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BPP401k.com Newsletter 06.24.15

Employer’s Excuses About Their Retirement Plan and Why They’re Wrong No one wants to accept responsibility for their ineptness; they just cling to these excuses. Plan sponsors don’t have that luxury of clinging to an excuse because they are on the hook if a plan goes wrong. This article is about plan sponsor’s excuses on why their plan is running correctly and why they are absolutely wrong. Source: Jdsupra.com

Plan Design and After-Tax Contributions Recent IRS guidance has created a new interest in “after-tax” contributions as a plan provision because they can be used to maximize plan contributions and reduce future tax liabilities. With proper plan design, after-tax contributions can be a valuable benefit to plan participants. This is a discussion of some strategies and caveats. Source: Kravitzinc.com (PDF File)

CITs: The Truth About Regulations, Transparency and Eligibility There’s a lot of interest in collective investment trusts (CITs). CITs are pooled investment funds that are designed exclusively for qualified retirement plans. But, there’s also a lot of misinformation and this article addresses some of the many misconceptions. Source: Invesco.us.com

Three Insights About Bad 401k Plans From Recent Lawsuit In this opinion piece, the author says the recent Ameriprise Financial 401k lawsuit provides several insights for investors and employers. Source: Marottaonmoney.com

Fiduciary and Plan Governance Material

Money Market Funds Changes – Implications for Fiduciaries New SEC money market funds rules that go into effect in 2016 will impact nearly every retirement plan that uses such funds as investment options or to facilitate plan administration. Plan sponsors, investment committees, those who advise them, and plan administrators should understand the upcoming changes in order to determine what steps that will be required or may be beneficial to take regarding such funds, and to consider their alternatives. Source: Reliance-Trust.com (PDF File)

Ever-Increasing Duties for Plan Fiduciaries There is little doubt that the fiduciaries of employee benefit plans are under closer scrutiny than ever before. As a result, the duties that are imposed on those fiduciaries are increasing. Two recent additions to the list of duties have emerged from guidance issued by a regulator and from a judicial decision. Source: Eisneramper.com

403(b) Plans

Analysis and Recommendations Regarding 403(b) Plans In this 258 page report, the Employee Plans Subcommittee of the ACT did a reexamination of the current state of the 403(b) community seven years after the issuance of the 403(b) final regulations. Specifically, the EP Subcommittee endeavored to identify the key issues that are plaguing the ability of the 403(b) plan sponsor to remain in compliance with requirements of the Internal Revenue Code. Source: Irs.gov (PDF File)

A 403(b) Plan Termination Checklist If a 403(b) plan termination is defective, individuals receiving amounts from the erstwhile termination may not meet the IRS criteria for having a distributable event for a 403(b) plan. That could have a further ripple effect if the individual has rolled over amounts to another eligible retirement plan or to an IRA. This article can assist employers who intends to terminate its 403(b) plan. Source: Ntsa-net.org

Insight: Studies, Research and White Papers

Net Outflows Befall 401k Plans Withdrawals from 401k plans are now exceeding new contributions as baby boomers age, a shift that could have profound implications for the U.S. retirement industry. Source: Yahoo.com

Frequent and Collective Trading Are Uncommon and Not a Significant Concern 401k plan participants often face trading policies that restrict frequent or collective trading in mutual funds, but the GAO found that this type of trading by plan participants is uncommon. Further, there is general agreement among industry representatives, participant advocates, and other stakeholders that current regulation strikes an appropriate balance between a participant’s ability to manage his or her retirement investments and the duty of plan fiduciaries to operate and manage their plans prudently. Source: Gao.gov

Canadians Confused About TFSAs Six years after TFSAs (Tax-Free Savings Account) were introduced, a Mackenzie Investments survey finds many Canadians still don’t understand how they work. They’re still not familiar with the basic elements of the program, meaning they risk not using their accounts to the fullest. Source: Benefitscanada.com

10 Best Practices for Global DC Plans This 24 page paper provides a list of 10 best practices for global plan sponsors to help companies better capitalize on the potential of DC plans to further both their own business objectives and the retirement readiness of their participants around the world. Source: Ssga.com (PDF File)

Plan Sponsor Survey: Focus on Automatic Plan Features DCIIA recently completed its third biennial survey of DC plan sponsors’ use of automatic plan features such as automatic enrollment, automatic contribution escalation and plan reenrollment. This survey of over 450 plan sponsors, ranging from sponsors of the largest plans (over $1 billion) to the smallest (under $5 million), found that the adoption of auto features is having its intended effect: more participants are saving for retirement, and saving at increasingly higher and more meaningful rates. Source: Dciia.org (PDF File)

2015 Defined Contribution Plan Sponsor Survey Findings This 30 page report provides insight into plan sponsors’ interpretation of the roles of their DC plans, goals and philosophies in providing retirement benefits, considerations driving plan-related decisions and actions underway to help employees reach retirement success. Source: Jpmorganfunds.com (PDF File)

Social Interaction Effects and Individual Portfolio Choice: Evidence From 401k Plan Investors Paper finds that participants are influenced by their coworkers when they make equity investment decisions. Using a rich dataset of 401k plans, researchers find that individuals are likely to increase their risky share when they have lower equity exposure than their coworkers in the last period. The effect is especially strong when the difference in equity exposure is substantial. Source: Pensionresearchcouncil.org

Items of Special Interest to Service Providers

Five Hot Trends in Retirement Planning Retirement planning might be based on a few fundamental financial concepts, but the specifics are constantly changing. Technology and federal regulations have brought several big changes for employers and employees. Here are five trends in retirement planning every retirement plan sponsor and participant should know about. Source: Bcigroup.com

DOL Sets Fiduciary Regulation Hearing Dates The DOL has announced public hearing dates of August 10-12, and August 13 if necessary, for its proposed conflict-of-interest (fiduciary definition) regulations. Source: Ascensus.com

Will Investors Benefit From a Unified Fiduciary Rule? The Department of Labor’s proposed rule holding brokers and registered investment advisers to a higher fiduciary standard isn’t the slam dunk that many claim. There are two possible problems with one uniform standard. Source: Institutionalinvestor.com

Legislative and Washington DC

Oregon Retirement Savings Bill Heads to Governor’s Desk The Oregon Senate passed legislation Tuesday that will ensure every Oregonian has access to a safe, easy and effective way to save for retirement. The bill cleared the Oregon House last week and will next go to the desk of Governor Kate Brown for her signature. Source: 401khelpcenter.com

Target-Date Funds

Impact of Tibble Ruling on Target-Date Monitoring All 401k fiduciaries should be asking themselves a question now that the U.S. Supreme Court’s Tibble decision has made it perfectly clear that no investment option, regardless of how prudently it was chosen, can be set on autopilot and forgotten. The question therefore is how should target-date funds be monitored? Source: Investmenthorizons.com (PDF File)

Court and Legal

Using Your IRA to Buy a Business: Still a Risky Strategy The use of assets in an IRA to finance a new business is sometimes known as a ROBS or rollover for business startups. In a case where a ROBS was used, the Eighth Circuit concluded that a prohibited transaction occurred because the payment of compensation to the individual was essentially an indirect payment by the IRA to the individual. Source: Benefitsnotes.com

Supreme Court Clarifies Plan Fiduciary’s Ongoing Monitoring Obligations Under ERISA The U.S. Supreme Court recently vacated a Ninth Circuit ruling which held that an ERISA claim (a class action suit filed by employees alleging that 401k plan fiduciaries breached their duty of prudence by selecting retail investment funds as opposed to lower-cost institutional funds) was time-barred because the initial selection of imprudent investments was made more than six years prior to the employees’ lawsuit. Source: Icemiller.com

Compliance and Regulatory

DOL Report on Plan Audits Shows That Plan Sponsors Must Continually Monitor Plan Compliance DOL’s findings are significant for plan sponsors and fiduciaries, because they illustrate the importance of continually monitoring employee benefit plans for compliance with the requirements of ERISA and the Internal Revenue Code. Moreover, plan sponsors have a fiduciary obligation to ensure their plans are properly maintained and administered beyond what is required to complete the annual audit. Source: Mwe.com

DOL Releases Plan Audit Quality Report, Recommends Stricter Plan Audit Standards Plan administrators and plan sponsors should be aware of this DOL report and its recommendations, because it may result in plan auditors significantly increasing the rigor of their annual audit procedures. Source: Franczek.com

Blackout Period and Notice Forms 5500, Annual Returns/Reports of Employee Benefit Plan and Forms 5500-SF have a two-part question about plan compliance with the blackout notice rules. The first part asks if an individual account plan had a blackout period. If the answer is yes, the follow-up question asks whether a blackout notice was provided or if one of the exceptions applied. The IRS is monitoring compliance with blackout period and notice rules. This is a review. Source: Kravitzinc.com (PDF File)

IRS on Section 401(k) Requirements The purpose of this worksheet and explanation is to identify major problems that relate to plans that include a cash or deferred arrangement. Generally, a “Yes” answer to a question on the worksheet indicates a favorable conclusion, while a “No” answer signals a problem concerning qualification of the plan. Source: Irs.gov (PDF File)

IRS on Employee and Matching Contributions The purpose of this worksheet and explanation is to identify major problems that relate to plans providing for employee and/or matching contributions. Generally, a “Yes” answer to a question on the worksheet indicates a favorable conclusion, while a “No” answer signals a problem concerning plan qualification. Source: Irs.gov (PDF File)

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