employee has accused the Maryland-based money manager of offering expensive, retail share classes to their plan participant/employees when other, less expensive share classes existed. Source:

Cybersecurity Issues

401k Service Providers and Cybersecurity: Questions to Ask (Updated)  401k plan fiduciaries have an obligation to secure and keep private the personally identifiable information of plan participants and beneficiaries. Part of this essential task is ensuring that plan service providers take cybersecurity preparedness and plan data protection seriously. Source:

DOL’s Fiduciary Rule

DOL’s Conflict of Interest FAQ (Transition Period)  This 11-page FAQ was just released by the DOL and provides additional information on the transition period from June 9, 2017 to January 1, 2018. This guidance, like the Fiduciary Rule and related exemptions, is generally limited to advice concerning investments in IRAs, ERISA-covered plans, and other plans covered by section 4975 of the Internal Revenue Code. Source:

DOL’s Fiduciary Rule Enforcement: Field Assistance Bulletin No. 2017-02  This document announces a temporary enforcement policy related to the DOL’s final rule defining who is a fiduciary under ERISA and the Internal Revenue Code, and the related prohibited transaction exemptions, including the Best Interest Contract Exemption, the Class Exemption for Principal Transactions In Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs, and certain amended prohibited transaction exemptions. Source:

The DOL Will Not Delay Fiduciary Rule  Labor Secretary, Alexander Acosta, threw in the towel in his effort to delay the application date of the Fiduciary Rule. Barring any additional developments, the Rule will now become applicable, as scheduled, on June 9, though certain provisions do not become applicable until January 2018. Source:

Acosta Declines to Extend Delay of DOL Fiduciary Rule  Labor Secretary Alexander Acosta confirmed Monday night that the agency’s fiduciary rule will become applicable on June 9. His decision is a victory for supporters of the rule. Source: (registration may be required)

Acosta’s DOL Approach to the Fiduciary Rule  In an op-ed in the Wall Street Journal, Secretary Acosta announced that the DOL will not delay the June 9, 2017, Applicability Date of the new fiduciary rule. Secretary Acosta wrote, “The fiduciary rule as written may not align with President Trump’s deregulatory goals.” However, DOL concluded there was “no principled legal basis to change the June 9 date.” Source:

DOL’s New Fiduciary Rule Will Go Into Effect June 9th  The DOL has announced that the new fiduciary conflict of interest rule and related exemptions will begin taking effect on June 9, 2017, ending speculation of further delay. At the same time, the Department announced a relaxed enforcement standard for the rest of 2017. Source:

DOL Announces No Claims Against Fiduciaries During Phased Implementation Period  DOL Issues FAB 2017-02 Announcing that the DOL will not pursue claims against fiduciaries working in good faith to comply with the fiduciary investment advice regulation and the related prohibited transaction exemptions before January 1, 2018. Source:

Fiduciary Rule: Some Conflict, Lots of Interest  Now that the new DOL secretary, Alexander Acosta, has announced that the DOL will not be seeking a further delay of the applicability date of the fiduciary rule and will be focusing its efforts on the examination, attention is shifting to the institution comment letters. What did they urge the DOL to do with its examination? This article summarizes the institution comment letters and offers a few observations regarding key issues and concerns. Source:

Win the Battle, Lose the War? The Fiduciary Rule Moves Forward  The DOL has confirmed that the initial June 9 compliance date for the Fiduciary Rule will not be postponed. Secretary Acosta reportedly shares the Trump administration’s position regarding the Rule, so it would be wrong to read this as anything other than a short-term victory for the Rule’s supporters. So, what happens on June 9? Source:

Compliance and Regulatory

Treatment of “Collateral” Employees Under Retirement Plans  It is common for employers to contract with one or more third parties to provide individuals to perform services for the employer. Various issues may arise regarding the treatment of such individuals under a retirement plan maintained by the employer. Source:

Reimbursement of Sponsor Expenses  Some plan sponsors bill their plans for the services the sponsor provides to them. That practice — while permitted under certain circumstances — does present certain issues under ERISA. This article briefly reviews the rules under which a sponsor/fiduciary may be reimbursed for expenses, some of the pitfalls those rules present, and some recent litigation on the issue. Source:

The Time is Right to Contact Recordkeepers About Hardship Substantiation  The IRS recently issued an internal memorandum providing guidance to its employee plans examination group on the substantiation requirements for hardship distributions from a section 401k plan. If your 401k plan recordkeeper has not talked to your company lately about hardship distributions documentation, it may be time to reach out to the recordkeeper. Source:

Are You Computing Your Maximum Participant Loan Amount Correctly?  The IRS issued a Memorandum providing two alternatives for computing the maximum participant loan amount when the participant has prior loans. Prior to this Memorandum, the law was not clear concerning how to compute the maximum loan amount where a participant had taken a previous loan during the year. Source:

What Expenses Can Be Paid From a 401k Plan?  From a regulatory standpoint, it is legal for the Plan to pay eligible expenses (such as 401k audit fees, investment advisor charges, TPA fees, etc.) if the Plan has been properly structured and doesn’t contain language which would expressly forbid. Source:

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