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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

 

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