Experts in Personalized Retirement Plan Design & Administration Newsletter 06.07.17

401k Accounts Need to Be Easier to Move From Job to Job  In short, in most cases as employees move from one large employer with a low-fee 401k to another, the smartest move would be to roll over their balances from the old plan to the new plan. But given the enormous hurdles, participants are much more likely to cash out or move their balances into a high-fee IRA. Cashouts and high fees dramatically reduce balances at retirement. This problem is fixable. Source:

401k Distribution Rules — Frequently Asked Questions  If you participate in a 401k plan, you should understand the rules for withdrawing money from your account — otherwise known as taking a distribution — even if you don’t plan to touch this money for decades. Source:

Tips for Improving Plan Sponsor Homepages  A well-designed homepage is among the most essential components of an effective retirement plan sponsor digital experience. As the front door of a plan sponsor portal, a homepage should communicate an assortment of critical plan information and illustrate the overall health of the plans that sponsors administer in a direct and intuitive manner. Contains top tips for improving a plan sponsor homepage. Source:

Retirement Savings Milestones: How Much Should You Have Now?  Measuring progress toward your retirement savings goals can be a challenge. This article shares some savings milestones you can use to see how your current savings stack up against your goals. If your savings fall short of where they should be for your age, some suggestions are offered on how to get caught up. Source:

Technology Reshaping Participant Communications  A new study finds plan providers are turning to cloud-based technology and other solutions to enhance targeted communications toward different age groups. Source:

Who Killed Retirement Security? If You Look Closely, It Wasn’t the 401k  Private retirement savings are at record levels, and the uptick in saving began at precisely the time when 401ks began to replace traditional pensions. By far the biggest risk to retirement security is underfunded government retirement plans, which have promised vastly greater benefits than they can pay. Source:

Pension Ages Simply Must Rise as We All Live Longer  The retirement age should rise to at least 70 in rich countries by 2050 as life expectancy rises above 100, according to a new report. The World Economic Forum said that employees should continue working until 70 in nations such as the UK, US, Japan and Canada. There’s a reasonable argument that it should rise very much more than that. Source:

403(b) Plans

Adopting a New Pre-Approved 403(b) Document? It’s a Good Time for a Plan Compliance Review  The restatement of a plan onto a pre-approved document is an opportunity to review the operation of the plan and to make sure that it is being administered in accordance with the terms of the document and applicable legal requirements. Conducting a periodic compliance review is a good idea even if the plan is not being restated, but a plan sponsor certainly wants to make sure that any current errors in the plan’s operation are not carried over to a new document. Source:

Insight: Studies, Research, and White Papers

DC AUM Totaled Nearly $6T in 2016  Defined contribution plan assets under management (AUM) reached $5.95 trillion in 2016, says a recent survey of money managers. Source:

Managers of Defined Contribution Benefits Regain Steam in 2016  Defined contribution money managers posted record assets under management last year of $5.95 trillion, up 8.6% from 2015, according to the latest survey of money managers by Pensions & Investments. Source:

Items of Special Interest to Service Providers

401k Recordkeepers Making Big Bets on Managed Accounts  Fidelity Investments and Empower Retirement are making big bets on 401k managed accounts and competing defined contribution plan recordkeepers are poised to follow suit. What isn’t yet clear is if these bets will pay off for retirement plans and their participants. Source: (registration may be required)

SEC Jumps Back Into Fiduciary Brouhaha  The Securities and Exchange Commission announced that it is again seeking public comment on investment-advice standards, restarting its consideration of a fiduciary duty regulation while a similar measure promulgated by the Labor Department is undergoing a reassessment. Source: (registration may be required)

SEC Chair Clayton’s Recent Fiduciary Comments Are Revealing  The SEC chair issued only a brief statement on his intention to work with DOL officials on reforming conflict of interest regulations, but his language is revealing. Source:

Automatic 401k Plan Features

Automatic Savings Plans Drive Better Investment Returns  In the U.S., TDFs have consistently had positive gaps because U.S. investors contribute to their 401k savings with every paycheck, and TDFs reduce bad market timing decisions. Source:

Court and Other Legal Issues

Wells Fargo Scores Rare Win in 401k Fee Litigation Series  Wells Fargo & Co. defeated a proposed class action claiming the company stuffed its $35 billion 401k plan full of expensive and poorly performing target-date funds affiliated with the company. Source: (registration may be required)

Chevron Again Defeats Lawsuit Over Its $19 Billion 401k  Chevron Corp. defeated for the second time a proposed class action accusing it of breaching fiduciary duties by allowing poorly performing investments that allegedly carried high management fees in its $19 billion 401k plan. Source: (registration may be required)

Lawsuit Filed for Retirement Plans Using United of Omaha GICs  The lawsuit alleges United of Omaha breached its ERISA duties by improperly exercising its discretionary authority “to maximize its own compensation and retain large profits rather than crediting the participants and beneficiaries of the plans with appropriate returns.” Source:

Partial Victories to Two Universities in Their Motions to Dismiss Code Section 403(b) Fee Litigation  District courts in Georgia and North Carolina, respectively, ruled on defendants’ motions under Henderson v. Emory University and Clark v. Duke University. Although the defendants in these cases have had some success in eliminating certain causes of action, other causes of actions involving the payment of excessive fees and use of multiple recordkeepers will continue through litigation. Source:

Cybersecurity Issues

Plan Sponsors Growing Fiduciary Responsibilities for Cybersecurity  This is the slide deck from a presentation on plan sponsors growing fiduciary responsibilities for cybersecurity given at the SPARK Institute’s National Conference, June 1-2, 2017. Source:

DOL’s Fiduciary Rule

ERISA’s Fiduciary Rule — Not Dead Yet, Not Dead … Ever?  It has been a long and winding road for the amended fiduciary regulation. The DOL has now made clear that the Regulation will be going into effect in part on June 9, as discussed in this article. Source:

Update on the DOL’s Fiduciary Rule  Assuming that the fiduciary rule and the revised prohibited transaction exemptions will survive in some form, plan sponsors (and other plan fiduciaries) that have not already done so should undertake an assessment of the investment education and investment advice services provided to the plan, to plan fiduciaries and to plan participants. To the extent service providers are providing more than general investment education, the parties should be making good faith efforts to modify the service arrangements, as necessary, to comply with the new and revised rules. Source:

DOL Rule Dramatically Changing 401k Advice, Education and Relationships with Providers and Advisors  Now that we know that the DOL fiduciary rule will go into effect June 9th, 401k and 403(b) plan sponsors need to start paying attention to the likely change in the relationship with their recordkeepers and advisors especially those providing investment education and advice. Source:

How the DOL Created a 401k Fiduciary Monster  The linchpin in the whole fiduciary rule mess isn’t regulation, but rather deregulation, at least according to Eugene Scalia, son of the late Supreme Court justice. A former solicitor for the Department of Labor under George W. Bush, Scalia took to the pages of The Wall Street Journal to decry what he sees as the department’s overreach, referring the fiduciary rule as a regulatory Godzilla. Source:

Compliance and Regulatory

How to Make Your 401k Loan Program State-of-the-Art  A significant factor in helping your 401k plan participants achieve retirement readiness is protecting them from themselves. In other words, helping participants avoid making bad decisions. An important component of that process is minimizing the loss of participant account balances from loan defaults. Source:

IRS Relieves Some of the Hardship of Hardship Distributions  The new guidelines provide some flexibility to employers and plan administrators by allowing them to rely on summaries rather than requiring actual source documents in all cases. However, while employers and plan administrators often are reluctant to impose additional burdens on individuals who are experiencing financial difficulties, it is clear that self-certification of a hardship, without the necessary information and/or source documents, will not suffice and will result in a plan failure. Source:

IRS Proposed Regulations Would Permit Forfeitures to Fund QNECs  The IRS published proposed regulations, which amend the definitions of qualified non-elective contributions (QNECs) and qualified matching contributions (QMACs). The questions and answers here explain the importance of QNECs and QMACs and how the proposed changes are beneficial to 401k plan sponsors. Source:

Improvement Opportunity Checklist for DC Plan Sponsors  While education, financial wellness and improving participants outcomes are top of mind for defined contribution plan sponsors, operations and compliance come first due to increased scrutiny by DOL examiners, new rules and the wave of 401k and 403(b) lawsuits. Source:


Share This!

Leave a Reply

Protected by WP Anti Spam

Subscribe to BPP401k

Enter your email address:

Hide Buttons