BPP401k.com Newsletter 07.18.12
QDIA Safe Harbor Applies to Fiduciary’s Transfer of Participant Accounts In this case involving a fiduciary’s investment of participants’ retirement plan accounts in a qualified default investment alternative (QDIA), the appellate court upheld the trial court’s decision in favor of the plan fiduciary, holding that the DOL’s safe harbor for QDIA investments applied to the fiduciary’s actions. Source: Thomson Reuters/EBIA
How to Use a Roth 401k for Smart Retirement Planning If you like the idea of a Roth IRA, you’ll love the idea of a Roth 401k. This plan, offered by many employers, allows you to create a tax-free retirement income stream down the road. Here’s how it works. Source: U.S. News & World Report
Safe Harbor 401k Plan — Start Now If you’re a financial advisor with 401k clients, now is the time to consider whether or not your existing or potential clients could benefit from a Safe Harbor 401k plan design. The benefits gained by offering this type of plan design often outweigh the requirements that are necessary to maintain this design. Source: Baden Retirement Plan Services
Participant Fee Disclosures and the Duty to Inform When Participants Ask Questions Once participant fee disclosures are fully disseminated, some participants may have questions about the disclosures. Although there is not likely to be a huge outbreak of inquiries, it only takes one participant to create a claim of breach of fiduciary duty. How might that happen? Source: Bryan Cave LLP
Deconstructing the Discretionary Fiduciary Models: ERISA Section 3(38) Investment Managers vs. Discretionary Trustees This article provides a comparison of these two outsourced fiduciary roles that can serve as a valid reference for those considering engaging one, the other, or both of these types of appointed fiduciaries. While there are a number of fiduciary capacities that arise in qualified plan governance, it discusses these two fiduciary roles in isolation rather than expanding the discussion to other named or functional fiduciaries such as limited or broad scope fiduciary investment advisors under ERISA Section 3(21). Source: Unified Trust
Face-to-Face Education Drives Better Retirement Savings Behavior According to a new analysis from the Principal Financial Group, employees who attend personalized, one-on-one sessions at the worksite take more positive actions including participating more and saving more. Source: 401khelpcenter.com
Why a Retirement Plan Advisor Should Care About Their Client’s TPA This article explains why a retirement plan advisor should care about the selection of your client’s third party administrator and how the TPA can determine your experience working on your shared client’s retirement plan. Source: Rosenbaum Law Firm
How to Avoid TPA Partnership Pitfalls Focusing on the specifics of what a firm does well, rather than trying to be all things to all clients, is what a good partnership arrangement can support. With an effective partnership arrangement, your firm can offer all services to a client without having to perform all services independently. But, there can be pitfalls. Here are six partnership pitfalls and how to avoid them. Source: Simoneaux & Stroud Consulting Services
An Alternative to a Bundled Retirement Plan A solution where different entities provide different plan services to a plan has the double-barreled virtues of looking like a bundled plan, without actually being a bundled plan. Source: Morningstar.com
Tailor Benefit Communications to Different Learning Styles The key to providing employees with an effective benefits education is a “three-plus-three” communications strategy—allowing employees at least three weeks to review their benefit options, using at least three types of education methods. Source: Society for Human Resource Management
Key Employees: Retirement Planning Concerns & Opportunities When it comes to key employees and retirement planning, it’s critical to remember this: Key employees’ planning needs are not identical to those of other employees, and the same rules don’t apply. Source: Principal
Hardship Distributions = Red Alert In down economic times, participants of 401k plans may attempt to draw on their savings using hardship distributions, but the administrative side of a hardship distribution presents numerous opportunities for operational error. It is important that your plan’s administrator is knowledgeable and vigilant during the entire process. Source: 5500audit.com
Communicating Benefits in the George Jetson Age From stuffing envelopes to virtual benefits fair, Karrie Andes shares how benefits communication has changed over the course of a decade. Source: Employee Benefit News
Summer Reading List for Benefits Professionals This summer, enjoy some educational reading while relaxing by the beach or pool. EBN has compiled some must-read books that bring insight to the HR and benefits profession. Source: Employee Benefit News
DC Retirement Plan Industry Needs Self-Esteem Boost The defined contribution retirement plan industry has a “self-esteem problem” that must be addressed, one industry expert contends. Source: Plansponsor.com
See How Your Company’s 401k Plan Stacks Up in Three Simple Steps If you’re one of the many business owners with a 401k plan, you probably just received an important 401k plan fee disclosure document from your plan administrator that reveals, in greater detail than ever before, just how much you and your employees are paying in fees. And while that document provides a lot of answers, it may also beg a few important questions. Source: Forbes
Multiple Employer Plans: An ERISA Enigma Although the basic concept has been with us for many years, multiple employer plans (MEPs) have been growing in public awareness. Some are questioning the status of open MEPs under ERISA. At issue is whether a properly structured open MEP is a single “employee pension benefit plan” under ERISA, or whether it is a combination of separate plans. The distinction is critical. Source: Employerbook.com
How 401k Plan Sponsors Can Best Teach Employees to Quit Emphasizing Income A 401k plan sponsor who merely follows the wants of his naïve employees tempts the fate of fiduciary liability. Money markets, stable value funds and even mutual funds that invest in bonds, can leave retiring employees with too little assets to pay for their expenses as well as leave them exposed to the ravages of inflation. Source: Fiduciarynews.com
Pension Funds Split Over Trimming Risk From the 401k Menu The debate over how many and what kind of investment options should be offered to working men and women in their workplace-sponsored retirement savings plans has been raging as long as employees have been expected to manage their own investments. The latest debate, no doubt ignited by the recent financial crisis, is over investment risk. And, as usual, the professionals do not agree. Source: Institutional Investor
Revenue Sharing Gets Closer Look by DC Plan Execs Defined contribution plan executives are becoming more interested in trying to equalize the costs of revenue sharing among their participants, and the new fee-disclosure rules could make the practice more prevalent. Source: Pensions & Investments
Wall Streeters Lose $2 Billion in 401k Bet on Own Firms Workers at the five largest Wall Street banks saw the value of company stock in their 401k accounts, sometimes the biggest holding of those plans, decline more than $2 billion last year, according to annual filings. Those losses don’t include shares received as bonuses. Source: Businessweek.com
Fiduciary Related Items
FINRA’s Quasi-Fiduciary Rule As the securities industry awaits a fiduciary rule from the SEC for brokers and advisors, Wall Street’s self-regulator caught most observers off guard with its recent, unexpected pronouncement of a ‘best interest’ standard for brokers under a revised suitability rule. Source: Fi360.com
FSI Takes Aim at Fiduciary Rulemaking Efforts The head of the Financial Services Institute has delivered a pointed letter to House committee leaders criticizing the efforts of the Department of Labor in developing a new definition of the term “fiduciary” that would cover financial professionals providing advice to retirement plans. Source: Financial-planning.com
Errors That Retirement Plan Sponsors Should Avoid but Do Anyway Thanks to advances in medical research, we know what can harm us. Even with that knowledge, we still do it anyway. The same can be said about common mistakes that plan sponsors commit in their role as plan fiduciaries, errors that increase their liability, but they still do it anyway. This article is about common plan sponsor errors that plan sponsors continue to do even if they understand the error of their ways. Source: Rosenbaum Law Firm
Insights: Studies, Research and White Papers
White Paper Released on Improving Retirement Plan Enrollment Diversified announced the availability of 10-Minute Enrollment: Scaling Back Meeting Content to Drive Higher Enrollment Rates, a new white paper that focuses on how simplifying the retirement savings plan enrollment process can help increase participation rates. Source: 401khelpcenter.com
New Study Affirms Auto Solutions Boost Retirement Readiness There is new hope that Americans will be better prepared for retirement, thanks to automatic features offered through employer-sponsored retirement plans, according to a study just released from Lincoln Financial Group and Retirement Made Simpler. Source: 401khelpcenter.com
The Impact of Longevity Improvements on U.S. Corporate DB Plans This paper provides the first empirical assessment of the impact of life expectancy assumptions on the liabilities of private U.S. defined benefit pension plans. Authors measure the impact of varying life expectancy assumptions across plans and over time on pension plan liabilities. The results indicate that each additional year of life expectancy increases pension liabilities by about 3 to 4 percent. Source: International Monetary Fund
Some Items of Interest to Advisors
DCIO Market Grows to 60% of DC Assets by 2017 The Defined Contribution Investment-Only (DCIO) market is set to grow to 60% of total DC plan assets by 2017, up from an estimated 52% at year-end 2011, according to a new report from Strategic Insight. Source: 401khelpcenter.com
Nine Things Advisors to 401k Plans Must Do to Keep Clients Out of Hot Water It’s no longer good enough for investment advisors to pick a few mutual funds for sponsors of 401k plans and then adjourn for lunch. Advisors need to also consider it their jobs to protect 401k plan sponsor boards, corporate officers and other plan fiduciaries from an increasingly active and high ERISA bar. Source: RIAbiz.com
Court and Legislative Items
Summary of Major Post-ERISA Benefit Legislation Since its enactment, numerous other laws have amended ERISA and expanded its scope to provide more protections for employees as well as corresponding responsibilities for employers. Aon Hewitt has assembled this summary of major post-ERISA legislation. Source: Aon Hewitt
Transfer to New QDIA Did Not Violate ERISA A 403(b) plan sponsor did not violate its fiduciary duties when it transferred participants’ accounts from a stable value fund to a new qualified default investment alternative (QDIA). Source: Plansponsor.com
Regulatory Related Items
Further Guidance Possible Regarding Brokerage Windows An official from the Department of Labor said further guidance may be issued regarding the treatment of brokerage windows in participant fee disclosures. Source: Planadviser.com
New 401k Fee-Transparency Rules Demand Attention Beginning this month, new transparency rules on 401k fees go into effect, and experts agree that HR leaders need to pay close attention to the other changes coming later this summer and beyond. Source: Human Resource Executive Online
ERISA Service Provider Disclosures: What Plan Sponsors Need to Do Now This Bulletin describes the steps that plan sponsors must take to review the disclosures they received, and how to proceed appropriately in cases where the disclosures were not furnished. Source: Drinker Biddle & Reath LLP
IRS Would Provide Limited Exception to Anti-Cutback Rules for Plan Sponsor in Bankruptcy The IRS has issued proposed regulations that would provide an additional limited exception to the anti-cutback rules of Code Sec. 411(d)(6) to permit a plan sponsor that is a debtor in a bankruptcy proceeding to amend its single-employer defined benefit plan to eliminate a single-sum distribution option. Source: CCH
New FAQs Provide Participant Fee Disclosure Guidance — Next Steps for Plan Sponsors Certain open issues remain and the DOL confirmed that it intends to issue an additional set of FAQs regarding the service provider disclosure rules. Despite the uncertainty around both of the covered service provider and participant-level disclosure regulations, the DOL was not persuaded to extend the compliance deadlines. The FAB confirms that the initial compliance deadline for participant disclosure for calendar year plans remains August 30, 2012, but includes certain additional, albeit limited relief for good faith reliance. Source: Aon Hewitt
Participant Fee Disclosure: Top 10 List of Issues to Consider The new 401k participant fee disclosure rules issued by the U.S. Department of Labor require plan administrators with calendar year plans to send disclosures to plan participants by August 30, 2012. The top 10 things to consider in complying with the new rules are described in this publication in Q&A format. Source: McDermott Will & Emery
Correcting a Cross-Tested Plan Practitioners not only must understand how to design cross-tested plans but they must also understand how to resolve situations in which the design no longer works. The following FAQs address several of the questions relating to corrective amendments. Source: Sungard/Relius
Participant Fee Disclosure: What Plan Sponsors Need to Know The Department of Labor regulations regarding participant fee and investment disclosures go into effect on August 30, 2012. This article covers the legal requirements of the rule and includes information about how plan sponsors should prepare for these new regulations. Source: Sentinel Benefits
401k Fees: Bad News, Good News The bad news on fees comes from a recent study from the Government Accountability Office. The findings of the GAO survey showed that many sponsors had no idea how much they and their participants were being charged. The good news is that the Department of Labor has two initiatives focused on fees. Source: Smartmoney.com
Due Date to File Annual Returns and Fee Disclosures for Puerto Rico Plans Due date to comply with PR treasury annual filing requirement for trusts funding calendar year Puerto Rico tax qualified plans is July 31st, Puerto Rico plans must also file IRS forms 5500 and 8955?SSA and Puerto Rico plans are subject to ERISA’s fee disclosure notice requirements. Source: Groom Law Group