Experts in Personalized Retirement Plan Design & Administration Newsletter 06.14.17

Questions 401k and 403(b) Participants Should Ask When the Plan Advisor is Changed The DOL rule will force many advisors to act as a fiduciary which will in turn force many of the over 200,000 advisors without necessary experience or training to either opt out or get serious creating massive turnover. So, what questions should plan participants be asking when a 401k or 403(b) change their plan advisor? Source:

Insight: Studies, Research, and White Papers

Defined Contribution Plan Participants’ Activities, 2016 Defined contribution plan assets are a significant component of Americans’ retirement assets, representing more than one-quarter of the total retirement market and about one-tenth of US households’ aggregate financial assets at year-end 2016. To measure participant-directed changes in DC plans, ICI has been tracking participant activity through recordkeeper surveys since 2008. This 12-page report updates results. Source:

Sponsors Implemented Meaningful Changes to 401k Plans Over Past Decade Implementation of automated features in defined contribution plans has skyrocketed over the past decade, driving up plan participation rates, saving rates, and balanced asset allocation strategies, according to the 110-page ‘How America Saves 2017’ report. Source:

Commitment to Employees’ Retirement Security Goes Beyond Working Years for Many Larger 401k Plan Sponsors In a new study, T. Rowe Price found broad-based commitment to workers’ retirement security based on the attitudes and actions of retirement plan sponsors. In addition to taking responsibility for retirement preparedness, plan sponsors are taking steps to offer several automatic programs, matching contributions, stretch matches, and more to drive successful retirement outcomes. Source:

Survey Finds Financial Wellness Programs Are Gaining Momentum With Employers A new survey from Charles Schwab reveals that financial wellness programs are quickly becoming a core part of employee benefit and compensation packages. Employers are increasingly finding that financial wellness programs can potentially drive better financial outcomes for employees, promote higher utilization of employer-sponsored savings and investment programs, and lead to productivity gains from a reduction of financial-related stress. Source:

Items of Special Interest to Service Providers

Stepping Out of the Defined Contribution ‘Echo Chamber’ With the competition among DC plan advisers tough and expected to get even tougher as the DOL’s fiduciary rule forces inexperienced advisers to exit the market, plan advisers need to step out of the DC “echo chamber” and bring new ideas to clients. What is the DC echo chamber and how can you exit it? Source: (registration may be required)

Qualified Default Investment Alternatives

Hybrids: The Next Generation of QDIA Qualified Default Investment Alternatives (QDIAs) are a fairly recent invention but have already become a central component of the corporate defined contribution retirement system. Although target-date funds have been the most popular choice to date, recently introduced hybrid forms of QDIA represent a notable new variation. Source:

Court and Other Legal Issues

Questioning 401k Lawsuits Based on Investment Outcomes No one can predict the excess return relative to a benchmark (Alpha) that is usually associated with active investment management. Then it should come as no surprise that no one can predict the market (beta). Choosing investments is a subjective endeavor. So why are so many legal actions and allegations against Employer Retirement Plans Sponsored Plans based on subjective endeavors with unknown outcomes? Source:

Another Court Dismisses Conclusory 401k Fee Suit We have now had a second case in Minnesota in which a judge looked under the hood and found no substance there. The Minnesota judge dismissed the case with prejudice (meaning plaintiffs won’t have a second bite at the apple.) Is this the beginning of a trend? Source:

Chicago Bridge & Iron Inflated Stock, 401k Participants Say Chicago Bridge & Iron Co. allowed artificially inflated company stock as an investment option in its retirement plans, causing its employees millions of dollars in losses, the workers allege. Source: (registration may be required)

Legislative and Washington DC

Bill Would Repeal Fiduciary Rule, Part of Dodd-Frank A bill repealing some of the major provisions of Dodd-Frank and the DOL’s fiduciary rule will move to the House floor for a vote this week, something that did not happen in previous sessions for similar legislation. That said, even if the House passes it, its chances in the Senate are bleak. Source:

House Republicans Pass “Choice” Act, Block Fiduciary Rule One of the most sweeping financial regulations in recent history took a step closer to destruction on Thursday, as the House of Representatives voted almost along party lines to repeal the Dodd-Frank Act. Part of the legislative package included a block of the DOL’s fiduciary rule set for implementation on Friday. Source:

DOL’s Fiduciary Rule

Fiduciary Rule’s Future Even More Uncertain as SEC Steps In SEC Chairman Jay Clayton in his first policy announcement said the SEC would seek comment on a range of issues related to the DOL’s Obama-era rule that aimed to reduce the allegedly conflicted investment advice given to retirement savers. Opponents of the rule may be pleased, but this isn’t the first time the head of the SEC has expressed interest in tackling the topic. Source: (registration may be required)

DOL FAQs Guide Compliance Efforts During Fiduciary Rule Transition Period The Department of Labor has issued guidance in the form of ‘Frequently Asked Questions’ to help firms and their advisers impacted by the Fiduciary Rule know what is expected on and after June 9, 2017, on and after January 1, 2018, and during the period between. Source:

Compliance With the ERISA Fiduciary Advice Rule: Beginning June 9, 2017 The DOL’s fiduciary rule significantly expands the categories of persons who are deemed a fiduciary when dealing with retirement investors. It is therefore important that financial services entities who deal with employee benefit plans and IRAs, consider the points reviewed here in connection with compliance with the Rule. Source:

Compliance With the ERISA Fiduciary Advice Rule The DOL’s fiduciary rule affects a broad range of financial services providers who deal with “Protected Investors.” This article provides a brief overview of the specific effects of the Rule on investment managers and sponsors of private funds that accept investments from Protected Investors and on investment advisers that provide managed account services to Protected Investors. Source:

DOL Fiduciary Rule: Ready, Set, Go! But How Far? As the rule becomes applicable on June 9, including the impartial conduct standards under the exemptions, the DOL’s recent guidance seems to support phased implementation as financial institutions move toward the full compliance date, which is currently scheduled for January 1, 2018. Though the scope of potential changes to the rule and exemptions in advance of January 1 is currently unclear, we expect that additional changes may be considered and potentially made. Source:

“Last Minute” Fiduciary Rule Check-In: What Plans and Arrangements Are Covered With the DOL Fiduciary Rule, there may still be confusion about exactly which plans and other arrangements are subject to the Rule. This article describes which plans and arrangements are covered, and which are not. Source:

Department of Labor’s New Fiduciary Rule Effect on Investment Funds The New Fiduciary Rule raises a major concern that investment fund sponsors and others who market investment products to ERISA-covered plans and IRAs could be deemed to be “fiduciaries” in connection with their marketing activities and, therefore, subject to ERISA’s prohibitions on self-dealing and conflicts of interest. Consequently, investment fund sponsors need to prepare appropriate measures to avoid becoming ERISA fiduciaries in connection with their marketing activities. Source:

Quantifying the Impartial Conduct Standards Under the DOL’s New Fiduciary Rule With a portion of the DOL’s new fiduciary rule scheduled to go into effect, there are still some unanswered questions with regard to how some key terms will be interpreted. The key terms in question are primarily located in the rule’s impartial conduct standards. Source:

DOL Issues Fiduciary Rule FAQs as SEC Re-Enters Fiduciary Rule Debate Given that the Fiduciary Rule will be implemented on June 9, 2017, with full compliance expected by January 1, 2018, it is expected that mutual fund sponsors will move ahead with plans to introduce clean shares and T shares in order to assist fund intermediaries in complying with the Fiduciary Rule. Mutual fund boards of directors and fund service providers should be prepared for a year of potential share class changes and related filings. Source:

What Can You Expect From the ERISA Fiduciary Advice Rule During the transition period, fiduciaries who meet one of the exemptions still need to comply with the Impartial Conduct Standards. This requires fiduciaries to: Provide advice which is in the best interests of their clients; Avoid making misleading statements; and Charge no more than reasonable compensation for services. Source:

Compliance and Regulatory

Audits and Other Form 5500 Developments Changes are afoot for ERISA-mandated Form 5500 filing requirements, though it is unclear at this time when and which changes will actually be implemented. IRS has once again allowed a pass on their compliance questions by omitting them from the 2017 draft forms. Source:

Why Should My 401k Plan Use a Calendar Plan Year? Off-calendar plan years are typically structured to follow the company’s fiscal year, with the rationale that the profit-sharing contributions would be tied to fiscal year performance. This logic is somewhat flawed. Source:

Form 5500 Update As a plan sponsor or financial advisor, it is paramount that you maintain an open line of communication with your TPA or recordkeeper responsible for preparing this filing in order to avoid potential penalties and fines from both the IRS and the DOL. In order to avoid delays in the preparation and filing of the form, here are some things you can do as the plan sponsor to assist your service provider. Source:

Handling QDROs for Your Retirement Plan When couples divorce, one spouse’s retirement benefits may be divided as part of a property settlement. Although federal law generally does not allow plan participants to assign or alienate their retirement plan interests, there is a limited exception. Retirement benefits may be assigned to a spouse, former spouse, child, or other dependent to satisfy family support or marital property obligations through a domestic relations order if the plan administrator determines it is a qualified domestic relations order (QDRO). Source:


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