Experts in Personalized Retirement Plan Design & Administration Newsletter 08.09.17

Fiduciary and Plan Governance Material

Avoid Getting Sheared by Revenue Sharing — Abstract: One of the most common approaches to recordkeeping fee payment is revenue sharing. It’s not easy to track investment revenue shared with 401k plan recordkeepers, but fiduciaries must. Source:

I’m Not a Fiduciary — It’s That Other Guy — Abstract: We are stuck at 43%. A 2017 DC plan survey by J.P. Morgan indicates that there has been no improvement in this percentage of corporate plan decision-makers who don’t understand that they are fiduciaries. Seventeen percent even thought that they could pass on all of their fiduciary responsibilities to third parties such as their provider, recordkeeper, or investment adviser. Source:

QDIAs…A Recipe for Fiduciary Protection — Abstract: A Qualified Default Investment Alternative is a provision available to 401k and 403b plans that reduces the potential personal liability of plan fiduciaries while improving the ability of participants to build toward retirement. Since a QDIA offers advantages to plan sponsor and participants alike, one might wonder what would prevent an employer from implementing one. Source:

Fiduciary Best Practices for Protecting Your Company — Abstract: Failing to follow best practices may leave a fiduciary personally liable for losses to the plan and result in removal from their duties. There are a number of actions fiduciaries can take to limit potential liability. Source:

Questions Employers Should Ask About Stable Value Funds — Abstract: Stable value investments have been a core investment option in defined contribution retirement plans since the 1970s and are an attractive alternative to money market investments due to steady returns and principal preservation guarantees. This article suggests 11 questions employers should ask about stable value funds. Source:

Insight: Studies, Research, and White Papers

More Americans Participate in Retirement Plans, Upsetting Conventional Wisdom — Abstract: Data shows that 63 percent of all workers aged 26 to 64 participated in an employer-sponsored retirement plan either directly or through a spouse. The data provide an alternative measure to the most commonly cited data on retirement plan participation. Source:

All About Retirement, An Employer Survey — Abstract: Sixty-nine percent of employers believe that most of their employees could work to age 65 and still not save enough to meet their retirement needs, a disturbing finding given the vital societal role that employers play in helping workers save, plan, and prepare for retirement, according to a study released by nonprofit Transamerica Center for Retirement Studies. Source:

Comparison Across Two Generations of 401k Savers in Their 20s Shows Contrast in Asset Allocations — Abstract: The asset allocations of 401k retirement plan savers in their 20s at the end of 2015 differed significantly from the allocations of 401k participants in their 20s in the mid-1990s, according to the Employee Benefit Research Institute. Source:

401k Plan Asset Allocation, Account Balances, and Loan Activity in 2015 — Abstract: EBRI and ICI released “401k Plan Asset Allocation, Account Balances, and Loan Activity in 2015.” Since 1996, the Employee Benefit Research Institute and the Investment Company Institute have worked together on collecting and analyzing annual data on millions of 401k plan participants’ accounts. This report reflects the year-end 2015 update of these data and EBRI’s and ICI’s ongoing research into 401k plan participants’ activity. Source:

Fidelity Q2 Retirement Analysis: Balances Again Reach Record Levels — Abstract: Fidelity Investments released its quarterly analysis of its 401k and Individual Retirement Accounts. Rising stock markets could lead to overexposure in equities, but target-date funds and managed accounts can help keep investors on track. Source:

Plan Design Can Help Participants Get the Full Company Match — Abstract: Advisers can help retirement plan sponsors design their plans and financial wellness programs to get participants to defer enough to receive the company’s matching contribution. Source:

Items of Special Interest to Service Providers

New Challengers Take Aim at Leaders in 401k Market — Abstract: Three firms — American Funds, Empower Retirement and Voya — are giving Fidelity Investments and Vanguard a run for their money in the 401k market. Source:

The Upside-Down 401k World Is About to Change — Abstract: In the next three years, defined contribution plans will go through a transformation, driven by new laws and technology, whereby what is currently customized (plan design, investment menus and fiduciary services) will be mass produced and what is mass produced (participant services) will be customized. Source: (registration may be required)

Can States Pick Up DOL Fiduciary Enforcement Slack? — Abstract: There are certainly states that are attempting to do so, but it’s unclear whether ERISA’s preemption of state law will render their efforts toothless. Source:

Four Reasons for 401k Advisors to Partner With TPAs — Abstract: TPAs also help bolster your firm by providing your client confidence and allow you to manage more. Here are four of many reasons why a TPA relationship is beneficial to your firm and your clients. Source:

Target-Date Funds

RFP for Target-Date Funds? It’s a Good Idea — Abstract: Although target-date funds may be very popular, they are widely misunderstood. TDFs must be prudently selected and have reasonable fees to satisfy the DOL’s default investment safe harbor and analyzing them isn’t easy. Source:

The Shift From Recordkeeper Proprietary Target-Date Funds to Nonproprietary Solutions — Abstract: Competition is crowded in the target-date market today. The number of target-date providers has risen 16% from five years ago, as more and more asset managers started offering new target-date solutions. About 78 firms offer more than 139 different target-date fund series today. Source:

401k Plans Sponsors Reject Proprietary Fund Products — Abstract: Study reveals a dramatically shifting target-date landscape where recordkeepers who offer their own target-date funds are losing share of assets on their own platforms as plan sponsors are increasingly choosing funds from other providers. Source:

Court and Other Legal Issues

Reliance Escapes Lawsuit Over SandRidge’s 401k Stock Losses — Abstract: Reliance Trust isn’t liable for the losses suffered by SandRidge Energy employees who invested their retirement savings in the natural gas company’s stock as it declined into bankruptcy, a federal court ruled. Source: (registration may be required)

Target Defeats Challenge Over Company Stock in Its 401k Plan — Abstract: Target Corp. defeated a lawsuit by employees challenging the retailer’s decision to allow company stock in its 401k plan despite allegedly knowing its value was artificially inflated because of its now-defunct Canada operations. Source: (registration may be required)

Winning Early Motions to Dismiss Breach of Fiduciary Claims, the Ministerial Defense — Abstract: One argument to use in seeking early dismissal of breach of fiduciary duty claims is the ministerial defense. The recent case that highlights the point is Turner v. Volkswagen Group of America, Inc. Source:

DOL’s Fiduciary Rule

Fiduciary Rule Change Delay Results in No Changes — Abstract: This rule has been a topic of debate and was recently delayed in order to make potential amendments. All the anticipation as to what actions the new administration might take during this time extension was for naught. Source:

Inside View of DOL Fiduciary Rule Arguments Before 5th Circuit — Abstract: Oral arguments in the consolidated case against the DOL and its fiduciary rule reforms were heard Monday morning by the 5th Circuit Court of Appeals; ERISA attorney Erin Sweeney offers her take. Source:

A Procrastinator’s Guide to the DOL Fiduciary Rule — Abstract: This article is an adapted and updated transcript of the May 17, 2017 FPA Public Policy and Regulation Knowledge Circle presentation, “A Procrastinator’s Guide to the DOL Fiduciary Rule” by Steve Niehoff. Source:

New Conflict of Interest FAQ — Abstract: This FAQ provides information on (1) a “fiduciary status disclosure” issue under the DOL’s ERISA section 408(b)(2) service provider disclosure regulation that applies to ERISA pension plans, (2) whether recommendations to plan participants and IRA owners to contribute to or increase contributions to a plan or IRA constitute fiduciary investment advice under the Fiduciary Rule, and (3) whether recommendations to employers and other plan fiduciaries on plan design changes intended to increase plan participation and contribution rates constitute fiduciary investment advice under the Fiduciary Rule. Source:

Compliance and Regulatory

Voluntary Compliance Program Fees — Abstract: The following general fees apply to single submissions involving qualified retirement plans established under IRC 401(a) or IRC 403(b). Source:

Regulatory Burdens Threatening Retirement Plans — Abstract: The ERISA Industry Committee submitted comments to the Department of Treasury outlining ways to reduce regulatory burdens for retirement plans. “It is imperative that regulations do not create uncertainty or introduce new risks that can drive plan sponsors further away from offering important and meaningful retirement benefits.” Source:

Penalties Hit ERISA Plans in Spite of CPA Audits — Abstract: The DOL is concerned about the increasing number of deficiencies it sees for plans that receive a CPA’s annual financial audit. Mistakes on an ERISA plan’s Form 5500 create a nice target for the Internal Revenue Service’s auditors, too. Source:

Red Flags on Form 5500 Alert IRS and DOL to Plan Issues — Abstract: Plan mistakes happen and can generally be corrected, but here’s four red flags that the IRS and DOL look for and want to make sure are fully corrected. Source:

The Hardship of Administering 401k Plan Hardship Withdrawals — Abstract: Many employers contract with a third-party administrator or platform vendor to administer the hardship application and approval process. But, even if outsourced, employers are the ones at risk of tax liabilities or plan disqualification if the process is not consistent with the very limited authority for early distributions on account of hardship contained in the Code and related regulations. Source:


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