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BPP401k.com Newsletter 06.15.16

Company Stock in Your 401k? Don’t Make My Costly Mistake  Company stock in your 401k has special rules, specifically an available tax treatment called Net Unrealized Appreciation. Under the right circumstances, you pay only the capital gains tax rate on appreciation, rather than regular income rates. Proceed with caution any time you consider selling, rolling over, or withdrawing shares of company stock in your plan. Source: Seekingalpha.com

The 401k Mistakes That Could Cost You a Bundle  Having a better understanding of your workplace retirement plan and how to make it work for you is very important. It’s not rocket science either. Article touches on four mistakes could be costing you money. Source: Nbcnews.com

Why Canadian HR Professionals Should Demand a Benefit Communications Policy  Canadian courts and arbitrators have shown an increasing propensity to award damages, or provide restitution, to employees where it can be shown that employer communications are untrue, inaccurate, misleading, ambiguous or omit important details. The challenge for employers, therefore, is how best to effectively communicate the excellent pension and benefit programs while minimizing potential legal liability and ensuring that proposed future changes to those programs won’t be hampered by the phantoms of past communications. Source: Employmentandlabour.com

SSGA Chief Calls on Congress to Mandate Workplace Retirement Coverage  Ron O’Hanley, president and chief executive officer of State Street Global Advisors, called on Congress to enact a national framework that ensures workplace coverage for all private-sector working Americans. Open letter outlines a suggested framework. Source: 401khelpcenter.com

Fiduciary and Plan Governance Material

Exceptional Plan Governance: Beat Back the Coming Litigation Onslaught  Exceptional plan governance means that, at a minimum, plan sponsors (and designated fiduciaries) should consider the items outlined here to help demonstrate that they are primarily operating their plans to the benefit of participants and their beneficiaries and then to reduce liability exposure for themselves. Source: Benefitsbryancave.com

ERISA and Cybersecurity  Data breaches are also causing benefit plan administrators and other fiduciaries under ERISA to consider whether their ERISA responsibilities include securing online plan data from cyberattacks, especially as to 401k and other benefit plans that are not subject to HIPAA. Although definitive guidance has not been provided, fiduciaries would be well-advised to proceed on the assumption that cybersecurity is an ERISA issue. Source: Passwordprotectedlaw.com

Fiduciaries Face an Alarming Number of Stable Value Fund Lawsuits  In the last several months, plaintiffs have filed multiple class action lawsuits against plan sponsors, plan fiduciaries, and stable value fund providers. As a result, plan sponsors and plan fiduciaries may want to evaluate the process they use to decide to invest in stable value funds. Source: Employeebenefitsblog.com

How Recaptured Revenue-Sharing Funds Can Be Used  In this one-page article, Fred Reish discussed how excess recaptured service provider’s compensation is handled, and how to allocate plan expenses. The article also highlights the creation of recordkeeping systems that “equalize.” Source: Drinkerbiddle.com

Five ‘Must-Haves’ to Consider When Outsourcing 401k Recordkeeping Services  The costs and complexity of retirement plan recordkeeping are continuing to increase given the demand to keep up with fiduciary rules and regulations. So as you deliberate through the pros and cons of in-house retirement recordkeeping versus Business Process Outsourcing, you must have a deep understanding of the core strengths that you deem critical for your firm to retain and deliver, and how your clients perceive the value of providing those services. Source: Aspireonline.com

Insight: Studies, Research and White Papers

The Evolution of Collective Investment Trusts and Considerations for Plan Sponsors  Plan sponsors have increasingly focused on finding low-cost investments and more transparent fee structures for their retirement plans, in part due to the increasing number of headlines related to fee-based litigation issues. This paper provides an overview of and trends surrounding CITs, and outlines what plan sponsors should consider when looking at adding CITs to their plan lineup. Source: Porteval.com

Retirement Plans Take Second Look at a Cheaper Alternative to Mutual Funds  Plan sponsors who wrote off using collective investment trusts in their retirement plans in the past should reconsider the products, as they have evolved to address many of their concerns, according to a paper by Portfolio Evaluations Inc. Source: Thinkadvisor.com

A Look at 401k Distribution Options  Where most 401k plans only offered a lump-sum distribution option, the new trend in retirement plans may have you facing a decision. Could additional options, such as installments and ad hoc distributions be the new featured value to plan participants? Could a lack of more distribution options be affecting participants’ distribution behaviors? Article looks at the options and what they offer the participant. Source: Retirementtownhall.com

How America Saves 2016  In the fifteenth anniversary edition of How America Saves, Vanguard’s analysis of DC plans and participant behavior is updated based on 2015 Vanguard recordkeeping data. Report is 110-pages. Source: Vanguard.com

What the Pension Protection Act Has Done for 401ks  Ten years on and what have we got to show for it? Quite a lot, according to Vanguard. The investment behemoth marks the 10th anniversary of the Pension Protection Act of 2006 by releasing a special 15th anniversary edition of its How America Saves report. Source: 401kspecialistmag.com

DC Plan Sponsors Say Less Is More in Investment Lineups  401k plan sponsors are consolidating the number of DC investment manager relationships as well as the number of plan investment options in an effort to reduce plan costs, according to a recent Cogent study. Source: 401khelpcenter.com

The Four Phases of Saving and Investing for Retirement  The framework of Earn, Save, Grow, and Preserve can be a helpful way to think about the progression of accumulating for retirement. Each phase has its own unique issues to be navigated, and success in one phase leads to the challenges of the next. Source: Kitces.com

The Retirement Income Dilemma: An In-Plan Solution  This four-page paper discusses how in-plan deferred income annuities within a retirement plan help future retirees manage different risks. The article also makes note of the paper’s checklists for plan sponsors to use when researching different in-plan products and providers. Source: Principal.com

Securing Our Financial Future: Recommendations for Retirement Security and Personal Savings  Bipartisan Policy Center releases a 152-page report, “Report of the Commission on Retirement Security and Personal Savings,” which forth numerous proposals to improve Americans’ retirement security. This report presents a comprehensive package of bipartisan proposals to address six key challenges. Source: Bipartisanpolicy.org

Items of Special Interest to Service Providers

Uptick in Fee Litigation Reshaping 401k Industry  Bloomberg BNA asked employee benefits attorneys how this litigation is reshaping the 401k industry. They pointed to lower industry wide fees and a reluctance by plans to embrace alternative financial strategies as potential side effects. They also predicted that companies would begin looking more closely at fiduciary liability insurance and the possibility of banding together through multiple employer plans. Source: Bna.com

Where to Find Help With ERISA 3(16) 401k Fiduciary Responsibilities  When advising clients, consider positioning services from providers who can act as an ERISA 3(16) Delegated Administrative Fiduciary. With this designation, providers can complete certain key plan administrative responsibilities and take on the inherent fiduciary responsibility for doing so. Source: 401kspecialistmag.com

Didn’t Get the 401k Business? Time to Find Out Why  Too many advisors fail to follow-up after missing out on a piece of 401k plan business. Those that do rarely get a straight answer. The solution, says Yaqub Ahmed, is to hire a win/loss consultant. Source: 401kspecialistmag.com

Small RIA Custodians Are Applying Tougher Love to Hobbyist RIAs  In part one of a three-part series, RIA.biz examines how seven small custodians — starting with Trade PMR and Scottrade — are evolving away from the utopian model of 100% inclusivity. Source: Riabiz.com

Court and Other Legal Issues

Fidelity 401k Lawsuit Could Up Ante for Plan Advisers  A lawsuit filed recently against Fidelity Investments, the largest record keeper of DC plans, highlights the growing scrutiny on 401k plan costs and increased need for retirement plan advisers to evaluate all tranches of fees paid to plan providers. Source: Investmentnews.com (registration may be required)

State-Based Retirement Programs

Public-Private Retirement Plans and Possible Fiduciary Gaps  In the aftermath of the passage of the DOL Fiduciary Rule, the concept of fiduciary duty is foremost on the minds of numerous industry executives and policymakers. Will public-private retirement plans receive the same scrutiny or is there a fiduciary gap? Source: Pensionriskmatters.com

State Retirement Arrangements for Small Business Employees  Susan Mangiero provides some food for thought regarding her lack of enthusiasm for state-run private-sector retirement programs — it has more to do with philosophy and a desire to encourage economic growth. Source: Pensionriskmatters.com

DOL’s Final Fiduciary Rule

Business and Trade Groups Bring First Lawsuits Challenging DOL Fiduciary Rule  Several groups representing financial institutions, insurance companies, and other businesses filed two federal lawsuits that seek to strike down the DOL’s recently finalized fiduciary rule. As described here, the plaintiffs are alleging that the DOL did not have the regulatory authority to issue the fiduciary rule and related exemptions, and that DOL did not follow the requirements of the Administrative Procedure Act. Source: Groom.com

Webinar: A Closer Look at the Final Fiduciary Rule  Vanguard’s Stephanie Napier and Frank Nessel discuss how the DOL final rule expanding the definition of a fiduciary will affect retirement plans. Offer candid views on: Why the DOL expanded the definition of a fiduciary, how the final rule differs from earlier DOL proposals, and how the final rule impacts plan sponsors and participants. Source: Vanguard.com

Trip to a Friendly North Texas Court to Upend the DOL Fiduciary Rule Looks More Like the Alamo  Article states, “Re-enacting the Alamo, the SIFMA-led fiduciary rule-haters have taken their posse to Texas in a last-stand effort to draw the DOL rule-makers into a losing position. The case relies on logic as mystifying as it is audacious.” Source: Riabiz.com

Conflict of Interest Rule Checklist  The DOL’s new fiduciary rule primarily affects service providers and advisors rather than plan sponsors, but this simple checklist can help you understand how services may change for your retirement benefits. Source: Lockton.com

The Final Fiduciary Rule: Impact on Investment Managers  This article describes the potential impact of the Fiduciary Rule on investment managers and the exceptions under the rule upon which investment managers may seek to rely in order to avoid triggering fiduciary status in connection with their marketing activities. Source: Groom.com

Obama Vetoes Congress’ Disapproval of Fiduciary Regulation  President Obama has vetoed Congress’ resolution that would have nullified the Labor Department’s fiduciary regulation. Source: Asppa.org

The DOL Fiduciary Rule: Six Immediate Concerns for Plan Sponsors  The DOL’s final conflict of interest rule redefines fiduciary investment advice under ERISA. Although the rule does not alter a plan sponsor’s basic fiduciary obligations, it will impact the plan’s relationships with its service providers. This five-page paper details six immediate concerns that plan sponsors need to address. Source: Ipbtax.com

Two More Groups File Lawsuits Against the DOL Fiduciary Rule  The list of lawsuits against the Labor Department got longer as two more industry groups joined three others in taking aim at the fiduciary rule in court. Labor Secretary Thomas Perez has vowed to vigorously defend the rule. Source: Investmentnews.com (registration may be required)

Carriers Join Fourth Lawsuit Against DOL Fiduciary Rule  The Indexed Annuity Leadership Council filed a fourth lawsuit today against the Department of Labor and Secretary Thomas Perez over its controversial fiduciary rule. It is the first lawsuit featuring carriers as plaintiffs. American Equity Investment Life Insurance is among the four carriers joining IALC in the lawsuit, which was filed in U.S. District Court Northern District of Texas. Source: Insurancenewsnet.com

The DOL’s New Fiduciary Rule: Capturing the Apparent Conflict at the “Moment of Rollover”  Under the DOL’s final fiduciary rule, a financial organization or adviser is acting as a fiduciary when advising a retail client to take a rollover or distribution from an ERISA plan or individual retirement account, even if the rollover or distribution recommendation is not accompanied by an investment recommendation. This four-page paper focuses on the impact of the final rule on the business of accumulating assets through capturing rollovers and plan distributions. Source: Shearman.com

Compliance and Regulatory

Correction Program Options for Retirement Plan Errors  In a highly regulated industry with complicated rules that always have exceptions, it is inevitable that sooner or later a failure to follow the plan document will take place. Such operational errors can be corrected through the IRS Employee Plan Compliance Resolution System in one of three ways. Source: Belfint.com

Exceptions to 10% Early Distribution Penalty Chart  Comparison chart of qualified plan and traditional IRA exceptions to the 10% penalty on distributions prior to age 59 1/2. Source: Mhco.com

Bonding Guidance  Section 412 of ERISA and related regulations generally requires all persons, including fiduciaries, who “handle funds or other property” of an employee benefit plan to be bonded. Good overview with a Q&A. Source: Mhco.com

Form 5500 Filing Date Approaching  July is next month. Obvious, but important for 401k plans and 403(b) plan with calendar year plan years to keep that in mind, since that means the July 31 Form 5500 filing deadline for 2015 is not far off. Article notes changes were made for 2015. Source: Asppa.org

IRS Updates Priority Guidance Plan  The IRS has released the third quarter update to its 2015-2016 Priority Guidance Plan. Projects related to retirement plans on which the IRS has noted action are listed here. Source: Asppa.org

DOL’s Final Overtime Rule May Affect Retirement, Other Benefit Programs  The final rule might affect a retirement or other benefit plan’s participation base or could raise concerns if the programs shift toward favoring the highly compensated. Article reviews the new rules and implications. Source: Milliman.com

Form 5500 Preparation — 10 Quick Considerations  It is critical to follow the Form 5500 instructions and carefully review the entries in order to avoid triggering an investigation. Article is a short list of considerations and questions aimed at helping avoid government inquiry otherwise prompted by a wrong answer on the Form 5500. Source: Erisalawgroup.com

 

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