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BPP401k.com Newsletter 07.20.16

Four Steps Towards Establishing a Small Business Retirement Plan  A recent survey found that 26% of small business owners aren’t confident about their retirement savings. Establishing a retirement plan is key to retirement confidence. Article provides some practical steps to move you towards establishing a retirement plan. Source: 401khelpcenter.com

Three Tips to Help You Navigate the Treacherous 401k Waters  Despite the 401k’s importance, the average participant’s only investment strategy is to plow money into the accounts, then do nothing. Don’t be passive. Here are three tips that apply to just about anyone with money stashed away in a 401k. Source: 401khelpcenter.com

Avoiding Poverty in a DC-Only World  A paper from the Center for Retirement Research at Boston College asserts that distribution provisions in DC plans are critical factors in evaluating the risk of falling into poverty in old age. Specifically, the paper states that reliance on non-annuitized DC benefits with fairly easy access to lump-sum distributions puts elderly households at risk of not having sufficient income. What can plan sponsors do to minimize the probability of their retirees falling into poverty? Source: Retirementtownhall.com

How to Save for Retirement on Less Than $40,000 Per Year  Saving for retirement is especially difficult when you are earning a small salary. But tucking away even a small amount might qualify you for tax breaks, an employer match and will get compound interest working on your behalf. Here’s how to begin building wealth for retirement when you have a low income. Source: Usnews.com

New Fiduciary Rule Calls for Higher Standard of Care  Under the new fiduciary rule, any investment recommendation made to an individual retirement account holder will be required to pass two basic tests: 1) did the adviser earn excessive compensation due to the investment recommendation? and 2) would an expert have made a similar recommendation under similar circumstances? Failing either one of these tests will put the adviser at risk of being held liable for damages. This is a significantly higher standard of care for your retirement assets than is currently required by law. Source: Jsonline.com

Reduce Your Tax Burden With Retirement Plans  As another tax season comes to an end, most business owners are feeling the burden of an ever escalating tax environment and in most cases are asking, “How can I reduce my tax liability next year?” Two solutions that could help alleviate some of their next “tax bill” are starting a 401k plan or reviewing their current plan design to see if it can be enhanced. Source: Bpp401k.com

401k RFP Tips for Employers  This short article outlines some tips on how plan sponsors can optimize their RFP process to ensure it produces the best possible result. Source: Lawtonrpc.com

403(b) Plans

Overcoming Challenges in the 403(b) Tax Exempt Market  IRS regulations have had a dramatic impact on 403(b) plans. This 8-page paper explores the challenges faced and enhancements made by many 403(b) plan sponsors in recent years and offer key takeaways for 403(b) plan sponsors going forward. Source: Rocaton.com

403(b) Policy Loan’s Continued Form 5500 Reporting Problem  One of the more intractable issues with which ERISA 403(b) plans sponsors must deal with every year arises from the “policy loans” issued by insurance carriers under the 403(b) annuity contracts held under the plans. There is simply no good way to report these loans on the Form 5500, and the newly proposed Form 5500 changes do not address this ongoing gnat of an issue. Source: Businessofbenefits.com

Fiduciary and Plan Governance Material

DOL Communicates Importance of Retirement Plan Fiduciary Responsibilities  The DOL’s Fiduciary Education Campaign has provided seminars around the U.S. in addition to providing various tools and publications. If you are responsible for administering your organization’s 401k plan or other company-sponsored employee benefit plan, it is important to keep certain essential duties in mind. Some of the most important duties to adhere to in order to meet these fiduciary responsibilities are outlined here. Source: Schneiderdowns.com

The Myth of the 15 Minute 401k Plan Setup  While technology might speed data collection and document delivery, it can’t reduce the amount of information 401k fiduciaries must supply a new 401k provider or guide 401k fiduciaries when picking 401k administration and investment options for their plan, the most time consuming steps in the 401k plan establishment process. Source: Employeefiduciary.com

Insight: Studies, Research and White Papers

Plan Sponsor Satisfaction and Loyalty to Their Retirement Service Providers Increases  The Provider Loyalty Index measures satisfaction and loyalty among plan sponsors with decision-making authority for their organizations’ retirement plans and is calculated based on insights from over 11,000 plan sponsors. Research found that creating more efficient and effective partnerships drives higher levels of loyalty and “promotability” for retirement service providers. Source: Chathampartners.com

Retirement Plan Road Map  When designing and establishing the correct retirement plan for yourself and your employees, you should do so with as much care, or more, as you would in planning a road trip. Infographic provides a ‘road map’ to better understand what to plan for and the routes to take as you begin your retirement plan journey. Source: Tristarpension.com

Video: Is Age 70 the New 65?  This 3-minute video explores why are so many people over age 65 choosing to remain in the work force. Is it for pleasure? Or do they not have enough saved in their retirement accounts? Source: Standard.com

DC Plans Shifting From One-Size-Fits-All to One-On-One Retirement Advice  Up until now, one-size-fits-all 401k retirement plans have been the main strategy. However, it appears that 401k plan sponsors are starting to reconsider this approach. This year, Cogent has found evidence of increasing interest among plan sponsors in adding new forms of advice. Source: Marketstrategies.com

Lower Fees Drive Demand for ETFs in 401k Plans  Plan sponsors are consolidating their investment menus to reduce cost, which should be giving DC investment managers cause for concern. Nearly two-thirds (65%) of plan sponsors point to investment fees as one of the primary factors they find most challenging to manage. Amidst the heightened attention on fees and expenses, there is an increasing interest in ETFs, especially among larger plans which tend to be trend setters in the industry. Source: Marketstrategies.com

DC in Review: A Quarterly Briefing for Plan Sponsors: 2Q16  This 51-page Janus “Defined Contribution in Review” report is designed to help CEOs, CFOs, Treasurers, Human Resource and Benefits Professionals and Investment Committees stay abreast of recent events that could have an impact on plan or plan participants. Source: Janus

ICI Reports Continued Downward Trend in Mutual Fund Fees in 401k Plans  The cost of investing in equity mutual funds through 401k plans fell again in 2015, marking a 31 percent decline since 2000, according to an annual research study that the Investment Company Institute. Source: Ici.org

Roth Accounts Can Benefit Most Retirement Savers  Researchers from the University of Arizona and the University of Missouri at Columbia note in a report that an uncertain, progressive tax schedule is the norm in the American economy. They conclude that the optimal asset location policy for most retirement savers involves diversifying between traditional and Roth vehicles, and, contrary to conventional advice, the largest economic benefits from Roth investments accrue to high-income investors. Source: Plansponsor.com

Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers  Boomers are making adjustments to meet the new financial challenges they are facing in retirement. The Boomer experience may provide a cautionary tale for generations to follow. More education, more advice and guidance and ultimately more saving for retirement will be necessary for people to live comfortably in their retirement years. This study report is 36-pages in length. Source: Centerforasecureretirement.com

Items of Special Interest to Service Providers

2016 RIA Benchmarking Study  Independent financial advisory firms reported that they have maintained a ten-year growth trajectory despite numerous and varied investment environments, according to results from Schwab’s 2016 RIA Benchmarking Study. The Study underscores the critical importance of the advisor/client relationship as the bedrock of firms’ strength and resilience, and as a driver of growth. Source: Schwab.com

Millennials Ditch 401k Advisors for 401k Apps  Millennials are ditching advisors (including 401k advisors) for apps. It’s not exactly news, but when it appears in the consumer press, it’s another reminder to industry technophobes to get on board, or else. Source: 401kspecialistmag.com

SEC to Audit Advisers Over Fund Share Classes They Sell to Clients  The SEC’s Office of Compliance Inspections and Examinations announced Wednesday that it will examine advisers’ practices related to share class recommendations and compliance oversight of the process. They will be particularly interested in conflicts of interest where the adviser is also a broker-dealer or affiliated with a broker-deal that gets fees from sales of particular share classes. Source: Investmentnews.com (registration may be required)

Court and Other Legal Issues

Court Finds Nothing Wrong With Fidelity’s Use of Float Income  The 1st U.S. Circuit Court of Appeals has ruled that “float income” Fidelity retained in the process of making distributions to retirement plan participants is not a plan asset, so Fidelity did not violate its fiduciary duties under ERISA. Source: Planadviser.com

401k Participant Sues Target Over Company Stock  Recognizing the new pleading standards set forth in Fifth Third v. Dudenhoeffer, the lawsuit suggests alternative actions plan fiduciaries could have taken rather than continuing to allow investments in company stock. Source: Planadviser.com

DOL’s Final Fiduciary Rule

Technical Corrections to BIC and Principal Transactions Exemptions Released  The DOL released technical corrections to the Best Interest Contract Exemption as well as to the Principal Transactions Exemption. These corrections attempt to address certain technical concerns raised by the retirement services industry. Source: Groom.com

Labor Department Fires Back at Fiduciary Rule Critics  In a July 8 court filing, the DOL disputed the accusation that it botched the rulemaking process, saying that it “acted well within its authority” and “provided a reasoned explanation for its decision.” The department contended that its new interpretation of “investment advice” — which industry groups blasted as overbroad and contrary to law — was entitled to deference and should be respected by the federal courts. Source: Bna.com

Technical Corrections to Best Interest Contract and Principal Transaction Exemptions  The DOL has published technical corrections to two of the exemptions issued in conjunction with its final rule expanding ERISA’s definition of investment advice fiduciary. The principal clarifications included in these releases are summarized here. Source: Sutherland.com

Compliance and Regulatory

DOL Releases Proposal to Improve, Modernize Form 5500  The DOL published a notice of proposed changes to its annual reporting regulations and seeks public comments on proposed revisions to modernize and improve the Form 5500 Annual Return/Report filed by private-sector employee benefit plans. Source: 401khelpcenter.com

Fact Sheet: Proposal to Modernize and Improve the Form 5500  On July 21, 2016, the DOL, the IRS, and the PBGC will publish in the Federal Register a Notice of Proposed Forms Revisions to the Form 5500 Annual Return/Report Series. This 4-page fact sheet has been developed by the DOL to background and an overview of the proposal. Source: Dol.gov

Complete Restructuring of Form 5500 Proposed for 2019  The DOL, IRS, and PBGC issued the Form 5500 Improvement and Modernization Proposal, a voluminous package of guidance and related materials (almost 1000 pages), in which they have proposed a complete restructuring of the Form 5500 annual return/report, including all Schedules. The agencies view the changes as necessary to modernize and improve the Form, noting that the last comprehensive update focused on revising the forms in anticipation of mandatory electronic filing beginning with the 2009 plan year. Source: Sibson.com

Proposed Changes to DOL Reporting Regulations  The proposed regulation, and related forms revisions, would improve employee benefit plan reporting for filers, the public, and the Agencies. The revision is necessary because the annual return/report forms have not kept pace with market developments and changes in the laws covering employee benefit plans, presenting problems with outdated and missing information that negatively impact the Agencies’ effective and efficient protection of employee retirement and health benefits. The proposed revisions would affect employee pension and welfare benefit plans, plan sponsors, administrators, and service providers. Source: Benefitsforward.com

IRS Finalizes Favorable Roth Account Rollover Guidance  The amended regulations will enable participants to avoid current taxation on partial rollovers of nonqualified distributions from designated Roth accounts. Sponsors will need to update the “safe harbor” rollover explanation given to recipients of eligible rollover distributions from designated Roth accounts. Source: Towerswatson.com

Timely Remittance of Participant Contributions  The purpose of this article is to discuss retirement plan compliance requirement that is connected to timing, more specifically, the timely remittance of participant contributions by a plan sponsor to the trust of its retirement plan. Source: Legacyrsllc.com

The Danger of Wishful Thinking: Don’t Avoid Plan Self-Audits  In a survey by Willis Towers Watson, nearly one third of the respondents reported that their retirement plans had been audited by the IRS or the Department of Labor. Roughly half of employers with at least 25,000 employees said they had been audited in the last two years. So why do we have so much difficulty convincing some plan sponsors and fiduciaries to prepare by reviewing their own plans first? Source: Cohenbuckmann.com

Some Top of Mind Thoughts on the Proposed 5500 Revisions  On July 10th, the DOL announced a proposed “reboot” of the 5500 annual reporting forms for ERISA plans. Article provides a few “thoughts regarding the 5500 updates that plan sponsors and those who work with them should keep in mind.” Source: Cammackretirement.com

“Other Shoe” Drops With Latest DOL Form 5500 Proposal  Retirement plan administrators and service providers may face significantly increased reporting burdens under changes recently proposed by the DOL. The agency has released a multi-part package of guidance proposing significant changes to the Form 5500 series annual returns for retirement plans. Source: Ascensus.com

 

 

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