Experts in Personalized Retirement Plan Design & Administration Newsletter 08.23.17

Retirement Savings: Why Hedging Inflation Is Important  Inflation has been calm for so long that many retirement investors have overlooked its potentially corrosive effects. But for defined contribution plan portfolios designed to last decades, inflation remains one of the greatest potential risks, making inflation-hedging assets critical. Source:

At Small Phoenix Company, 401k Plan Is Taken Seriously  Small employers rarely can afford to offer traditional pensions and often struggle in crafting a worthwhile 401k program, but it can be done. Norman S. Wright Co., a Phoenix company that represents air-conditioning manufacturers in dealing with contractors, is an example. Source:

Is There an Optimal Strategy for Withdrawing Funds From a 401k  Conventional wisdom tells us to maximize our contributions to a 401k account and to grow the balance as much as possible for retirement. However, we may not have considered the decumulation side of retirement income. Source:

Infographic: Top Re-Enrollment Misperceptions  Re-enrollment may help put participants on the path to better retirement outcomes, but some common misperceptions could be preventing plan sponsors from leveraging this strategy. This infographic explores the top four re-enrollment misperceptions. Source:

Fiduciary and Plan Governance Material

DC Plan Sponsors: Fiduciary Matters Matter  The DOL has cut financial advisors some slack in getting ready to comply with its new fiduciary rule. But DC plan sponsors don’t have the same luxury. That’s because plan sponsors have been subject to ERISA. Based on the results of ABG’s latest survey, many don’t know it. Source:

Everything You Wanted to Know About BICE but Were Afraid to Ask  The best-interest contract exemption (BICE) is part of a large regulatory package with quickly approaching deadlines for compliance. BICE rules are important to plan sponsors and something they need to start considering in their interactions with plan vendors. This 8-page article is designed to heighten awareness to assist plan sponsors in fulfilling their fiduciary duties. Source:

Adding Sustainable and Responsible Investing Options to DC Plans  This 12-page step-by-step guide assists plan sponsors considering the addition of a sustainable, responsible and impact investing option to a defined contribution retirement plan. Source:

Insight: Studies, Research, and White Papers

Debt Regret Fuels Financial Stress, Finds New Retirement Study  A new survey from Schwab Retirement Plan Services reveals that everyday money matters are dramatically impacting the lives and retirement saving efforts of Americans. The nationwide survey of 1,000 workers with access to a 401k plan — half of whom are actively contributing to it and half of whom are not — reveals that non-savers are increasingly challenged by day-to-day financial stresses, compounded especially by credit card debt. Source:

What Ranks as the Top Retirement Worry?  Is ignorance fueling participants’ retirement paranoia? Americans rank inflation as their main economic worry, yet wildly overestimate the rate of inflation itself, according to a new survey from Allianz Life. Respondents predicted an average increase of 4.4 percent per year, with a third believing the cost of living would increase between 5 percent and 10 percent per year. Source:

Report Finds Participant Account Balance Size Influences 401k Plan Fees  According to a new report published by the authors of 401k Averages Book, the size of a 401k plan’s average participant account balance will influence the amount of fees they pay. Source:

Participants Do Not Factor Tax Rates Into Retirement Savings Decisions  Researchers found that although education increased participants’ use of expected tax-rate changes in their plan choices, participants continued to display an economically “irrational” preference for pre-tax deferrals over Roth deferrals. Source:

Majority of Small Businesses Do Not Offer Retirement, Health Benefits  The majority of small- to mid-sized businesses do not offer health, retirement or other ancillary benefits, Paychex found in a survey of 318 such companies. Only 38% offer such benefits. Source:

ETFs Are Hot Everywhere but Workplace Retirement Plans  Of the $5 trillion in assets in company-sponsored 401k plans, two-thirds are held in mutual funds, the ICI says. ETF assets, meanwhile, are a mere fraction of the pool left over, with the exact percentage not tracked publicly. So why are so few ETFs offered in workplace retirement plans? Source:

Items of Special Interest to Service Providers

401k World Is About to Change – Are You Ready?  As a result of technology and new laws, the small and mid-size 401k and 403b market is about to go through even more dramatic changes than after the 2006 Pension Protection Act which spawned the growth of auto enrollment, auto escalation and target date funds. Source:

Get-Out-of-DOL-Rule-Jail Card for Those Who Dabble in 401k Business?  Without recent guidance, 401k specialists were set to devour one-off accounts held by brokers but new DOL rule guidance offers a well-lit path to build toward a far larger 401k practice. Source:

Target-Date Funds

The Case for Custom Target-Date Funds  The increase in the use of custom TDFs by defined contribution plans has been significant. This 4-page paper explains why plan fiduciaries should consider custom TDFs when selecting the investment options for a 401k plan. Source:

How to Select the Right TDF for a 401k Plan  The promise of TDFs is that they are designed to protect investor assets from the risk of large losses stemming from inadequate or improper portfolio diversification. For advisers, this is directly aligned with the obligation under ERISA to protect assets. For participants, the funds simplify investment decisions. But simply choosing any TDF won’t do, because there are underlying risks of choosing the “wrong” TDF relative to other available options. Source: (registration may be required)

How to Build a Better TDF  The DC industry has devoted tremendous amounts of time and effort to improve the likelihood of successful retirement outcomes. But, much like the ancient Roman goddess Fortuna capriciously interfering in the lives of mortals, random economic and market forces largely drive retirement outcomes. Source:

Court and Other Legal Issues

Seventh Circuit Upholds ERISA Plan’s Forum Selection Clause  In a mandamus petition involving an issue of first impression, the US Court of Appeals for the Seventh Circuit held that ERISA’s venue provision did not invalidate a forum selection clause in an ERISA-governed health plan. Source:

ERISA (7th Circuit): Are ERISA Plan Forum Selection Clauses Enforceable?  ERISA gives plan beneficiaries a choice on where to bring suit seeking ERISA benefits. Section 1132(e)(2) allows plan beneficiaries to sue “in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found.” But what happens when the plan has a forum-selection clause? Are forum selection clauses enforceable? Source:

Tibble’s Trials Near the End With a Win  Nearly a decade to the day that Glenn Tibble, William Bauer, William Izral, Henry Runowiecki, Frederik Sohadolc, and Hugh Tinman, Jr. filed their excessive fee class action known as Tibble v. Edison, they may be nearing the conclusion of a case that has gone all the way to the United States Supreme Court and back. Source:

State-Based Retirement Programs

State Retirement Plans March Forward  States are working to bring retirement-savings plans to residents who lack them. Fans and foes alike say the endeavors will likely end up scrutinized in court, as detractors contend the programs violate federal pension laws. Source:

DOL’s Fiduciary Rule

Deloitte White Paper on the DOL Fiduciary Rule: Response and Impact  The Securities Industry and Financial Markets Association engaged Deloitte to facilitate a study with 21 SIFMA member firms to understand and analyze the realized and potential impacts of the DOL’s Fiduciary Rule on retirement investors and financial institutions. Report is 29-pages. Source:

Major Developments in Fiduciary Rule  There are two recent developments regarding the DOL fiduciary advisor regulation, sometimes known as the conflict-on-interest regulation. Source:

Fuzzy on Fiduciary Compliance  Today the industry is left in a somewhat confusing spot, given that an anti-regulation Republican is in the White House and in command of the agency supposed to enforce the new fiduciary rule, a rule still not even fully in effect, as the applicability dates for various provisions stretch well into 2018. Source:

Anticipating Delay to Fiduciary Rule, BDs, and RIAs Change Course  Broker-dealers and registered investment advisers are pivoting in the wake of news that the DOL is likely to get a lengthy delay in the implementation date of its fiduciary rule. While strategies and mechanisms put in place thus far will largely remain intact, according to analysts and executives, firms are gearing up to halt ones that had been deferred or haven’t yet materialized. Source: (registration may be required)

Compliance and Regulatory

Mitigate Qualified Domestic Relations Order Risk With Best Practices  While QDRO administration can be problematic and time intensive, ERISA and the Internal Revenue Code clearly outline the obligations of a plan administrator regarding QDROs for qualified retirement plans. These obligations must be met by all plan sponsors. Source:

Many DC Plan Sponsors Must Annually “Notice” Their Participants  Sponsors of DC plans with certain features are required to provide annual notices to participants. This chart summarizes the annual notice requirements for each of these notices, including timing, recipients, contents, and methods of delivery. Some plan designs may require multiple notices and some of the notices may be combined or packaged together in one mailing. Source:

Key Rules for Non-Spouse Beneficiaries  This is a high-level overview of some of the rules that beneficiaries must follow to help preserve the tax-deferred status of inherited retirement account, and avoid penalties. Source:

Are You Overlooking Required RMD Beginning Dates?  Required minimum distributions are a small but important part of retirement plans. Failure to start making them on time can lead to problems for employers and plan participants. If you’re a plan administrator, you hold the responsibility of ensuring the first RMD is made in time to fulfill this requirement. Source:


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