BPP401k.com Newsletter 06.08.16
403(b) Plans
The Role of 403(b) Plans: A Closer Look By the end of last year, 403(b) plans contained nearly $1 trillion in assets. They are a significant part of the U.S. retirement landscape, and a recent paper takes a closer look at 403(b)s. Highlights key findings. Source: Napa-net.org
Insight: Studies, Research and White Papers
Achieving Retirement Income Security: A Comparison of Withdrawal Strategies Many retirement income products attempt to satisfy multiple and sometimes conflicting objectives because retirees desire products that provide retirement security, inflation protection, liquidity, asset growth and the potential for an estate. In this 27-page paper, the authors used historical data over the past 90 years to conduct simulations and analyze how a Guaranteed Lifetime Withdrawal Benefit, systematic withdrawal, and partial Variable Immediate Annuity strategies performed in meeting these multiple objectives. Source: Tiaainstitute.org
Employees Say They Cannot Afford to Save for Retirement A survey found not being able to afford to contribute is the top reason employees say they do not participate in their employer-sponsored plans, and many are not confident about managing investments. Source: Plansponsor.com
Average 401k Balances Blossomed in May The balances of consistent 401k plan participants continued to enjoy solid growth in May, according to a new report. Source: Napa-net.org
Target-Date Funds
Podcast: Three Key Pillars of Target-Date Fund Evaluation Target-date funds are the fastest growing investment in 401k plans primarily due to their popularity with plan sponsors as the QDIA. As some fiduciaries are starting to realize, evaluating target-date funds can be a bit tricky due to the numerous variances in style from one fund to another. Podcast discusses the three pillars of differentiation amongst target-date fund managers, glide path construction, investment diversification, and management style. Source: 401kfridays.com
Court and Other Legal Issues
Delta 401k Participants Sue Fidelity Alleging Fiduciary Breach Participants in a Delta Air Lines Inc. 401k plan have sued units of Fidelity Investments, alleging fiduciary breaches in Fidelity’s recordkeeping role. The case, Fleming et al. vs. Fidelity Management Trust Co. et al., was filed May 20 in the U.S. District Court in Boston. Source: Pionline.com
Small Minnesota 401k Plan Face Class Action Over Excessive Fees Specific allegations include: (a) failure to assess the reasonableness of the investment fees; (b) selecting inappropriate and imprudent mutual fund classes when lower cost institutional share classes were available; and (c) selecting investment options that were unnecessarily expensive relative to industry benchmarks and standards. In addition, the Plaintiffs allege that the Trustees failed to have a process for monitoring the Plan recordkeeper and investment providers, the fees that they charged, the investment classes and the investment options. Source: Benefitsnotes.com
Think Only Large Plans Get Sued? Think Again Litigation trends tell us that, for billion dollar 401k plans, it is a matter of when, not if, they will face a participant lawsuit. So when a plan with only 114 active participants and just over $9 million in plan assets was sued on the same grounds as the biggest plans in America, the retirement industry and small employers everywhere were taken by surprise. But should they have been? Source: Amazonaws.com
State-Based Private-Sector Retirement Programs
Washington to Launch First State-Run Retirement Plan for Private-Sector Starting January 1, 2017, Washington will be the first state to offer a state-run retirement plan for private-sector workers. Source: Planadviser.com
How States Are Working to Address the Retirement Savings Challenge The Pew Charitable Trusts analyzed efforts in progress or under legislative consideration in 25 states. In this 41-page paper, Pew’s analysis identifies three approaches to increase retirement savings for private sector workers that states are considering. Paper also looks at other specific choices and issues facing policymakers. Source: Pewtrusts.org
DOL’s Final Fiduciary Rule
It’s On! Litigation Filed Challenging DOL Fiduciary Regulation As anticipated, a number of retirement industry trade groups and the U.S. Chamber of Commerce have taken their case against the Labor Department’s fiduciary regulation to the courts. Source: Napa-net.org
Lawsuit Against DOL Fiduciary Rule Seen as ‘Weak’ Opponents have finally filed an anticipated lawsuit challenging the Labor Department’s rule to raise investment advice standards for retirement accounts, but some observers say arguments levied against the regulation are flimsy and exaggerated. Knowledgeable sources say the DOL has the authority to write rules governing who is and isn’t a fiduciary in both the ERISA-plan world and IRA market. Source: Investmentnews.com (registration may be required)
Nine Groups File Lawsuit to Strike Down ‘capricious’ DOL Fiduciary Rule As anticipated, a number of retirement industry trade groups and the U.S. Chamber of Commerce have taken their case against the Labor Department’s fiduciary regulation to the courts. Source: Investmentnews.com (registration may be required)
Labor Secretary Perez Defends Fiduciary Rule U.S. Secretary of Labor Thomas E. Perez today issued this statement regarding a lawsuit filed to stop the DOL’s recently released fiduciary rule. Source: 401khelpcenter.com
Lawsuit Challenges DOL’s Fiduciary Rule Retirement industry trade groups filed on June 1st a legal challenge to the Department of Labor’s fiduciary rule for brokers and registered investment advisers serving Americans with Individual Retirement Accounts and 401k plans. Source: 401khelpcenter.com
Quantifying “Best Interest,” Reasonable Compensation and Suitability for investment Professionals With the DOL’s recent release of their new fiduciary rule and the related Best Interest Contract Exemption, there has been an increased interest in the concepts of “best interest” and prudence, two of the key concepts involved with both the Rule and BICE. Source: Iainsight.wordpress.com
Challenging the DOL’s Authority to Regulate the Annuity Marketplace The second suit challenging the DOL’s new fiduciary regulations is a more narrowly targeted action, brought by sellers of fixed annuities and charging that the Department of Labor, for various reasons, overreached when it included insurance agents and this product within the scope of the regulation. Source: Bostonerisalaw.com
Businesses Fight for Their Right to a Lousy Retirement Plan And while America’s biggest companies are often quite generous to employees, its smallest companies are notorious for lousy 401ks. So it’s surprising to see lobbyists fighting changes to the current retirement system and using small businesses to back their case. Source: Bloomberg.com
Second Lawsuit Filed Against Fiduciary Rule Less than 24 hours after the filing of litigation challenging the Labor Department’s fiduciary regulation, a second lawsuit was filed June 2. This one, filed in the U.S. District Court for the District of Columbia by the National Association for Fixed Annuities, seeks to “challenge and vacate” the fiduciary rule, with an arguably narrower focus than the lawsuit filed the day before, but making many of the same arguments. Source: Napa-net.org
Compliance and Regulatory
Fundamentals for Your 401k Plan Learn the difference between mandatory and discretionary contributions and which one is better for your plan in this three-minute video. Source: Erisasunscreen.com
401k Disclosure Rules Are Out of Date; It’s Time for Common Sense Reform The posterchild for bad 401k regulation is the ERISA participant disclosure rules. The disclosures need to be more streamlined and easier for 401k plans to deliver using modern technology. Article analyses the issue. Source: Employeefiduciary.com
DOL Obtains Judgment to Restore Nearly $20k to 401k US Labor Department obtains judgment to restore nearly $20k to 401k plan of contractor based in Jessup, Maryland. Source: Dol.gov
How Long Should Retirement Plan Records Be Retained? Maintaining an employer-sponsored retirement plan can be an onerous task. A lot of paper a can accumulate in short order. Before you go off and shred some of those old documents in an effort to clean up your fiduciary file, you should know that ERISA has specific requirements for the retention of records relating to employee benefit plans. Source: Axiaadvisory.com
IRS Proposes New Nondiscrimination Rules The IRS published proposed rules to provide additional nondiscrimination testing relief to both closed plans and ongoing plans that provide grandfathered benefits to closed groups of employees. The intent of these rules is to enable plan designs to continue to meet nondiscrimination requirements, even though the covered populations may become more discriminatory over time. Source: Prudential.com