Experts in Personalized Retirement Plan Design & Administration Newsletter 08.28.17

Harnessing Behavioral Economics to Reinvent Employee Education Education in its current form does not work and a radically new approach is needed. An approach that incorporates behavioral economics and visually disruptive and intuitive design. Source: (registration may be required)

Four Reasons You Should Never, Ever Take a 401k Loan While it can theoretically seem like a smart financial move to use that money to pay off high-interest debt, put down a down payment on a house, or fulfill another immediate need, you should resist the urge and leave your 401k cash right where it is. Here are four big reasons why you should leave the money in your 401k alone so you don’t have major regrets later. Source:

Retirement Plan Investment Lineup Construction for Future Markets With all of the attention paid to retirement plan fees and the associated lawsuits, plan sponsors and their retirement plan committees tend to be very focused on ensuring that plan investments provide consistent long-term performance, are competitively priced, and offer good diversification. However, potential concern over future market returns has led some plan sponsors to plan for new investment lineup construction that will respond to the changing market conditions. Source:

Why Most Participant Communication Is Horribly Ineffective; and What You Can Do About It Whether witty, entertaining, simplistic, or dramatic, plan sponsors should take steps to ensure their retirement communication is engaging for participants. Otherwise, the message, no matter how well-constructed, will be lost. Source:

Re-Enrolling the Enrolled Employers who hope to positively impact their worker’s lives in retirement know they have a few levers to pull. Getting as many employees as possible into the plan is an obvious step, as is increasing deferral rates, and including the best investment options possible. But what if you achieve all three objectives through thoughtful plan design and investment selection, yet your employees don’t invest properly? Source:

403b Plans

New Report Highlights 403b Retirement Plan Trends Nonprofit organizations surveyed saw noticeable improvements in investment selections and auto-plan design features, such as increased default deferrals. The percentage of plans with a default deferral rate of more than 3 percent increased from 21.6 percent to 34 percent. In addition, organizations saw average employer contributions increase to 5 percent, up from 4.7 percent in 2015. Source:

More 403b Plans Offering Target-Date Funds as QDIA Target-date funds grew in popularity among 403b plans last year as more plans offered this option as a qualified default investment alternative, according to a report just issued. Source:

403b Plans Improving Plan Design In a survey of 608 nonprofit organizations conducted by the Plan Sponsor Council of America, the council found these nonprofits are making improvements to their 403b plans, particularly with respect to auto-plan features. Source:

Fiduciary and Plan Governance Material

What Is Revenue Sharing and How Does It Work? There are a few ways to pay for retirement plan administrative fees. A popular method is called revenue sharing. This approach allows service providers, based on the plan sponsor’s election, to collect all or a portion of the plan administrative fees implicitly through the plan’s investment options. Source:

Insight: Studies, Research, and White Papers

Expense Ratios for DC Plans Stall Out at a New Low For years, fees on investments in workplace retirement savings plans have been falling. Now, at least for the moment, they’re stalling. But there’s room for improvement in plan options, and look out for new fees creeping in. Source: (registration may be required)

Corporate DC Plans Report Flat Fees NEPC published the results of its 12th Annual Defined Contribution Plan and Fee Survey, which looks at trends in the management of America’s employee-fueled retirement plans. For the first time since 2010, the results show that recordkeeping, trust and custody fees bucked the long-standing trend of declining year-over-year and remained flat. Source:

Items of Special Interest to Service Providers

401k DCIOs: Some Are Folding, Holding, and Doubling Down It behooves plan advisers to pay attention to their asset-management partners, because advisers rely on them for marketing and practice management support and guidance. Source: (registration may be required)

Court and Other Legal Issues

Edison Hit With $7.5m Judgment in Long-Running 401k Suit Edison International must pay more than $7.5 million to compensate employees for its decision to include high-fee retail share mutual funds in its 401k plan when identical institutional share classes were available at lower cost. Source: (registration may be required)

Standing and Plausibility in ERISA A district court in New York has held that a plaintiff cannot assert claims against a plan in which she did not participate and cannot assert claims of fiduciary breach without plausible allegations of wrongdoing. Source:

Tibble and Class Action Plaintiffs Win Round Two Members of plan investment committees have an affirmative duty to monitor the investment performance of offered fund investments and in addition, monitor fees charged against the Plan assets which impact the ultimate return to the participants. This is an ongoing fiduciary duty and that selection of fund managers and Plan investment options is not a “set and forget” decision. Source:

Excessive Fee Suit Alleges Fiduciary “Abdication” A new excessive fee suit claims that plan fiduciaries “abdicated” their responsibilities, allowing the plans’ trustee “to lard the Plans with high-cost mutual funds.” Source:


How to Guard Benefits Plans From Cyberattacks Cyberattacks — including incidents of ransomware — are making headlines almost daily. Because employee health and retirement plans are often top targets, HR professionals should take precautions to defend against these assaults, especially since breaches can also result in penalties and fines. Source:

DOL’s Fiduciary Rule

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

DOL Again Signals Death of Fiduciary Rule’s Arbitration Ban A legal challenge to the fiduciary rule’s anti-arbitration provision will “likely be mooted in the near future,” the Department of Labor told a federal district court. Source: (registration may be required)

DOL Makes “Moot” Point in Fiduciary Litigation In a written response to a judge in litigation involving the fiduciary rule’s anti-arbitration provision, the Labor Department says the provision will “likely be mooted in the near future.” Source:

Fiduciary Rule Best Interest Requirements: Creditor Protection in ERISA Plans The DOL states that financial advisors need to determine the client’s individual needs and circumstances. If they are an investor with debt or in a position that predisposes them to debt, that affects their suitability for a rollover into an IRA. Source:

Fiduciary Rule Requirements Disrupting Annuity Market Many annuity providers argue they won’t be able to meet the best-interest contract exemption (BICE) requirements, because of the commission-focused distribution structures of fixed-indexed annuities. Therefore, many could turn to fee-based products. Source:

Compliance and Regulatory

DOL Withdraws Rule Requiring Fee Disclosure Guide The DOL has announced that it is withdrawing a rule requiring that employers provide a guide or similar material along with fee disclosures. The Obama administration had issued a notice of proposed rulemaking about the requirement on March 12, 2014. Source:

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