Experts in Personalized Retirement Plan Design & Administration Newsletter 07.26.17

Why Your Participants Should Avoid Active Trading of Their 401k  If plan sponsors understand that investors often work against their own self-interests, how can they use this information when designing their 401k investment lineup? One way is to offer a fund lineup that includes low-cost, passive funds. The result can be a one-two punch for boosting participant performance. Source:

Interview: Dale Neibert Explains 21st Century 401k Plan Design  The H-E-B Grocery 401k plan incorporates leading edge behavioral finance research into its plan design. Dale Neibert was part of a 2-man team managing a $2.8 billion corporate 401k for the H-E-B Brand Savings & Retirement plan. Source: (registration may be required)

Customized Retirement Plan Communications Pack a Bigger Punch  Customized retirement plan communications pack a bigger punch. When it comes to communicating the benefits of an employer-sponsored retirement plan, one size does not fit all. Each generation has its own financial priorities and goals, from Baby Boomers on the brink of retirement to Millennials just starting out on the job. So as a plan sponsor, how do you make sure you’re communicating to each demographic in a way that resonates? Source:

403(b) Plans

What You Need to Know About 403b Loans  If you find yourself in a tight spot financially — a surprise medical procedure or fewer hours resulting in less income — then in some cases, you might be able to borrow money from your 403(b) retirement account rather than taking an early distribution or using higher-interest debt. Source:

Fiduciary and Plan Governance Material

Avoiding Fiduciary Traps: Eight Tips for DC Plan Sponsors  Defined contribution plan sponsors often worry about landing in hot water for doing the wrong thing. However, many fiduciary issues crop up because plan sponsors have failed to act. Here, we list eight potential fiduciary traps and suggest ways to avoid them. Source:

Stuff in a 401k Plan That Doesn’t Look Right  There are certain things a plan sponsor should avoid and this article is all about stuff in a 401k plan that doesn’t look right and that might make the wrong impression. Source:

A Guide to Retirement Plan Fees & Expenses  This 11-page paper discusses retirement plan fees and expenses with the intention of assisting retirement plans sponsors in achieving a greater understanding of their plan fees. For the purposes of this paper, they categorize the fees and then detail the specific functions typically related to each expense. Source: (free registration may be required)

The Risk Of 3(38) Fiduciary “Flexibility”  There are many reasons that a plan sponsor and/or a plan advisor would look to engage an investment manager under section 3(38) of ERISA. But if you invite flexibility into your 3(38) services, you should understand the risks. Source:

Can You Put Your Retirement Plan on Autopilot?  There’s no risk-free way to put your retirement plan on autopilot. Having quality service providers is a good idea but they cannot relieve you, your company or your other in-house fiduciaries from all responsibility for investment and administrative decisions. Source:

Aon Drops Company Stock Fund From Its $5.3B 401k Plan  Aon is terminating the company stock fund as an investment option in its $5.3 billion 401k plan. The Aon Stock Fund will be liquidated and removed from the plan by the end of December 2017, the company said in its latest filing with the Securities and Exchange Commission. Source: (registration may be required)

Insight: Studies, Research, and White Papers

Transforming the Participant Experience  Retirement communications have reached a tipping point and leading plan providers are looking to embrace a new path. New solutions are coming to the forefront: self-service workflow tools hosted securely in the cloud; software that makes it easy to streamline content management; the ability to orchestrate experiences based on personas. With these recent innovations, market leaders are transforming their participant engagement strategies into more profitable realities. Source:

Mid-sized Employer Meets Big 401k Goal  When Peggy Zembower became the human resources director for Thomas Automotive Family about four years ago, she was dismayed that some long-time employees had never increased their retirement saving above the measly 1 percent of pay they’d started at. Source:

The Small Business Retirement Savings Challenge  New research reveals opportunities to increase retirement plan coverage among small employers. This research demonstrates the importance of small, reasonable tax incentives in motivating small businesses to adopt and enhance retirement plans. Source:

Items of Special Interest to Service Providers

Managed Accounts Look Attractive to 401k Advisers  For 401k advisers, managed accounts are a tough nut to crack. On one hand, many advisers believe managed accounts will compete with target-date funds as the most popular type of default investment option in 401k plans as soon as they become a bit more cost-competitive. But benchmarking is an area that could present a snag for advisers. Source: (registration may be required)

Shifting DCIO Distribution Offers Opportunity for 401k Advisers  In the large defined-contribution-plan market — the realm of plans larger than $1 billion — the norm is for money managers to sell directly to plan sponsors and work cooperatively with the plan’s consultants. For smaller plans, the defined contribution investment-only groups at these asset managers have generally sold only through advisers. But that’s about to change. Source: (registration may be required)

Plan Automation

What’s Wrong With Automatic Enrollment?  Automatic enrollment has long been touted — and proven — to be an effective way to overcome retirement savings inertia in 401k plans. But these days automatic enrollment plan design seems to be suffering from its own inertia. Source:

Court and Other Legal Issues

Sears Hit With 401k Class Action Over Company Stock  Sears kept its own stock as an investment option in the 401k plan although it knew or should have known that the retailer was in “extremely poor financial condition,” workers allege in a new lawsuit. Source: (registration may be required)

Legislative and Washington DC

Senators Urge DOL to Issue Guidance on Auto Portability  To help prevent retirement plan cash out leakage when workers change jobs, Sen. Tim Scott and 10 other Senators sent a letter to Labor Secretary Alexander Acosta asking the DOL to issue guidance clarifying the application of ERISA to auto portability features, that is, ones that help facilitate the movement of a participant’s retirement account from one employer to another. Source:

Cybersecurity Issues

Is Cybersecurity a Fiduciary Duty?  Fiduciary duties and functions have been discussed over the last few years. But a recent blog entry suggests that cybersecurity should be added to them. Source:

State-Based Retirement Programs

OregonSaves Pilot Launch “Successful,” State Board Says  The July 1 launch of the Oregon Retirement Savings Program pilot has been a success, according to a report by the Oregon Retirement Savings Board that looks at the program’s first few weeks, as well as what lies ahead. Source:

OregonSaves: New State-Run Retirement Plan Requires Employer Action Beginning November 15, 2017  Are you an employer with employees in Oregon? If you do not offer a retirement plan to any of your employees, this article reviews your obligations under a new state-run retirement savings program called OregonSaves. You should be aware of the first compliance deadline on November 15, 2017. Source:

DOL’s Fiduciary Rule

ARA Crafts New Levelized Fee Exemption in RFI Response  In a July 18 letter responding to the Labor Department’s request for information (RFI) on its fiduciary regulation, the American Retirement Association has requested an extension of the applicability date and a streamlined levelized fee exemption. Source:

Audio: SEC Enters Fiduciary Rule Discussion  SEC Chairman Jay Clayton grabbed headlines when he announced that the Commission would seek to “engage constructively” with the DOL as each agency pursued standards of conduct for advisors. This raises questions about how the two agencies will work together, what it might mean for the fiduciary standard, and how Congress might also factor into the discussion. Source:

Fiduciary Rule and Plan Sponsors: What Happens Now?  The effect on sponsors of large retirement plans will mostly involve their relationships with service providers. Some defined contribution plan vendors will deliver investment advice to participants in a fiduciary capacity, which requires a fiduciary assessment. In its response brief to the 5th circuit, the DOL made a significant concession for the best interest contract (BIC) exemption. Source:

Impact of the DOL Fiduciary Rule on Broker-Dealers  The focus of this article is the prohibited transaction exemptions — PTE 84-24 and the Best Interest Contract Exemption — that are available to broker-dealers when their registered representatives recommend annuities to IRA investors. The purpose is to address the factors that firms may want to consider in deciding which exemption to use during the “transition period,” currently scheduled to end on December 31, 2017. Source:

Compliance and Regulatory

Why the SEC Will Not and Cannot Adopt a Fiduciary Standard  In recent appearances on Capitol Hill, SEC Chairman Jay Clayton and DOL Secretary Alexander Acosta pledged to work together on a fiduciary rule applying to stockbrokers and other financial advisers providing investment advice to the public. Both men are on record as saying any fiduciary rule must not curb the public’s access to advice or products. The articles author writes, “That’s all you need to know. Mr. Clayton and Mr. Acosta are clearly drinking the Kool-Aid supplied by the investment industry.” Source:

Timeliness of 401k Participant Deposits  Today’s 401k plan sponsors are subject to an array of what often seem complex fiduciary responsibilities with respect to carrying out their duties to plan participants and beneficiaries. However, meeting these duties need not be difficult, and for some functions, there are specific rules to help guide the employer. For example, the DOL has guidance to help clarify regulations regarding the timeliness for depositing participant payroll deductions that represent contributions or loan payments to the plan. Source:

General Rules and Exceptions to the Three RMD Rules  The required minimum distribution amount must be calculated separately for each IRA and 403(b). However, such amounts may then be totaled and the total required minimum distribution taken from any one or more of the participant’s IRAs or 403(b)s. Confused? This article looks at the main distinctions between the three RMD rules. Source:

Audit Survival Tips for Retirement Plans  Although the odds of your plan being audited are low, if the DOL or the IRS perceives some elevated risk of noncompliance, your chances of an audit will go up substantially. As a plan sponsor, there are three things you can do to make your plan audit-ready, should that letter arrive from the DOL or the IRS: organize, review, and retain. Article provides a list of action steps. Source:

The IRS Paves the Way for More Preapproved Plans  The IRS issued the 2017 Cumulative List, which lists changes to the qualification requirements that are required to be taken into account in preapproved defined contribution plans that are submitted for opinion letters during the third six-year remedial amendment cycle. Source:


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