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Experts in Personalized Retirement Plan Design & Administration

BPP401k.com Newsletter 08.12.15

What to Consider When Setting up a 401k Plan for Small Business Setting up a 401k plan for small business is still an essential step to ensure financial security in the long term. With the right choice, small business owners can still choose a retirement solutions to fit with their budget and business size. Source: 401khelpcenter.com

Small Business Retirement Plans — SEP-IRA vs. Solo 401k 2015 Update Both plans can offer a great way for the small business owner to save for retirement and to realize some tax savings in the process. This is a comparison of the main features of the two plans. Source: Thechicagofinancialplanner.com

Why Conduct an RFP for a Recordkeeper? “Why should I conduct a request for proposals for a recordkeeper for my retirement plan?” This is a common question among retirement plan sponsors. The regular completion of an RFP process (as often as every three to five years or under another reasonable period based on the specific plan) is an essential component of the due diligence process. Source: Plansponsor.com

Three Things Plan Sponsors Should Know About Changing Providers By most industry estimates, approximately 10% of plans change providers every year. Regardless of the motivation for undertaking the change, here are three things that every advisor and provider wishes plan sponsors understood about recordkeeping conversions — before setting them in motion. Source: Napa-net.org

Boomers Face “Hidden Danger” in 401k Plans Many baby boomers are carrying too much risk in their retirement portfolios because of the stock market’s rapid rise during the past five years. While the stock market boom has propelled the average 401k balance up 50% in the past five years it has “increased exposure to the negative impact of a market downturn,” according to Fidelity Investments. Source: Benefitnews.com

How to Play Catch-up With Your Retirement Savings You’ve let the first 20 years of your career slip by without doing much in the way of preparing for retirement. Where should you start to make up for this lost time? Source: Cnn.com

When Does a Roth IRA or 401k Work Best? People are pretty predictable about their feelings on income taxes. Hardly any of them want to pay more them, but funding Roth accounts can be one of the ways where short term tax pain can actually result in long-term gain. Source: Financialfinesse.com

403(b) Plans

How ERISA Has Changed the Game for Nonprofits Since coming under ERISA jurisdiction in 2008, 403(b) retirement plans are now subject to a litany of compliance checks and balances. This article provides an overview of the biggest challenges ERISA has instigated for nonprofits, and how these organizations are reacting to managing their retirement plans effectively and efficiently in light of this shift. Source: Rolandcriss.com (PDF File)

The Special 15-Year 403(b) Catch-Up Contribution: How Does It Really Work? Plan sponsors must make sure that they have the historical information necessary to compute the maximum available 403(b) catch-up for each employee. If historical information is not available due to permissibly excluded contracts, then the plan sponsors should consider the wisdom of offering a plan provision that they cannot administer accurately, due to lack of information. Source: Belfint.com

SPARK Institute Best Practices for 403(b) and Related Retirement Plans Information Sharing These “Best Practices” set forth: 1. The data elements for information sharing between 403(b) plan employers or employer representatives and vendors. 2. A basic file convention layout. 3. The frequency of data transmissions. 4. An approach for sharing and transmitting data on a transaction or daily basis when agreed upon by both the sending and receiving parties. Source: Sparkinstitute.org (PDF File)

Fiduciary and Plan Governance Material

Top Three Fiduciary Priorities in 2015 With unprecedented regulatory oversight over retirement plans and their management teams, plan sponsor executives need straightforward, easy-to-execute steps for maintaining compliance and effectiveness in their fiduciary role. This article provides the top three “fiduciary checkpoints” that will help keep retirement plan managers on track and in control of their retirement plan processes. Source: Rolandcriss.com (PDF File)

Benchmark DC Plan Fees Now to Lower Your Personal Risk Continuing focus on DC plan fees by litigators, regulators and the media has made it clear that fiduciaries must understand and determine “reasonable” fees being paid from a DC plan. Since fiduciary liability is personal, sound risk mitigation calls for a rigorous process to establish reasonable fees on an ongoing, regular basis. Source: Xerox.com

Four Steps to Fiduciary Success for Plan Committees Every decision plan fiduciaries make should be done in the best interest of the participants; that should be the guiding force committees follow. Here are four specifics to help you achieve fiduciary success. Source: Vanguardinstitutionalblog.com

Money Market Reforms Are Coming: Is Your Plan Ready? Following the financial crisis of 2008, when heavy redemptions broke the buck in money market funds, the SEC is planning changes for how those funds operate. The new rules will impact more than $375 billion of retirement assets, or nearly 64 percent of all defined contribution plans in America. Source: Lockton.com (PDF File)

Insight: Studies, Research and White Papers

Behavior Trends in 401k Plans Analyzing plans on the Ascensus platform, the data assessed key information among 401k plan sponsors and employees. Ascensus identified a number of trends from this data. Source: 401khelpcenter.com

People Saving More for Retirement, but They’re Still Making One Big Mistake For the first time, employers and employees contributed more than $10,000 on average to 401k accounts over the course of a year, according to a new report from Fidelity Investments. The milestone shows that both workers and their employers are contributing more to the savings vehicles. But, there’s a more troubling trend: 401k loans are getting bigger, also. Source: Washingtonpost.com

Guiding DC Participants With a Simplified Menu Most participants in DC plans are not on track to achieve retirement income adequacy. Since they are not investment experts, most DC participants would benefit from a simplified lineup, guiding (but not forcing) them into professionally designed portfolios. Source: Pionline.com

Should Plan Sponsors Restrict Access to 401k Loans? The country’s retirement savings deficit, estimated by the nonprofit Employee Benefit Research Institute at more than $4 trillion, invariably calls into question the matter of 401k loans and the extent of the toll that plan leakage may be having on Americans’ ability to save adequately for retirement. A recent study shows that toll may be much higher than previously thought. Source: Treasuryandrisk.com

Three Common Retirement Plan Considerations in Corporate Transactions There are also several decisions to make when retirement plans are included in corporate transactions. The design of the plans should be based on the goals and objectives set for the ongoing retirement program. Three of the more common plan-specific considerations are reviewed here. Source: Principal.com

Data Shows Retirement Plan Participants’ Commitment to Saving ICI’s latest study of retirement plan savers’ actions shows Americans’ continuing commitment to saving for retirement. The study is based on defined contribution plan recordkeeper data covering more than 26 million participant accounts at employer-based DC plans. Source: 401khelpcenter.com

Retirement Optimism Cited in Survey of African Americans African Americans demonstrate continued optimism when it comes to finances, due to growing affluence, Prudential Financial found in its biannual “African American Financial Experience” report. However, many are not taking advantage of financial and investment tools, which may hinder long-term wealth accumulation. Source: Plansponsor.com

Small-Business DC Plan Benchmarking Report This 28 page benchmarking report is designed to help small-business DC plan sponsors understand how their plans compare with other small-business plans. Information can help small-businesses make more effective plan decisions and serve as a valuable reference tool. Source: Vanguard.com (PDF File)

Items of Special Interest to Service Providers

Navigating Change in the 401k Market This 10 page research paper examines several behavioral and attitudinal aspects of 401k plan sponsors that are likely to impact the defined contribution industry over the next several years. Data are based on the opinions of a representative sample of 401k plan sponsors responsible for plans ranging from less than $1 million to over $1 billion in DC assets. Source: Marketstrategies.com (PDF File)

What’s Driving Provider Changes? A new report suggests that the plan investment menu is of growing importance in motivating and determining provider changes by plan sponsors. Source: Napa-net.org

Most Advisors See Little Effect From New Fiduciary Rules Some reps who think they are ready for a fiduciary standard may not fully grasp the implications. More than two-thirds of financial advisors, 67 percent, say recent moves by regulators are having “minimal to no impact” on their risk assessment processes, according to a survey. Source: Benefitspro.com

Massive Turnover of 401k Plans Possible in 2016 The next year has the potential to bring massive turnover to 401k plans, as 75 percent of plan sponsors say they are likely to initiate a formal review of plan design and service providers in the next 12 months, according to Cogent Wealth Reports’ most recent breakdown of sponsors’ intentions. Source: Benefitspro.com

TPAs Should Make Sure Clients Know What They Do If plan sponsors know what a great job their TPA is doing, the less likely they will make a change even it means not saving a few dollars. Source: Jdsupra.com

Target-Date Funds

Custom Target-Date Fund Perspective Target-date fund selection and monitoring is becoming more important as the assets held in these funds grow. Fiduciaries must move beyond industry chatter when addressing their participants’ outcomes. Armed with an understanding of a plan’s demographics, fiduciaries will be in a better position to determine how well a prospective TDF provider’s glide path assumptions align with their plan’s needs. Source: Manning-Napier.com

Legislative and Washington DC

Canadian Coalition for Retirement Security Calls for Pension Protection The Canadian Coalition for Retirement Security has launched a campaign to push for legislation to protect the earned pension benefits of public and private sector employees and retirees. The campaign is being launched in response to the federal government’s plans to introduce target-benefit or shared-risk pension plans to Crown corporations and federally-regulated employers. Source: Benefitscanada.com

Retirement Savings Shortfalls Becoming State Problem While states are starting to realize they need to step up and help private sector employers better prepare their employees for retirement, Americans continue to fall short in meeting their economic needs in retirement. Source: Benefitnews.com

Compliance and Regulatory

Safe Harbor 401k Establishment Deadlines In general, a safe harbor 401k plan must be adopted before the beginning of the plan year and maintained throughout a full 12-month plan year. However, in the context of the first year that the plan or 401k feature is established, a plan is permitted to have a no shorter than three month plan year for purposes of the safe harbor 401k feature. Source: Legacyrsllc.com

Dold Comments on Changes to Determination Letter Program Elizabeth Dold was quoted as saying, “Determination letters are considered a vital component of our voluntary retirement system, and, as a result of these pending severe restrictions, heightened IRS qualification risks and uncertainty will fall on the shoulders of plan sponsors.” Source: Groom.com

Terminated Participants Are Still Participants What obligations do retirement plan sponsors owe to participants who have terminated employment? As they are still participants in the plan, even if not active or contributing ones, they still need to receive regular benefits statements and other plan disclosures. Source: Plansponsor.com

New IRS Form Requests Supplemental Information From Plan Sponsors If you sponsor a calendar year retirement plan, you are likely in the process of completing your Form 5500 for the 2014 plan year. Thus, it seems like a good time to let you know that new information may be required next year on your Form 5500. Source: Retirementtownhall.com

IRS Announces Major Changes to Determination Letter Program For remedial amendment cycles beginning after 2016, plan sponsors will no longer be able to apply for determination letters on their individually designed defined contribution and defined benefit plans, except for initial qualification and qualification upon termination. Effective on the Announcement date, off-cycle requests for determination letters will no longer be accepted. The IRS intends to publish additional guidance periodically, and seeks comments on the upcoming changes. Source: Mwe.com

IRS Emphasizes Hardship Withdrawal Requirements for Plan Sponsors The IRS is putting additional focus on the handling of hardship withdrawals for 401k plans. In a bulletin, the IRS cautioned plan sponsors to ensure that certain documentation requirements are being met. Source: Schneiderdowns.com

DOL Clarifies Annuity Selection Safe Harbor Regulation for DC Plans In FAB 2015-02, the DOL clarified that an employer’s fiduciary duty to monitor an insurer’s solvency ends when the insurer’s annuities are no longer offered as a distribution option in the DC plan. There had been some concern that confusion about fiduciary responsibilities might have been creating disincentives for plan sponsors to offer annuities in their plans. The FAB also cites two circumstances that necessitate an immediate review of an insurer. Source: Towerswatson.com

IRS’s Employee Plans Unit Announces Program Changes The IRS has announced two changes to services under the agency’s Employee Plans Compliance Unit that oversees tax-qualified retirement plan issues. Source: Retirementtownhall.com

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