Experts in Personalized Retirement Plan Design & Administration Newsletter 08.16.17

Do 401k Managed Accounts Live Up to All the Hype?  Offering employees professionally managed accounts in a 401k plan might seem to be an excellent option, as this service seeks to provide an investment mix customized to individual needs and goals while increasing the odds of saving enough money for retirement. But managed accounts present challenges and concerns that both plan sponsors and participants should fully understand. Source:

Robo-Advisers: More Complex Than They May Appear  The article analyzes the growing trend of investment firms including robo-advisers as part of their service offerings. The SEC’s Information Guidance and Investor Alert from February 2017 indicated that “robo-advisers, like all registered investment advisers, are subject to the substantive and fiduciary obligations of the Advisers Act.” The article provides insight into the challenges robo-advisers face in terms of compliance with disclosure requirements, fiduciary obligations, and other regulatory responsibilities. Source:

Are We Ready to Fund Retirement From DC Plans?  DC plans have been focused on the accumulation of assets for retirement, and the DC industry has spent considerable effort to improve investment offerings, control costs, encourage participation, and streamline the technology of the participant’s interaction with the plan. But what about the distribution of accumulated savings to retirees? Source:

403(b) Plans

New Jersey Considers 403(b) Disclosure Bill  A bill that would require new disclosures in New Jersey, A5151, has been filed by Assemblywoman Amy Handlin, the Deputy Republican Leader of the Democrat-controlled Assembly. Source:

Why Some 403bs May Delay Form 5500 Filing  Many retirement plan sponsors, including 403b plan sponsors, file an extension of time to file their Form 5500s. This article discusses the two primary reasons. Source:

Fiduciary and Plan Governance Material

Fiduciary Considerations for Plan Sponsors – Evaluating Plan Fees  A common theme running through class-action lawsuits filed against plan fiduciaries is the violation caused by not properly understanding and addressing the fees of their 401k plan. The article describes three methods for determining if plan fees are reasonable. Source:

Checklist for Strengthening Your Defenses to 401k Plan Class Actions  It is in the interest of plan sponsors and plan fiduciaries to take all reasonable steps to head off claims quickly if they are asserted. The following checklist is offered as a non-exclusive guide for those purposes. Source:

The Often Overlooked Fiduciary “Gotcha”  The author wonders “why more plaintiffs’ attorneys, plan sponsors and other investment fiduciaries have not fully utilized the cost-consciousness ‘blueprint’ that the Restatement provides in drafting pleading and addressing potential liability exposure based on alleged breaches of a fiduciary’s duties of loyalty and/or prudence.” Source:

Seven Ways a Fiduciary Can Follow “Procedural Prudence”  “Procedural Prudence” is not a new concept. It underlies one of ERISA’s bedrock requirements. A fiduciary must discharge their duties prudently with care, skill, and diligence. It’s the process by which a fiduciary can accomplish this. Here are seven practical considerations for fiduciaries to shore up their defenses and improve their governance practices. Source:

Revenue Sharing: What’s the Right Way to Apply It in a 401k Plan?  Revenue sharing became an industry concern as technology advanced in the late 1990’s. It comes in various forms or names. To understand the question of how to apply revenue sharing in a 401k plan, we first must examine what revenue sharing really is, what form it takes and how it is commonly applied. Source:

Insight: Studies, Research, and White Papers

Survey Says Large Plans Nervous About Roth Mandate  A CIEBA survey of larger plan sponsors finds most concerned about the potential participant response to a mandated shift to Roth tax treatment in 401k plans. Source:

Improving Participant Communications  It’s always been important to communicate effectively with plan participants. Not to mention that law and regulation set certain bottom lines for performing that function. A recent paper offers some insights on how those communications can be improved based on current circumstances. Source:

401k Saving Harder at Lower Incomes  Our 401k retirement system doesn’t work as well for lower- and middle-income workers as it does for those at the top. That’s because they face more severe headwinds in pursuit of their retirement goals, concludes a new study. Source:

Items of Special Interest to Service Providers

Pro-Rata Participant Fees and Fee Transparency: A Recordkeeper’s Conundrum  As 401k fees are being challenged in excessive fee lawsuits, and participants are, rightfully, checking their accounts and verifying their fees, it is prudent to have fees that are fair and transparent. Source:

Target-Date Funds

Taking a Risk-Based Approach to Evaluating Target-Date Funds  How can plan sponsors objectively assess the merits of a glide path and its effect on plan members? The once-popular method of comparing funds based on their equity percentage method doesn’t do justice to what really matters to plan members: retirement outcomes. Source:

Plan Automation

The Positive Impact of Automatic Features  Automatic plan features offer numerous benefits. These positive impacts occur amidst a backdrop that surprises many employers: employees favor automatic features and appreciate an employer that utilizes them. This 7-page white paper will help employers to strengthen their commitment through a thoughtful and informed automatic enrollment and escalation structure. Source:

Court and Other Legal Issues

Arch Coal Beats ERISA Lawsuit Over Company Stock in 401k Plan  Arch Coal defeated a lawsuit by employees accusing it of failing to divest their 401k plan of the company’s stock during a three-year period when its value declined from $680 to $1.42 per share. Source: (registration may be required)

What Hitchcock v. Cumberland Means for Plan Fiduciaries  Earlier this year, the 6th U.S. Circuit Court of Appeals ruled that the participants in a university’s pension plan do not have to exhaust administrative remedies before they pursue claims of ERISA violations. A recent blog entry discusses what this ruling means for plan fiduciaries. Source:

Participant Fails to Establish Class Status in Prudential Lawsuit  A federal district court judge has denied class action status to an ERISA challenge filed by a retirement plan participant invested in a stable value product offered by Prudential. The denial of the class certification motion goes into some detail regarding what it takes to establish class standing under ERISA. Source:

Sears Hit With Second Lawsuit Over Company Stock in 401k Plans  Sears Holdings was sued for the second time in a month over its decision to retain and continue purchasing its own declining stock as an investment option in the retailer’s 401k plans Source: (registration may be required)

Fifth Circuit Oral Arguments — A New Hope for Fiduciary Rule Opponents?  During oral argument in Chamber of Commerce v. Acosta, Judge Jones not only peppered both parties with questions that appeared to be largely based on the Chamber of Commerce’s briefs, but also raised a new argument about why the Fifth Circuit need not defer to the DOL’s analysis. Should Judge Jones and at least one of the other members of the panel side with the Chamber of Commerce, the Fiduciary Rule could be vacated. Source:

Legislative and Washington DC

These Five Retirement Issues Brought Out the Lobbyists  Five hot-button issues in retirement policy were at the forefront of lobbying efforts in the second quarter of 2017, Bloomberg Government data show. They were the fiduciary rule, multiemployer reform, retirement issues relevant to tax reform, repeal of state retirement plans, and Pension Benefit Guaranty Corporation premiums. Source: (registration may be required)

State-Based Retirement Programs

MyRA Phase-Out Clips a State-Run Auto-IRA Program  The U.S. Treasury’s winding down of the myRA program will cause at least one state-run retirement program to delay its opening. Source:

DOL’s Fiduciary Rule

Easing Into the DOL Fiduciary Rule  The latest set of FAQs affirms that participant communications specifically encouraging larger plan contributions — at specific individualized levels — are not fiduciary in nature as long as investment recommendations are not specified. In addition, the FAQs provide helpful advice to new plan fiduciaries about fee disclosure responsibilities. Source:

DOL Seeks to Delay Fiduciary Rule Until July 2019  The Labor Department is seeking to delay implementation of the remaining parts of its fiduciary rule for 18 months. In a brief filed in a Minnesota lawsuit Wednesday, the DOL indicated it had submitted to the Office of Management and Budget a proposal to delay the rule from Jan. 1, 2018, until July 1, 2019. The OMB must review and approve the proposal before it can go into effect. Source: (registration may be required)

New Conflict of Interest FAQs Address 408b-2 Disclosure Transition Period  The 408(b)(2) FAQ will allow some service providers to avoid changing previously provided 408(b)(2) notices and give others additional time to adjust the content of those notices. Source:

Compliance and Regulatory

Begin Working on 2018 401k Plan Changes Now  If you intend to review your 401k plan fees and/or providers this year, now is the time to get started. Most plan sponsors who decide to make 401k plan changes like to have those new features in place by January 1 of the new plan year. Here are a few things to consider. Source:

Five Common Mistakes of Plan Sponsors  There are a number of ways plan sponsors can reduce their liability and avoid costly penalties for operational errors. These include conducting a complete review of plan documents and company policies to ensure they are in accord. Here are five common mistakes plan sponsors make. Source:

Hardship Distributions: Source Documents vs. Documentation of Self-Certification by Participants  The IRS released a Memorandum to its agents setting forth the substantiation they should expect to see for 401k plan hardship distributions issued. The IRS agents were instructed to examine source documents if they are obtained by the employer or third-party administrator, or to examine the summary of documentation that the hardship distribution recipient will maintain. Source:

October 1 401k Safe Harbor Deadline Gets Closer  If you want to set up a new Safe Harbor 401k plan for 2017, it has to be done by October 1. Source:


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