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Experts in Personalized Retirement Plan Design & Administration

BPP401k.com Newsletter 06.29.16

General Items

401k Providers See Participant Calls Surge in Wake of Historic Brexit  Retirement plan participants phoned their providers in a frenzy Friday morning as news of Britain’s exit from the European Union caused severe market gyrations and investors wanted to know what it meant for their nest eggs. Fidelity Investments, the largest record keeper of defined contribution plans, saw call volume for its 401k business increase 50% over regular levels for the first hour of business Friday morning. Source: Investmentnews.com (registration may be required)

The Future Is Now for 401k Plan Sponsors  Author states, “For retirement plan sponsors, the future of retirement plans is actually here and they need to know about the existing issues of their plan that could increase the potential for liability.” Then lays out five ‘issues’ sponsors need to learn about. Source: Jdsupra.com

Average Investors Shouldn’t Panic Over Brexit Storm  Britain’s unprecedented decision to leave the European Union sent global financial markets into tailspins Friday, but analysts say that average investors shouldn’t panic over their personal investments or retirement plans. Source: Detroitnews.com

Because of Brexit, Don’t Check Your 401k  What does all this mean for you, the ordinary person saving for retirement? First, it was a good day not to look at anything financial. Instead of asking yourself what is going to happen to the value of your retirement accounts, the question to ask is: How does this play out for me financially, years down the road? Source: Bankrate.com

The ABCs of 401k Retirement Savings Plans: DIY vs. TDFs  About half of workers invested in a 401k plan rely on target-date funds, and most plans now offer them. But is putting your investments on autopilot the best approach to retirement planning? It depends on whom you ask. Source: Cnbc.com

403(b) Plans

403(b) and the Fiduciary Rule  A close look at the DOL’s fiduciary rule reveals interesting twists in the manner in which the rule affects (or doesn’t) 403(b) plans, which simply do not apply to other participant directed defined contribution plans. Two really are the most obvious. Source: Businessofbenefits.com

Fiduciary and Plan Governance Material

How to Conduct an Annual Investment Review  A well-established and implemented investment policy statement is one of your best defenses against potential legal challenges in light of recent court rulings. But it’s not enough just to create an investment policy statement, you must follow through on the review procedures it outlines. Source: Investmentnews.com (registration may be required)

The Problem With Investment Committees  The decisions which have the most negative impact on investment results tend to be associated with capitulating on a good strategy after a stretch of bad performance. In fact, capitulation can evolve into a pattern of selling low and buying high as the investor seeks to recoup foregone returns. Source: Russell.com

Plan Fees Still Lawsuit Trigger for Retirement Plan Sponsors  The legal landscape continues to be unforgiving for many retirement plan sponsors who find themselves defendants in excess plan fee lawsuits. Plan sponsors can work with their recordkeepers to reverse the negative perception surrounding fees, a fiduciary benchmarking practitioner said. Source: Bna.com

401k Plan Fees: Can Benchmarking Determine Value and Reasonableness?  401k plan fees have been the hot topic of discussion amongst both plan sponsors and the industry. With fee disclosure regulations, a growing number of lawsuits and the press all swirling around the issue the need for plan fiduciaries to have a process to both understand and evaluate plan fees for reasonableness has never been more important. Tom Kmak, the CEO and co-founder of the firm Fiduciary Benchmarks, shares his experience and perspective on how to create a meaningful fee benchmarking process. Source: 401kfridays.com

Evaluating Auditor Proposals: Audit Quality  Evaluating responses to your plan auditor request for proposals can be done simply and efficiently if you lay out the criteria you consider most critical in advance and assign a weight in terms of importance to each. This approach creates a framework of objectivity before you begin reviewing the proposals. Source: Fiduciaryplangovernance.com

Insight: Studies, Research and White Papers

Defined Contribution Plan Participants’ Activities, 2015  Americans continued to save for retirement through defined contribution plans in 2015, according to ICI’s latest study of retirement plan savers’ actions. The study is based on DC plan recordkeeper data covering more than 26 million participant accounts in employer-based DC plans. Source: Ici.org

2016 Recordkeeping Survey  PLANSPONSOR’s 18th annual Recordkeeping Survey questionnaire was distributed to known providers of full-service and unbundled recordkeeping for both qualified and nonqualified DC plans. The survey data provides insight into each provider’s experience, services, and capabilities. Source: Plansponsor.com

401k Trends and Tips for 2016  It may be quite surprising to some is that participants’ best interests are not necessarily the top motivation for plan sponsors’ shifting strategies. Rather, research shows that many decisions about plans, including shifting the mix of investment options available to participants, are made primarily with an eye to avoid being sued. And that’s sparking discussion as to whether companies’ plan or investment committees, often headed by CFOs, are properly exercising their fiduciary duties. Source: Cfo.com

Steps Employers Can Take to Help Women Close the Retirement Savings Gap  Men and women are on equal footing when it comes to 401k plan participation, but research from Aon Hewitt shows that this equality doesn’t hold true when evaluating overall retirement readiness. Suggests three steps employers can take to help women close the retirement savings gap. Source: 401khelpcenter.com

Retirement Assets Total $24.1 Trillion in First Quarter 2016  Total U.S. retirement assets were $24.1 trillion as of March 31, 2016, up 0.6 percent from the end of December. Retirement assets accounted for 34 percent of all household financial assets in the United States at the end of the first quarter of 2016. Source: Ici.org

How 403(b) Plans Can Inform 401k Plans  A properly designed defined contribution plan can provide a retiree with an income stream for life. Article identifies five characteristics of a well-designed plan that can help participants pursue lifetime income. Source: Cfo.com

ETFs and Defined Contribution Plans  This 7-page paper’s self-described objective is to provide a high level perspective on why ETFs are not more broadly held in retirement plans, and to summarize solutions developed to address the issue. It was written with ETF stakeholders in mind. Source: Vmsholdings.com

Retirement Calculators Show ‘Dramatically Different’ Results  Calculators used by investors to gauge their probability of retirement success may not actually be good gauges of that success. Comparing the outputs from several retirement planning programs shows a huge dispersion of results, underpinning how investors and advisers should use them as a guide rather than take them at face value. Source: Investmentnews.com (registration may be required)

Items of Special Interest to Service Providers

Is DOL Rule Slowing Service Provider Changes?  Though proposal activity is high, it seems like advisors and plan sponsors are reluctant to make a change. Could the new DOL conflict of interest rule be the culprit? Source: Napa-net.org

The Obama Administration Signals an Open Mind About Open MEPs  Some in the industry wonder if the Labor Department’s late 2015 guidance on state-run retirement plans, which gave the okay for states to use the MEP approach, indicates that its opposition to private sector open MEPs could change. And President Obama’s 2017 Budget indicated support for Congress to develop a legislative solution that would open up multiple-employer defined contribution plans to any unrelated employer. Source: Napa-net.org

Brexit: How to Manage Client Fears  Author writes, “I am frank with my clients and readily admit that I know I don’t know the future. That’s why I typically put them in balanced portfolios and stress the importance of sticking with that balanced allocation no matter what they read, hear or see.” Source: Financial-Planning.com

Target-Date Funds

Is the Time Ripe for a Move to Custom Target-Date Funds?  As target-date fund assets swell, a growing number of large plans have moved to custom TDFs — the idea is custom target-date funds are just better than off-the-shelf target date funds. But plan sponsors shouldn’t assume they ought to follow this trend. Source: Napa-net.org

Plan Automation

Using Auto-Enroll to Improve Participant Outcomes  Having a competitive retirement program is essential to attracting and retaining employees for not just a corporation or not for profit entity, but for governmental entities as well. Employers can set an important precedent by offering an automatic enrollment arrangement and impressing upon employees how important it is to begin saving for retirement as soon as possible. Source: Nagdca.org

Issue of Lifetime Income

The Ease of Automation and Guaranteed Lifetime Income  Are there plan design features plan sponsors could use to drive better participant behaviors and outcomes? This 16-page paper offers answers. It is aimed at CFOs, HR directors and other plan sponsor decision-makers who want to get the most from their DC plans. Source: Prudential.com

DOL and Lifetime Income  The DOL can take certain regulatory actions to facilitate the adoption of lifetime income programs by sponsors of defined contribution retirement plans. This article outlines the simple steps the DOL can take, without the need of legislative change, that would support plan sponsors in these efforts. Source: Iijournals.com

Legislative and Washington DC

A Federal Lost and Found for Retirement Accounts?  U.S. Senators Elizabeth Warren and Steve Daines have teamed up to introduce legislation that would create a federal lost and found designed to help stem leakage from retirement accounts. According to its sponsors, the bill uses the data employers are already required to report to create a national online lost and found for Americans’ retirement accounts. Source: Napa-net.org

Court and Other Legal Issues

Breach of Fiduciary Duty Class Action Targets Relatively Small 401k Plan  A new class action lawsuit filed in the U.S. District Court of Minnesota raises concerns that plan sponsors and fiduciaries of relatively small 401k plans may also become targets of ‘breach of fiduciary duty’ suits. Source: Haynesboone.com

Great-West Loses Another Round in ERISA Class Action  Great-West lost another battle in a lawsuit challenging the money it makes off annuity contracts sold to 401k investors. A federal judge in Colorado certified the case as a class action on behalf of more than 270,000 investors in about 13,600 different retirement plans. The judge also denied Great-West’s attempt to block expert testimony on the amount of money at stake in the lawsuit. Source: Bna.com

Overpaid Former Plan Participant Found to Be a Fiduciary  A federal court said that by not repaying the overpaid funds, the former participant became a fiduciary and breached her ERISA fiduciary duties by not returning the funds. Source: Planadviser.com

DOL’s Final Fiduciary Rule

TIAA Breaks With Rivals to Support DOL Fiduciary Rule  Roger Ferguson, the former Federal Reserve vice chairman who is chief executive officer of TIAA, is breaking from industry groups that sued the U.S. Labor Department to challenge increased government oversight of retirement products. Source: Investmentnews.com (registration may be required)

The Cold Comfort of the Best Interest Contract Exemption  The BIC Exemption comes at a steep price, imposing extensive compliance costs in the form of new disclosure requirements, as well as new policies and procedures requirements, discussed in depth in this 10-page brief prepared by the law firm Latham & Watkins. The exemption also substantially increases litigation risk by providing IRA and other retirement plan investors a new private enforcement right against financial advisers. Source: Lw.com

DOL Fiduciary Rule Stands as Veto Override Falls Short  House Republicans have failed — by a wide margin — to overturn President Barack Obama’s earlier veto of legislation to block enforcement of final U.S. Labor Department pension plan fiduciary rules. Source: Businessinsurance.com

The New Fiduciary Regs: A Practical Review — Part II  This 5-page paper looks at the potential for self-dealing if you are an advice fiduciary, and how the Best Interest Contract Exemption (BICE) can help. Source: Ferenczylaw.com

Best Interest Contract Exemption  The DOL has issued a prohibited transaction exemption (BICE) to permit an advisor to receive increased compensation or third party payments under certain circumstances. This 8-page paper discusses the BICE and the more accessible version of the BICE that is available to level fee advisors. Source: Ferenczylaw.com

Will Fiduciary Rule Survive Rising Tide of Lawsuits?  Regardless of the probability of success of these legal challenges, it seems this result was inevitable, if for no other reason than that this guidance has been accompanied by more controversy than the industry has seen in a very long time. The plaintiffs’ arguments for an injunction are numerous, but may not be so easy to prove to a court’s satisfaction. Source: Erisanews.blogspot.com

 

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