Experts in Personalized Retirement Plan Design & Administration Newsletter 07.10.17

Retirement Plans Are Leaking Money and Why Employers Should Care  Workers are depleting their employer-sponsored retirement plans when they take out loans and don’t pay them back and take hardship withdrawals. If an employer wants workers to stay until normal retirement age, pass along their knowledge and skills, and then leave so younger workers can move up, early withdrawals become more problematic. Source:

Is Retirement Plan Leakage Finally Drying Up?  The high-profile problem of 401k leakage continues to confound, robbing participants of asset accumulation and appreciation and the potential for a secure retirement. In a possible policy change for more firms going forward, fewer organizations are offering defined contribution plan hardship withdrawals and loans. Source:

The Importance of Retirement Investing Over Saving for Older Employees  When building retirement wealth, the critical factor is the age at which you commence retirement savings. Investments matter very little when you are just starting, since investment returns represent a negligible portion of your retirement savings. However, for older employees, the priorities switch rather dramatically. Source:

Top Five Mistakes Made by 401k Plan Sponsors  Penalties for administrative blunders can be costly, through fines or, at the severe end of the spectrum, plan disqualification, creating a taxable event for all participants. Here are the most common mistakes plan sponsors make, as well as ways for plan advisers to guide their clients away from those mistakes. Source: (registration may be required)

403(b) Plans

Connecticut 403(b) Fee Disclosure Law to Take Effect Oct. 1  Beginning Oct. 1, 2017, administrators of 403(b) plans run by political subdivisions in the Nutmeg State will have to disclose to the plan’s fiduciary any conflict of interest the service provider has with the plan. Source:

Fiduciary and Plan Governance Material

Best Practices for Improving Retirement Plan Investment Committee Decisions  As a plan sponsor, one of the many hats you probably wear is investment committee member. It’s a role that’s critical to the success of your retirement plan, but your specific responsibilities may not always be clearly defined or easy to figure out. This article offers some best practices. Source:

Free Advice for 401k Plan Sponsors  This article is free advice from ERISA attorney Ary Rosenbaum for all 401k plan sponsors out there on how to improve their plan and avoid liability. Source:

Making Sure 401k and 403(b) Fees Are “Necessary” and “Reasonable” – Part Two  You are also required to ensure the services for which the plan is paying are necessary and reasonable. The most effective way to meet this fiduciary requirement is a Request for Proposals (RFP) process. This is part two in a series on making sure 401k and 403(b) fees are “necessary” and “reasonable.” Source:

Insight: Studies, Research, and White Papers

Average 401k Balances Continue to Surge in Q2  While they’re not quite as strong as the numbers for the first quarter of the year, there should be plenty to celebrate in this year’s June 30 participant statements. Source:

Boomers’ Delayed Retirements Good for Employers, Employees  Many baby boomers are choosing to delay retirement. However, this can be a positive trend for employers and workers of all generations, according to the ADP Research Institute. Source:

More Employers Make Roth 401k Matching Contributions  Among employers offering Roth 401k savings programs, 40% now offer matching contributions. Source:

Print Communications Still Key for Many Participants  In an effort to find out how workers understand financial communications regarding retirement savings plans, and how participant knowledge can affect asset-allocation decisions, TIAA conducted research about how specific media communications (print vs. online, graphical vs. text), affects a worker’s comprehension of financial material. Source:

Target-Date Funds

How the Target-Date Fund Can Help Maximize Plan Design  Plan sponsors have two powerful tools that could help nudge participants toward improved retirements: plan design and target-date funds. However, these tools are frequently considered separately. Source:

Court and Other Legal Issues

401k Fraud: Wife Steals Thousands From Husband’s Account  Talk about brotherly love. A woman’s sibling posed as her spouse to help her steal thousands of dollars from her (actual) husband’s 401k. Source:

Marathon Petroleum Execs Sued Over Stock in Retirement Plan  Marathon Petroleum executives are accused in a new lawsuit of wrongly allowing workers to invest their retirement savings in the stock of Marathon Oil Corp. Source: (registration may be required)

DOL Files Fiduciary Lawsuit Brief Defending Advisory Market Authority  The DOL argues it must not lose its broad authority to regulate the workplace retirement planning market, notwithstanding the fact that it may very well decline to aggressively enforce the fiduciary rule under President Trump. Source:

Brown University Sued Over Retirement Plan Fees  Brown University is accused of filling its two retirement plans with high-cost, poorly performing investment options, allegedly causing participants millions of dollars in losses. Source: (registration may be required)

DOL’s New Stance on Fiduciary Rule at Odds in Thrivent Case  Thrivent Financial for Lutherans stepped up its fight against the fiduciary rule’s anti-arbitration condition that would bar class litigation against financial advisers by citing the Labor Department’s latest court argument. Source: (registration may be required)

DOL’s Fiduciary Rule

The Fiduciary Rule: A Fifth Request for Public Comment  The DOL has released a request for information seeking public comments yet again on its new fiduciary definition and related exemptions which became applicable on June 9th. This article reviews the topics on which the RFI requests comment. Source:

Simplifying Tasks and Reducing Risk Under the Fiduciary Rule  The new DOL rule seeks to bring brokers and insurance reps to heel by establishing a stronger baseline of fiduciary protection. If they wish to continue providing advice to company retirement plans, they now will be held to a higher standard: the best interests of the client. And employers will need to monitor their activity to ensure these advisors are fully compliant. Source:

Comment Period on DOL Fiduciary Reg RFI Open  The DOL announced that it would publish its request for information on the fiduciary rule in the Federal Register on Thursday, July 6, starting the official comment period on whether to delay part of the rule. Source:

DOL to Publish Request for Information Regarding Fiduciary Rule  The RFI summarizes comments that the DOL has received regarding the rule and exemptions, and identifies specific areas for additional comment. In addition to asking general questions about the rule’s implementation, the RFI specifically requests comments on whether communications encouraging investors to make or increase their contributions should be excluded from the rule. Source:

DOL’s 2016 Fiduciary Rule: Background and Issues  This updated 28-page report was prepared by the Congressional Research Service and provides an in-depth background and overview of the DOL’s fiduciary rule along with the rationale for the rule and stakeholders perspectives. Source:

Most Advisers Handling Implementation of Fiduciary Rule Well  The Aite Group included questions on the DOL fiduciary rule in its seventh annual survey of financial advisers to reveal the sentiment on the front lines. Source:

The Fiduciary Rule and Discretionary Investment Management  Discretion is said to be the better part of valor, but that’s not necessarily the case with discretionary accounts and the fiduciary regulation. And, according to a recent blog post by ERISA attorney Fred Reish, if you’re not sure how the Best Interest Contract Exemption (BIC) applies differently to discretionary accounts and non-discretionary accounts, well, you’re not alone. Source:

Compliance and Regulatory

Who’s Responsible for Keeping Retirement Plan Records?  Who is ultimately responsible for retention of retirement plan records: the sponsor, or the participant? It’s an interesting conundrum. In a recent case, the 9th U.S. Circuit Court of Appeals found that the retirement plan sponsor — who was the defendant in the case — was the party responsible for keeping accurate records. Source:

Operational Compliance for Eligibility Classification  This article focuses on operational compliance, the requirement that the plan be operated in accordance with the terms of the plan document, and in particular, the terms of the plan relating to eligibility classification. Source:

Form 5500 Filing Date Approaching  July is here. For DC plans and 403(b) annuity arrangements with calendar year plan years, it means the July 31 Form 5500 filing deadline for the 2016 plan year is not far off. Source:

2017 Cumulative List for Pre-Approved Plans Issued  The Internal Revenue Service has issued Notice 2017-37, which contains the Cumulative List of Changes in Plan Qualification Requirements for Pre-Approved Defined Contribution Plans for 2017. Source:

Safe Harbor 401k Establishment Deadline Fast Approaching  401k plans can be adopted at any time during the plan year However, a Safe Harbor 401k plan must have at least a 3-month plan year. Therefore, a calendar year Safe Harbor 401k plan must be established by October 1st in order to receive an exemption from the ADP and ACP tests. Source:

IRS Overhauls Opinion Letter Process for Pre-Approved Plans  The overhaul of the pre-approved plan program is not surprising given the IRS’s significant reduction of the determination letter program for individually designed plans. The revenue procedure contains detailed information that is a must-read for providers of pre-approved plan documents as well as employers and advisors maintaining pre-approved plans or considering a switch from individually designed to pre-approved plans. Source:

ERISA Bond: What Is It and Do I Need One?  Almost every sponsor of every tax-qualified retirement plan must obtain a fidelity bond in accordance with section 412 of ERISA. This article helps explain the requirement in order to attempt to ensure that those who are subject to this requirement satisfy it. Source:


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