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Experts in Personalized Retirement Plan Design & Administration

BPP401k.com Newsletter 11.19.14

Impending Changes to Private Retirement Plans The retirement landscape in America is shifting. The private pension system is under pressure and may be significantly changed through tax reform or more direct efforts to alter the character of the system to a more centralized model. In this eight page article, Marcia Wagner reviews many of the ways policymakers are working to transform the current system. Source: Wagnerlawgroup.com (PDF File)

Aging Boomers and Rollovers to IRAs As baby boomers approach retirement in a defined contribution world, the regulators are focusing on distributions and rollovers to IRAs. The SEC, FINRA, DOL and GAO have all spoken on the subject. Their conclusion appears to be that plan fiduciaries, advisors and recordkeepers need to reconsider their current practices and, in some cases, change their practices. Fred Reish talks about why this is. Source: Fredreish.com

Three Reasons to Offer Employees a 401k Blame it on a lack of knowledge or limited time and cash flow, but either way tons of small business owners aren’t offering their employees some form of retirement savings, despite the fact that it ranks second just behind health care in terms of things workers want. While you may not be under any specific requirement to give your employees a vehicle to save for their retirement, there are three major reasons small businesses should offer a plan. Source: Foxbusiness.com

Fiduciary and Plan Governance Material

Target-Date Fund Outcomes Expose Fiduciaries to Risk To help fiduciaries assess the thoroughness and the adequacy of their documentation of their processes for selecting, monitoring and communicating TDFs, fiduciaries should ask themselves how quickly and in what detail they could respond to the following letter from a participant. Source: Investmenthorizons.com (PDF File)

Many Sponsors Don’t Know Plan Documents, Aren’t Aware They’re Fiduciaries Some of the most common problems audits uncover in retirement plans come down to the basics: the plan sponsor must have a plan document, know where it is, and be familiar with what’s in it. Too many plan sponsors have missed those basics, and many don’t even realize they are fiduciaries as defined by ERISA. Plan sponsors need to pay attention to the plan document and also to the internal controls they’ve set up to run their plans. Source: Bna.com

Three Ways 401k Plan Sponsors Can Reduce Fiduciary Liability Corporate executives designated as a named fiduciary for their company’s 401k have many duties. Unfortunately, running a profitable business usually has a higher priority than the ongoing maintenance of the firm’s retirement plan. But the executive’s fiduciary liability does not diminish in line with the lessened primacy in the executive’s duties. Fortuitously, ERISA provides the plan sponsor with several opportunities to reduce that fiduciary liability. Source: Fiduciarynews.com

Settlement Provides Guidance on Fiduciary Governance Once the parties in complex litigation agree on the terms of a settlement, it is not common for a court to reject the settlement unless there is some profound error or injustice. While a settlement holds no weight beyond the signatory parties, the terms of a settlement can be highly instructive to observers. Here are nine questions to ask. Source: Fraplantools.com

Watch for a New Wave of ERISA Stock Drop Cases Plan fiduciaries may create a fiduciary duty in stock drop cases by incorporating filings with the Securities and Exchange Commission into the Summary Plan Description. Source: Boomerisablog.com

A Fiduciary Tune-Up This 65 page paper by attorney John L. Utz, of Utz & Lattan, was presented at the recent 25th Annual SW Benefits Compliance Conference. The paper reviews a number of topics including: Does Dudenhoeffer change who should serve on a fiduciary committee, making sure investment consultants are subject to fiduciary standards, and IRS emphasis on internal controls and what it means for fiduciaries. Source: Utzlattan.com (PDF File)

The Inattentive Fiduciary: When Supervisors Don’t Supervise The DOL recently commenced legal action against a plan investment manager who caused $7 million in losses. The complaint also named members of the Retirement Committee that retained the manager, and particularly cited them for failing to monitor the investment manager and take action to correct this problem. This complaint serves as a forceful reminder to plan committee members that their responsibilities to monitor investment managers are ongoing and don’t end when the hiring process is completed. Source: Pensionsbenefitslaw.com

ERISA Plan Service Provider Avoids Fiduciary Status – What It Means for Service Providers and Plan Sponsors A recent Third Circuit decision (Santomenno v. John Hancock, et. al.) serves as a reminder to plan sponsors about their fiduciary duties and the need to be vigilant in monitoring fees. This article provides a brief summary of the decision and the lessons it offers both to service providers to plans and plan sponsors. Source: Employeebenefitslawreport.com

ERISA Fiduciary Decisions – Making Changes to Your Qualified Plan’s Investment Lineup There are multiple reasons that could prompt a fiduciary committee to consider making changes in their retirement plan’s investment lineup. Poor performance, eliminating duplicate and overlapping funds, expanding investments alternatives, organizational changes at the fund manager level, evaluation of fees, etc., are all potential reasons for considering investment alternative changes. This four page article summarizes the technical requirements and recommended procedures in making changes to your plan’s investment lineup. Source: Alston.com (PDF File)

Why an Employer Can and Should Set up a Retirement Plan Committee In this article, attorney Ary Rosenbaum writes about how retirement plan sponsors can delegate their retirement plan committee and some of the things they should avoid by setting one up. Source: Jdsupra.com

The Top Five 401k Compliance Matters That Employers Can’t Delegate Away It’s the plan sponsor who typically retains responsibility for overall plan operations as the “Plan Administrator.” So practically every 401k plan sponsor needs to deal with each of the five items listed in this article, sometimes without help from the plan’s current providers. Source: Retirementplanblog.com

Insight: Studies, Research and White Papers

The Middle-Income Boomer Retirement Gap: Savings, Education and Advice The challenges of saving, investing and managing assets through retirement are becoming more complex. Navigating this world requires an increased level of knowledge, training and experience with financial matters and an ability to draw on trusted resources for information and guidance. This study explores how middle-income Boomers are saving for retirement, and the extent they use financial professionals for retirement advice. Source: Centerforasecureretirement.com (PDF File)

Small Business Study Reveals Disconnect Between Retirement Preparedness and Aspirations The Small Business Owners Retirement Readiness Study shines a spotlight on small business owners’ perspective on retirement and provides a better understanding of their retirement needs and aspirations. Compared to the 2011 study, SBOs are feeling more confident, 52 percent of SBOs state they are either “very” or “fairly” well prepared for retirement, and 56 percent have a clear vision of how they will spend their time once they are no longer involved with the business. Source: 401khelpcenter.com

Survey Reveals That, Despite Challenges, More Women Looking Forward to Retirement Despite starting with less savings at retirement and needing to fund more years in retirement, a new survey from Financial Engines found that women are surprisingly optimistic about their golden years. Fifty-one percent of women surveyed said that they are looking forward to retirement, compared to just 41 percent of men. Source: 401khelpcenter.com

Who Is Internationally Diversified? Evidence From 296 401k Plans Paper examines the international equity allocations of over 3 million individuals in 296 401k plans over the 2006-2011 period. Finding suggests that the home bias phenomenon may slowly disappear over time, worker’s salary has a positive effect on international allocations, and factors like education and financial literacy have strong positive effects on international diversification. Source: Bc.edu

Items of Special Interest to Service Providers

Does the DOL Fiduciary Rule Level the Playing Field for Brokers? The reproposal and finalization of the DOL’s fiduciary definition rule (now expected in early 2015) will likely change things for brokers. When the rule becomes finalized, brokers will be subject to a fiduciary standard and to the conditions of several prohibited transaction exemptions. Being a broker to a 401k plan is about to get a lot harder. Source: Fiduciaryplangovernance.com

Take a Trip Into the Small Plan Market — Opportunity Awaits! With 23 million small businesses in the U.S, and more than 55% of workers employed by those small businesses, a potentially lucrative opportunity awaits financial professionals in this market. That is, if you can make it profitable. To do that you need easier to use, streamlined, and cost effective plan design solutions for clients. Source: Principal.com

As a 401k Financial Advisor, Networking Takes Time Author suggests that “when it comes to networking with people either in meeting in-person or online, you should take things slow and not try to make a hard sell because are likely going to scare away someone that can be a valued partner to help build your practice or someone that can act as a referral of business.” Source: Jdsupra.com

Benchmark Study for Hiring Sales Personnel to Grow Your TPA Firm This is a four page summary of the study. The study presents insights on TPAs, their employment of dedicated sales personnel and their impact on sales, revenue and profit, and aims to serve two important objectives: 1) Help TPAs understand the best practices surrounding hiring and maintaining strong salespeople; and, 2) Bring this topic under closer focus so TPAs can determine if hiring a salesperson will help fuel future growth. Includes how to obtain full study. Source: Ta-retirement.com (PDF File)

DC Provider Consolidation Picks Up 2014 promises to go down as one of the more active years for DC provider consolidation and repositioning, with 12 actions taken so far and one big merger pending, according to many industry sources. With more pressure on fees and lawsuits, expect more consolidation as survivors will need massive scale to compete, working in multiple markets and plan types with help from sales of proprietary and downstream products. Source: Napa-net.org

Optimize DC Recordkeepers’ Chances of Being Selected by Large Plans A recently released study and online simulator, by Boston Research Technologies, reveals the weights large plan sponsors place on a wide variety of factors when selecting recordkeepers. Using the quantitatively-derived weights and the accompanying simulator, recordkeepers can determine which one, of the various ways they could position themselves in specific sales contests has the highest probability of success. Source: Linkedin.com

Issue of Lifetime Income

ERISA Advisory Committee 2014 Recommendations on Lifetime Plan Participation The ERISA Advisory Council presented its recommendations on two retirement issues it studied in 2014: Facilitating Lifetime Plan Participation and Outsourcing Employee Benefit Plan Services. This article discusses the EAC recommendations on “lifetime plan participation” and how they may play out in regulatory or sponsor initiatives. Source: Bmogamviewpoints.com

Court, Legal, Legislative and Washington DC

Supreme Court Won’t Review Tussey vs. ABB Fiduciary Breach Case The U.S. Supreme Court declined a petition that it review Tussey et al. vs. ABB Inc. et al., a fiduciary breach case that has been closely watched by the defined contribution plan community. Source: Pionline.com

Supreme Court Declines to Hear Appeal of Tussey v. ABB The Supreme Court published an order declining to hear the appeal of the 8th Circuit decision in Tussey v. ABB from earlier this year. The Court does not provide a reason why they decline to hear appeals, but in this instance, there are at least a few speculative guesses which are outlined here. Source: Fraplantools.com

MassMutual Settled Its “Functional Fiduciary” Lawsuit In the settlement, MassMutual will pay out over $9MM in cash compensation, give a 60-day window for any planned fund changes, and clearly disclose fees and expense ratios in plan funds as well as any revenue sharing payments it receives. The ruling and settlement appear to open the door to further legal action by plan sponsors in a similar arrangement with other providers. Source: Employeefiduciary.com

Harris v. Amgen Decided by Ninth Circuit On October 30, 2014, a three-judge panel of the Ninth Circuit handed down its decision in Harris v. Amgen, a “stock drop” case. The decision came after the Ninth Circuit’s earlier (2013) decision in favor of participant-plaintiffs had been vacated and remanded by the Supreme Court for reconsideration in light of Fifth Third Bancorp et al. v. Dudenhoeffer. This article reviews the Ninth Circuit’s Harris v. Amgen decision, focusing on how that court applied the principles articulated by the Supreme Court in Fifth Third. Source: Octoberthree.com

Compliance and Regulatory Related

More Guidance on New One-Per-12-Month Rollover Limitation The IRS released Announcement 2014-32 and News Release IR-2014-107, providing additional guidance on the new one-per-12-month rollover limitation that applies to IRAs. Announcement 2014-32 is a follow-up to Announcement 2014-15, which was issued earlier this year in the wake of the Bobrow v. Commissioner U.S. Tax Court case that led to a redefinition of this rollover limitation. Source: Ascensus.com

Reporting Changes Required for Multiple Employer Plans DOL issued guidance in an interim final rule requiring certain multiple employer plans to provide additional information to the agency. Beginning with 2014 plan years, MEPs that file Form 5500 or Form 5500-SF must include detailed information relating to participating employers. Source: Ascensus.com

IRS Provides Guidance on Application of One-Per-Year Limit on IRA Rollovers This IRS announcement is intended to address certain concerns that have arisen since the release of Announcement 2014-15. The IRS will apply the Bobrow interpretation of ยง 408(d)(3)(B) for distributions that occur on or after January 1, 2015. This means that an individual receiving an IRA distribution on or after January 1, 2015, cannot roll over any portion of the distribution into an IRA, if the individual has received a distribution from any IRA in the preceding one year period that was rolled over into an IRA. Source: Erisalawyerblog.com

Windsor Decision on DOMA — Does Your Plan Have a Year-End Plan Amendment Deadline? Among other things, Notice 2014-19 dealt with the need for tax-qualified retirement plans to adopt plan amendments to conform to the new Windsor standard. Whether or not a tax-qualified retirement plan needs to be amended to conform to Windsor depends on plan design. For calendar year plans, the deadline will be December 31, 2014 — not too far down the road. Source: Employeebenefitslawreport.com

IRS Clarifies Application of One-Per-Year Limit on IRA Rollovers In IR-2014-107, the IRS clarifies application of one-per-year limit on IRA rollovers, allows owners of multiple IRA’s a fresh start in 2015. Source: 401khelpcenter.com

New IRS Rules on Direct Rollovers Require Changes to DC Plan Administration by January 1, 2015 The IRS recently released guidance allowing participants to allocate the taxable and non-taxable portions of a single distribution from a defined contribution retirement plan into separate accounts. The rules apply to distributions beginning January 1, 2015, though participants may select an earlier applicability date in certain circumstances. Sponsors of DC retirement plans should consider how their administrative practices and participant communications may need to be changed in light of these new rules. Source: Mwe.com

How to Locate Missing Participants The DOL recently issued new guidance (FAB 2014-01) on locating missing participants of terminating DC plans. This article is a discussion of the guidance. Source: Kravitzinc.com (PDF File)

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