BPP401k.com Newsletter 08.15.12
Patrick Shelton, GBA Joins AIRE Board
Patrick Shelton, GBA of Benefit Plans Plus has been appointed to the American Institute of Retirement Education (AIRE) Board of Managers by the American Society of Pension Professionals (ASPPA) and the National Institute of Pension Administrators (NIPA). Shelton joins a team of key leadership from across ASPPA & NIPA tasked with carrying out AIRE’s administration of the ERPA-Special Enrollment Examination (ERPA-SEE) and its mission to provide quality preparatory and continuing education materials and networking opportunities for candidates and professionals.
Shelton is currently the managing member of Benefit Plans Plus. He has more than 22 years of retirement plan industry experience in Banking/Trust, Insurance and Third Party Administrative environments. He is responsible for executing the firm’s business plan and over-all business development. In addition, he specializes in financial advisor relations, including 401k sales prospecting presentations, vendor searches and fiduciary consulting. Shelton’s reputation as a nationally recognized industry expert has led him to media and speaking and panelist opportunities at various annual advisor conferences. Shelton also serves as an executive member on the Board of Directors of the National Institute of Pension Administrators (NIPA).
Now What? A Retirement Plan Sponsor’s Guide after Fee Disclosure There has been a discussion and buildup for years as to what the duties and liability of the plan sponsor and plan providers are in conforming to the DOL fee disclosure regulations. So now that the age of fee disclosure for retirement plans is here, the question remains: “Now What?” So this article is what plan sponsors need to do now that fee disclosure regulations have been finally implemented. Source: Rosenbaum Law Firm
Half of Americans Die With Almost No Assets A study from three Ivy League professors finds many can barely pay for their funerals Source: Advisor One
Money, Access and Pain: It Takes All These to Qualify a Lead. Who Knew? Without discipline around lead qualification, firms jump into an unstructured process based more on wishin’ and hopein’ (apologies to Dusty Springfield…) than on solid facts. Source: Crosley Company
A Look at 401k Plan Fees You’re participating in your employer’s 401k retirement plan. All plans have fees and expenses and these costs can have a real impact on how much your savings grow. Learn about new employer 401k fee disclosure rules in this U.S. Department of Labor video. Source: 401khelpcenter.com
401k’s for the Self-Employed More older people than ever are working for themselves these days, according to the Bureau of Labor Statistics, and self-employment rises steadily with age. The group with the most self-employed? Men 55 to 64 years old. That means they have to take the initiative to save for their retirement—and that is far trickier than simply signing up for a company 401k plan. Source: Wall Street Journal
Petco Reports 401k Information Security Breach Petco has filed a notice of a data security breach of 401k participant information with the California Attorney General’s office. Source: Plansponsor.com
HSA: Superior Savings Compared to 401k Are health savings accounts simply better than 401k plans? While there’s no simple answer, a leading authority is quick to point out the unsung potential of HSAs as a long-term investment vehicle at a time when some critics have suggested the 401k plan model provides insufficient savings. Source: Employee Benefit News
ETFs Prepping 401k Offensive — For Better or Worse Coming soon to your 401k plan: trading vehicles that will allow you to buy and sell baskets of stocks, commodities and even more obscure financial instruments in the blink of an eye. Providers of exchange-traded funds are readying a major lobbying effort to push aside mutual fund firms and make inroads into the more than $5 trillion currently held in retirement savings accounts. Source: CNBC.com
Heavyweight ETF Providers Lobbying for 401k Inroads Exchange traded fund providers have banded together to lobby and gain market share within the huge 401k plan industry. The retirement business is one of the areas that ETF firms have been trying to break into, touting lower fees as a selling point. Source: ETFtrends.com
Why Financial Wellness is Much Easier Than Physical Wellness What if, as an employer you could flip a switch and automatically get employees making healthy lifestyle choices? So if it was that automatic for financial wellness, would you do it? As it relates to financial wellness and retirement savings, this type of automatic transformation is possible within a 401k plan. Source: Lockton Retirement Services
Fiduciary Related Items
The Unspoken Fear of Every 401k Plan Sponsor The 401k plan sponsor is held liable for the actions of every vendor, and – here’s the really difficult part – it’s hard to know what fiduciary rules (if any) apply to which service providers. That’s because at least three different fiduciary standards exist: the tradition trust law variety; the ever-evolving SEC form; and, the much-maligned ERISA version. Source: Benefitspro.com
Three New 401k Plan Success Metrics The true metric is now whether employees are actually achieving retirement readiness. Employers are taking their role as fiduciaries more seriously. The new environment requires a well rounded retirement plan and communication strategy that not only educates employees on their benefit, but gets them to use it effectively, which is challenging for many plan sponsors. Source: Benefitspro.com
The Role and Responsibilities of the Individual Trustee As an individual trustee, you have a great variety of responsibilities. And it’s not so easy to mitigate fiduciary liability. It’s sort of a sticky kind of nuisance. That’s why most people don’t want to go near it. This article lists the principle functions and general duties of an individual trustee. Source: Fiduciarynews.com
Formalize Response to Service Provider Fee Disclosures Responsible plan fiduciaries need to take the steps summarizes here to comply with the prohibited transaction exemption. At the same time, fiduciaries of participant-directed individual account plans must also be taking steps to ensure that they comply with the participant-level fee disclosure requirements under ERISA Section 404(a) by August 30. Source: Perkins Coie LLP
New Fiduciary Exposure: Unfair Fund Revenue Sharing Against a backdrop of new fee-disclosure requirements, plan sponsors and their advisors and consultants need to protect themselves and their trustees from potential fiduciary risk by ensuring that all participants are paying an equal share of plan administrative fees. This is a recorded webinar. Source: Diversified Retirement Corporation
Fund Revenue Equalization Some in the industry are moving towards a more equitable system of recognizing the fees associated with the administrative costs of a retirement plan to ensure all participants are paying a similar proportion of the general plan administrative fees based on their account balance in each of the plan’s core funds. Diversified calls this approach Fund Revenue Equalization and explains the approach here. Source: Diversified Retirement Corporation
Effective Delegation of ERISA Plan Administrator Duties and Standard of Review You probably already know that an ERISA Plan that fails to properly delegate administrative duties to another party may lose discretionary review. But does the delegation of authority have to be in writing? Maybe not, so long as the Plan allows for delegation. Source: Lane Powell PC
Insights: Studies, Research and White Papers
Forty-Three Percent of Small Business Owners Don’t Plan on Retiring As reported in Barlow Research’s Economic Pulse Survey for the 3rd quarter of 2012, 43% of owners of small businesses with sales $100,000 to $10 million do not intend to retire and of those who do intend to retire, the average age is now approximately 67 years old. Source: 401khelpcenter.com
Shifting Investment Responsibility in 401k Plans This TDF growth signals an important development in the nature of investment decision-making within 401k plans. Previously, participants seeking to make an educated portfolio decision had to undertake extensive research and analysis. By contrast, with the advent of TDFs, the complex decision-making process is delegated to the professional fund manager hired by the plan sponsor. Source: Vanguard
White Paper: Better Participant Outcomes Through In-Plan Guaranteed Retirement Income Embedding in-plan guaranteed retirement income options in defined contribution plans is a key solution to improve DC plan participants’ overall retirement preparedness and provide a source of lifetime retirement income, as well as help reduce pressure on employers that want employees to retire on time and enjoy a more secure and satisfactory retirement, according to this white paper from Prudential Retirement. Source: Prudential
New Disclosure Requirement Pulls Back the Curtain on Fees In this white paper, author argues the new service provider fee disclosures give retirement plans a valuable tool to match fee structure and service provider relationships to industry best practices while benchmarking fees to determine reasonableness. The paper also describes a methodical five-step approach retirement plan committees can follow and mitigate fiduciary risk. Source: 401khelpcenter.com
White Paper: New Disclosure Requirements Pull Back the Curtain on Retirement Plan Fees This white paper looks at the fiduciary risk, plan administration and governance implications for retirement plan sponsors and their retirement plan committees emanating from the new fee disclosure regulation under ERISA Section 408(b)(2). Increased fee transparency heightens the visibility of retirement committees’ fiduciary obligations and risks. Source: DCadvisors.com
Target-Date Funds – A Look Under the Hood When you invest in a target-date fund, where is your money going? Here is a comparison of the TDF series offered by the “Big 3″ Vanguard, Fidelity, and T. Rowe Price who control about 80% of the target-date fund assets. Source: Chicago Financial Planner
Global ETF Industry Enters its Next Phase of Development Global ETF assets under management have doubled in the last five years, as has the number of products available. While growth in the more mature ETF markets is likely to slow in the medium term, new products will continue to be added to an increasingly diverse and sophisticated ETF line-up. Source: 401khelpcenter.com
Custom Target-Date Strategies Will Hold 22% of 401k Target-Date Assets by 2016 Cerulli’s latest research study on the large and mega defined contribution plan marketplace includes in-depth analysis of the state of custom target-date funds within these plans, and includes projections for these assets to reach $218 billion by 2016, a 22% increase from the 2011 asset level of $46.4 billion. Source: 401khelpcenter.com
Gen Y Favors Target-Date Funds and Roth 401k’s Analysis of Generation Y participants—born between 1979 and 1991—in defined contribution plans revealed stronger adoption of target-date funds and Roth 401k options compared to other age groups, according to data from Fidelity Investments. Source: Society for Human Resource Management
Some Items of Interest to Advisors
Nine Things That Financial Advisors to 401k Plans Can Actually Use Unlike much of what you may read, this article will tell you stuff that you can actually use in building and maintaining your retirement book plan of business. Source: Rosenbaum Law Firm
Harmonizing the Regulation of Financial Advisers Regulators are considering ways to harmonize the regulation of these professionals, but harmonization is fraught with difficulties. This paper discusses the debate over harmonization and explains how the U.S. Securities and Exchange Commission, the courts, and Congress have responded. The paper concludes with insights into considerations that will likely determine how the harmonization debate will be resolved. Source: Pension Research Council
How DC Plan Providers Educate Clients and Participants About Social Security Through a survey and in-depth interviews information was collected on how advisors and plan providers counsel clients and participants on Social Security. The results indicate steps that could increase the effectiveness of these channels to provide effective education and advice on Social Security and claiming. Source: Pension Research Council
Relationship Management Key to Recordkeeper Success Defined contribution plans with more than $5 billion in assets are much more likely to stay with the same recordkeeper for at least seven years, new research has found. Source: Plansponsor.com
Court and Legislative Items
Moench Presumption Revisited Plan fiduciaries are accorded wide latitude in determining whether to retain company stock on the list of investment options in a 401k or employee stock ownership plan (ESOP), no matter how harshly the stock price fares. That, combined with reliance on the ERISA section 404(c) safe harbor protection in connection with participant-directed accounts, appears to signal a lack of appetite by the courts for new stock-drop cases. The one untested exception to the presumption is a largely undefined “dire situation” that might force a plan fiduciary to abandon a plan option. Source: FI360.com
TPA Is Not Fiduciary in Dispute Over Benefits Error, Judge Rules Employers should exercise oversight of third-party administrators, to ensure they distribute accurate plan notifications and information about beneficiary distributions. That’s because in the case of certain errors, the TPA may end up not being defined as a fiduciary, as Judge James Graham in the U.S. District Court for the Southern District of Ohio, Eastern Division, ruled in Stark v. Mars Inc. And that could leave the employer holding the bag. Source: Thompson.com
Texas Firm Sees 401k Loan Gold on Capitol Hill Tod Ruble is trying to sell retirement plan insurance that employers say they do not want and their employees may not need. But the Dallas-based veteran commercial real estate investor is not letting that stop him. Source: Reuters
Regulatory Related Items
I Received My 401k Service Provider Fee Disclosure; What Do I Do Now? You have probably received one or more fee disclosures from your retirement plans covered service providers. The deadline for covered service providers to give you these disclosures was July 1, 2012. So now what? Here are the steps that retirement plan fiduciaries need to take to protect their plans, the plan participants and themselves. Source: McKenna Long & Aldridge LLP
DOL Revises Guidance on Participant Fee Disclosures for Brokerage Window Investments The U.S. Department of Labor recently issued new and welcome guidance for fiduciaries of account-based retirement plans by withdrawing its controversial guidance on fee disclosures for brokerage windows, self-directed brokerage accounts and similar arrangements. Source: McDermott Will & Emery
Participant Fee Disclosure Rules as Applied to Brokerage Windows A considerable controversy has arisen regarding U.S. Department of Labor guidance on the participant disclosures a defined contribution plan sponsor is required to provide if the plan’s investment platform offers brokerage windows, self-directed brokerage accounts or similar arrangements. Source: Trucker Huss
404(a)(5) Participant Disclosure Checklist Participants and beneficiaries in participant directed 401k plans are subject to the ERISA §404(a)(5) disclosures. ERISAdiagnostics developed this checklist to help with these fee related participant disclosures. Source: ERISAdiagnostics.com
Questions and Answers on Brokerage Accounts This article focuses on plans which provide participants the option to direct their investments through brokerage accounts, and do not otherwise provide a set of designated investment alternatives (DIAs) for participant selection. Source: Sungard/Relius
The 60 Day Rollover Hardship: The IRS Definition The IRS is looking for a hardship that prevented you (even though you had the money) from completing the rollover, not a hardship that caused the withdrawal in the first place, or that prevented you from getting replacement funds on time. Source: Morningstar.com