BPP401k.com Newsletter 09.05.12
Gateway St. Louis ASPPA Benefits Council
Legislative and Regulatory Update Richard Hochman, McKay Hochman Company
Wednesday, September 19, 2012 – 1 – 5:00 p.m.
Speaker:Richard Hochman, McKay Hochman Company
CPE: Four (4) ASPPA, ERPA (core and non-core) Continuing Professional Education credits are available for this meeting.
Topics: Legislative and Regulatory Update, Fiduciary Issues, PPA of 2006 Plan Document Restatement, Ethics
Where: Sheraton Clayton Plaza Hotel, 7730 Bonhomme Ave, 63105 – (314) 863-0400
New disclosures give workers a better look at 401(k) fees BPP’s Patrick Shelton weighs in on the fee disclosure discussion. If you’re like most 401(k) participants, you probably ignored the long disclosure document you got recently. Source: St. Louis Post-Dispatch
New Law Reveals 401K Fees Get ready for some new changes when it comes to your retirement plan. In a just a few days you’ll get a much clearer picture about the fees charged to your 401K account. Source: KSDK
Working With a Retirement Plan Advisor As a retirement plan sponsor, you have many responsibilities and important decisions to make. With a retirement plan advisor as your trusted partner, you have someone who can help you establish an action plan to support your goals and ultimately help you and your employees build a better retirement future. Source: Blackrock
Reenrollment in a QDIA Improves Plan Diversification Some defined contribution plan participants adopt extreme asset allocations or take concentrated positions in certain asset classes, investment styles, or company stock. But reenrollment into a qualified default investment alternative (QDIA) is an innovative plan design strategy that can improve asset allocation and thereby enhance retirement readiness. This can achieve better diversification of plan assets quickly, while also providing plan sponsors with fiduciary relief. Source: Vanguard (PDF File)
Focus Less on Fluff, More on Stuff Just because something about retirement plans is nicely done by an advisor, a third party administrator, or even an ERISA attorney, doesn’t mean that they actually have the experience or skill set to accomplish the services they are promising to plan sponsors. Source: Rosenbaum Law Firm PC
Ways to Catch Up on Your Retirement Savings If you’re behind on your retirement savings, you aren’t alone. Whether it’s due to bear-market setbacks, getting off to a late start, or other reasons, a lot of people are trying to catch up on their retirement savings. Fortunately, there are plenty of actions you can take right now. Source: Schwab.com
403(b) Plans
Latest 403(b) Market Stats This chart illustrates the distribution of investments in the 403(b) market as of December 31st of each year. Source: 403bwise.com
Fiduciary Related Items
It’s the Small Things that Create the Greatest Liability for 401k Plan Sponsors When it comes to being a retirement plan sponsor, the greatest threats in breaching fiduciary duty resulting in liability usually comes from the smallest mistakes. So this article is to let you know which mistakes to avoid that are nails that can cause your financial kingdom to be lost. Source: Rosenbaum Law Firm PC
Why the Fiduciary Standard Can’t Live in Harmony Fi360, long an advocate of the adoption of a uniform fiduciary standard, is not alone in its concern that a call for “harmonization” may, in fact, unnecessarily delay the process of adopting such a standard. Source: Fiduciarynews.com
Harmonizing DOL, SEC Fiduciary Rules Forces a Stark Choice Asking the DOL and EEC to harmonize their fiduciary rules would create “significant challenges,” as the fiduciary standards under the Investment Advisers Act and the Employee Retirement Income Security Act are “quite different,” fi360 told members of Congress last week. Source: Advisorone.com
On the Ambiguous Nature of Fiduciary Status The DOL has tried, through rulemaking, to simultaneously expand and make more consistent who is a fiduciary and when. The issue becomes even more complicated, though, if and when you try to coordinate that issue under ERISA with similar, but not identical, obligations imposed by the SEC. Source: Boston ERISA Law Blog
Insights: Studies, Research and White Papers
More Employers Add Features to Drive Participation and Savings A growing number of employers are providing their employees with 401k plan features to help drive positive plan participation and encourage savings, according to data released by Schwab Retirement Plan Services. Source: 401khelpcenter.com
Study Finds 401k Matches Back at Pre-Crisis Level More companies are now offering a 401k match to their employees than were before the 2008 financial crisis, when many dropped it under duress, according to new data by Charles Schwab Corp. Source: Bangor Daily News
LIMRA Study: Few Know What Retirement Plan Fees They Pay Two-thirds of Americans with defined contribution (DC) plans or IRAs admit to spending less than five minutes examining their retirement plan disclosures – one in five say they rarely or never read the disclosure paperwork at all. Only 12 percent of plan participants said they could estimate the amount of fees and expenses they paid on their retirement plan account. Source: 401khelpcenter.com
A Field Guide to Exchange-Traded Products There are now at least six different exchange-traded structures, each of which can behave differently in given market conditions. This paper takes a deeper look at the different species of exchange-traded products: how they’re constructed, their risks, and how they might fit into a portfolio. Source: Arnerich Massena (PDF File)
DC Plan Sponsors Should Improve Communications, Employees Say Defined contribution plan sponsors need to do a better job communicating key information to participants, according to a survey of plan participants conducted by State Street Global Advisors. Source: Employee Benefit News
Advisor-Directed Account Performance Falls Short Compared to Packaged Programs Cerulli’s latest research measures the performance of advisor-directed accounts compared to packaged programs, and finds that when the advisor is making the investment decisions, performance falls short. This raises the question whether clients should give advisors discretion to manage their portfolios. Source: 401khelpcenter.com
Work to Age 70? For Many, That Still Won’t Pay for Retirement Contrary to some reports that working just a little bit longer — to age 70 — will allow between 80 and 90 percent of households to have adequate income in retirement, new research by the nonpartisan Employee Benefit Research Institute (EBRI) shows that for approximately one-third of the households between the ages of 30 and 59 in 2007 that won’t be enough. Source: 401khelpcenter.com
Postponing Retirement Indefinitely More than a third of adults near retirement age — 35 percent — said last year that they simply don’t expect to retire. That was up from just 29 percent two years earlier. Source: New York Times
“Through-Retirement” DC Investment Options Uncommon Americans increasingly rely on defined contribution plans for retirement savings, but investment options that will help them through retirement have yet to become mainstream, a report found. Source: Plansponsor.com
Measuring Employee Savings and Investing Behavior in DC Plans This research report analyzes participant behavior across the participation rates, savings levels, plan balances, investments, account activity, and demographics of more than 3.6 million employees eligible for defined contribution plans. Participant behavior is separated into demographic groups that include age, salary, tenure, balance, and gender. Source: Aon Hewitt (PDF File)
Some Items of Interest to Advisors
How a Retirement Plan Financial Advisor Can Stand Out From the Crowd This article will give you some ideas on how you can stand out in the crowd of financial advisors and stand out in a good way as opposed to a financial advisor who gets their name in the news in the wrong way. Source: Rosenbaum Law Firm PC
Advisor Practices of the Future 2012-2015 This Diversified study, Advisor Practices of the Future 2012-2015, reveals how mandated fee disclosures and healthcare reform will fuel double-digit growth for advisors who work primarily or exclusively with retirement plans, as practices transition from regional to national and merger and acquisition activity increases. Source: 401khelpcenter.com
Retirement Plan Advisors Will See Huge Growth Over Next Three Years Advisors who work with retirement plans will see double-digit growth in the next three years. According to a new study by Diversified, mandated fee disclosures and health care reform will fuel the growth for these individuals as practices transition from regional to national and merger and acquisition activity increases. Source: Benefitspro.com
How a Financial Advisor Can Get Business During 401k “Crazy Season” When it comes to 401k plans, “Crazy Season” is the last few months of the calendar year because it is the time that many plan sponsors decide to make a change of their third party administrators (TPA) and/or financial advisors in order to make a change by December 31. This article is suggestions on how a financial advisor can take advantage of 401k crazy season as they approach potential new clients. Source: Rosenbaum Law Firm PC
Court and Legislative Items
Fears of Increased “Leakage” Drive Efforts to Insure, Toughen Retirement Plan Borrowing Concerns are mounting in the US about the increase in retirement plan “leakage” — hardship early withdrawals and loans being taken against such plans during tough economic times. As more Americans deplete their retirement savings to meet emergency expenses resulting from long-term unemployment, tightened credit or high medical expenses, policy makers are seeking ways to stem the flow. Source: Thompson
Regulatory Related Items
How to Fix 401k Plan Foul-Ups, Bleeps & Blunders A 401k plan is like a piece of delicate machinery where something is bound to go wrong if the slightest thing goes off track. Thankfully, retirement plans have a system of self-correction and programs for the plan to go back on track. So this article is how to fix a 401k plan’s foul ups, bleeps, and blunders. Source: Rosenbaum Law Firm PC
I Found an Error With My 401k Plan, Now What? Because a plan sponsor’s failure to administer a 401k plan in accordance with the terms of the actual plan document can cause the IRS to disqualify the plan resulting in tax issues for all plan participants and the company, it is important for plan sponsors to periodically audit their plans to ensure compliance. If you identify a plan failure, be sure to call your relationship attorney in order to review whether the error is correctable without reporting it to the IRS. Source: Masuda Funai
August 30 Deadline to Provide Fee Disclosures to 401k Participants Plan administrators of 401k, 403(b), or other defined contribution plans with participant-directed investment accounts must make good faith efforts to comply with the newly regulated participant fee disclosures on or before August 30, 2012. Disclosures are necessary to continue fiduciary insulation under ERISA Section 404(c). Source: Mitchell, Williams, Selig, Gates & Woodyard PLLC
401k Fee Disclosure Laws Still Don’t Give the True Cost of Plans At the end of this month, 72 million 401k participants will receive required disclosures about their plans’ underlying investment expenses. At best, the new rules give participants and plan sponsors a tiny window into costs. At worst, they provide just enough information to thoroughly confuse participants and employers. Source: RIAbiz.com
Most Americans Clueless About Fee Disclosure So the final days before Aug. 30′s first deadline for 401k participant fee disclosures are underway, and there’s already good evidence that the extra information will be helpful – but probably totally ignored by most. That’s the consensus of a recent LIMRA study. Source: Benefitspro.com
Participant Fee Disclosure: Just Another Compliance Fizzle The expected RIA field day and B-D comeuppance may come limping out of the gate; Fidelity has put 17 million 401k disclosures in the mail with few folks batting an eye — with high-balance participants as the possible big exception. Source: RIAbiz.com
Money Market Reform Fight Not Over Yet Last week’s failure by Securities and Exchange Commission chair Mary Schapiro to push through her proposals for additional safety measures is not the last word from regulators in an area some deem systemically risky to financial markets. Source: CFO.com
Statement on the Regulation of Money Market Funds This is a joint statement of SEC Commissioner Daniel Gallagher and Commissioner Troy Paredes on the SEC Chairperson’s statement on the proposal to restructure money market funds. They write that after careful consideration, “we determined that the changes were not supported by the requisite data and analysis, were unlikely to be effective in achieving their primary purpose, and would impose significant costs on issuers and investors while potentially introducing new risks into the nation’s financial system.” Source: Sparkinstitute.org (PDF File)
IRS Discontinues Letter-Forwarding Program The IRS has issued Revenue Procedure 2012-35 revising the scope of their letter-forwarding program. Revenue Procedure 2012-35 provides that the IRS will no longer forward letters on behalf of plan sponsors or administrators of qualified retirement plans or qualified termination administrators (QTAs) of abandoned plans under the Department of Labor’s Abandoned Plan Program who are attempting to locate missing plan participants and beneficiaries. Source: 401khelpcenter.com
Lifetime Income Options in 401k Plans As part of an initiative by the U.S. Department of Treasury and the Department of Labor to expand lifetime income choices, the Treasury Department and the IRS recently issued two revenue rulings and two proposed regulations that will make it easier for plan sponsors to offer certain lifetime income options to 401k and other DC plan participants. Source: McKay Hochman
Designated Investment Alternative (DIA) Definition After the final regulations were released, the DOL received commentary from the retirement plan industry seeking guidance on the application of the definition of a DIA in various situations. Many of these issues about the application of the DIA definition to various real life plan investment scenarios are addressed in this Q&A. Source: McKay Hochman
New Rules Provide Greater 401k Transparency The new rules require two disclosures. The deadline for getting the first notice to plan participants was August 30. This notice details the plan’s costs, performance data on all investment options, and the performance of comparative benchmarks. The second disclosure, a quarterly notice first due out in November, will detail how much you are personally paying in fees, including charges related to any 401k loans. Source: Forbes
New 401k Disclosure Regulations Could Cause a Stir in November Fee disclosures by early adopters have produced a collective yawn from employees, but plan participants may not be so apathetic after November 14, when they start receiving their statements for the previous quarter. That’s when they will find out how much in administrative fees is being deducted from their accounts in terms of dollars and cents. Source: CFO.com