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Experts in Personalized Retirement Plan Design & Administration

BPP401k.com Newsletter 12.10.14

A Guide to Communications/Participant Education DC plans are most successful when participants understand their choices and are empowered to take action. As a plan sponsor, you must transform complexity into simplicity, and fear into action. Yet, you are faced with many communications challenges; because participants crave simplicity, but DC plans are inherently complex. Though communication can be difficult, the benefits offered by a successful communication program outweigh the challenges. Source: Nagdca.org

Hiring a Quality Auditor to Perform Your Employee Benefit Plan Audit The AICPA Employee Benefit Plan Audit Quality Center prepared this 24 page advisory to provide plan sponsors, administrators, and trustees with an understanding of the importance of hiring a quality auditor to perform their employee benefit plan financial statement audit, and information to help select a quality auditor. Source: Aicpa.org (PDF File)

Auto Features Gain Ground With 401k Plan Sponsors Employers are taking a more engaging and firm approach to making sure employees take retirement saving seriously, making use of automatic enrollment and escalation, as well as personalized tools. And both employers and retirement plan providers are noting changes in the savings attitudes of employees. Source: Benefitnews.com

403(b) Plans

NTSA 403(b) Plan Compliance Calendar This 403(b) Plan Compliance Calendar is a listing of the critical compliance deadline dates for 403(b) plans. Some of the deadlines only apply to particular plan types (such as ERISA plans) and are noted accordingly. This year’s calendar is not significantly different from the 2014 calendar, which should be good news for all of those who work with 403(b) plans. Source: Ntsa-net.org

Fiduciary and Plan Governance Material

Roadmap to a Successful Tiered Investment Menu Design and Communication Program Plan fiduciaries have an important task of managing fiduciary responsibility and, at the same time, designing an investment menu that is easily understood by participants and addresses the needs of a diverse participant base. Thoughtful investment design can help lead to better participant outcomes. This paper suggests that a first step is to shift the focus of menu design to a tiered structure, based on a plan’s unique needs and the level of participant involvement. Source: Manning-napier.com (PDF File)

How to Evaluate Your 401k Plan Investment Advisor Many plan sponsors use an investment adviser to help them manage their 401k plan. “This is a smart decision since most advisers are able to save plan sponsors at least as much as they charge,” writes the author. But how can you tell if you are working with a good investment adviser? Six suggestions are given. Source: Lawtonrpc.com

Evaluating Plan Expenses: A Road Map of Possible Routes and Potholes to Avoid! It is important for plan fiduciaries to understand that while certain plan expenses can be paid out of plan assets, such expenses must be reasonable. A plan fiduciary must also evaluate and defray investment fees and expenses as part of that process because such costs could have a significant impact on plan investment returns. Therefore, to fully satisfy his/her fiduciary obligations with respect to a plan, each fiduciary should understand how to evaluate the myriad of plan fees, including unraveling those associated with various plan investments and plan services. This article provides guidance. Source: Drinkerbiddle.com (PDF File)

Insight: Studies, Research and White Papers

PSCA Releases 57th Annual Survey of the 401k System The survey finds that plan sponsors are spending more time and effort to educate, promote, and encourage saving for the long-term. They are making great strides in adopting new plan design features, investments, and financial wellness programs that are making a positive impact on participant outcomes. This year, 613 plans with eight million participants and $832 billion in plan assets were surveyed. Source: 401khelpcenter.com

Fee Compression Slowing, Fee Structures Changing Asset levels continue to peak in DC plans, driving fees tied to asset levels higher in the investment management as well as recordkeeping and administration marketplaces. However, after three straight years of material compression in recordkeeping and administration expenses, the market may have found equilibrium. Source: Multnomahgroup.com

Items of Special Interest to Service Providers

Differentiate Yourself in the 401k Market If you want to stop competing on fees (and funds and fiduciary status), Sharon Pivirotto, CEO of 401kbestpractices.com, suggests five things you can do to identify the value you actually bring to the table and clearly articulate in a way that helps plan sponsors understand why they would want to hire you (as opposed to a product or vendor you might be able to represent). Source: The401ksgblog.com

Why it’s up to the Industry to Solve the Fiduciary Standard Issue In this 1:43 minute video, HighTower Advisors CEO Elliot Weissbluth discusses how financial advisers and clients will ultimately be the ones to navigate through this key transition. Source: Investmentnews.com (free registration may be required)

Cerulli Sees Consolidated, High Tech Future A limited group of strategic acquirers will continue to gain influence in the financial advisory industry, according to new research from analytics firm Cerulli Associates. Helping to fuel the trend is the relative aging of financial advisers and the lack of succession planning and engagement of younger generations of advisers. Source: Planadviser.com

When Will the Fiduciary Reproposal Surface? The revised guidance plan provided for the first time an expected release date for final regulations regarding a new required “guide” to accompany the disclosures that must be provided to responsible plan fiduciaries under the 408(b)(2) regulations. The final regulations are projected to be out in September 2015. Source: Napa-net.org

DOL Planning RFI on 408(b)(2) Disclosure Effectiveness The Department of Labor wants to request new industry input and form focus groups about the effectiveness of retirement plan service provider fee disclosure requirements. The DOL says a new information collection effort is needed to explore current practices and effects of a final regulation. Source: Plansponsor.com

Target-Date Funds

Are Annuities a Good Fit for Target-Date Funds? New regulatory guidance allowing plan sponsors to include annuities in QDIA-ready target-date funds is a watershed moment for the retirement industry. But cost and complexity may warrant a look at other reliable income options, writes Glenn Dial. Source: Allianzgi.com

Target-Date Glide Paths: Balancing Plan Sponsor Goals The challenge of target-date glide path selection lies in striking a balance between two goals: the ability to replace preretirement income over the course of retirement, and the ability to limit the risk of capital loss close to retirement. Because no one glide path can simultaneously satisfy both goals optimally, a compromise is required, and thus the selection process must be informed by the subjective horizon and risk preferences of the sponsor acting as an agent for plan participants. This eight page paper provides detailed analysis. Source: Troweprice.com (PDF File)

Court, Legal, Legislative and Washington DC

Tenth Circuit Finds Plan Administrator Has No Duty to Inquire Into Authenticity of Beneficiary Designation The Tenth Circuit affirmed and further noted that Kristopher’s allegations that the forms were forged failed to state a claim under ERISA because a plan administrator has no duty to inquire into the authenticity of the forms if it had “no reason to suspect that anything was amiss.” Source: Erisapracticecenter.com

Courts May Require Disclosure of Investment Policy Statements In Murphy v. Verizon Commc’ns, Inc., the Court of Appeals for the Fifth Circuit considered whether investment guidelines must be provided upon request to plan participants and beneficiaries and determined that ERISA requires the disclosure of formal legal plan documents. Source: Winston.com

Plenty of Regulatory Action Ahead for Retirement Industry Experts from Drinker Biddle & Reath LLP had no shortage of topics to cover in a recent discussion about potential regulatory and legislative actions related to employer-sponsored retirement plans. Upcoming actions from the Congress, DOL, SEC, and FINRA are all expected to have a direct impact on the way retirement plans are administered under ERISA and other legislation. Source: Planadviser.com

Compliance and Regulatory Related

Eligible Rollover Distributions — Safe Harbor Notices Revised In Notice 2014-74, the IRS issued amendments to the safe harbor eligible rollover distribution notices, one of which describes the rollover options available to distributions from non-Roth accounts and the other of which describes the rollover options that apply to distributions from designated Roth accounts, for changes in the law and other clarifying changes. Several of the changes in the non-Roth account notice address the tax effects of in-plan Roth rollovers. Source: Benefitsbryancave.com

After-Tax Contributions Eligible for Rollover to Roth Account After the recent IRS Notice 2014-54, people are asking about converting after-tax funds to Roth IRAs. In practice, there are very few plans that still have after-tax contributions available since most were written out of plans after the Tax Reform Act of 1986. But with the renewed interest, offering after-tax contributions may come back, however, plan sponsors should beware of the pitfalls. Source: Benefit-resources.com

New Safe Harbor Explanations for Eligible Rollover Distributions The IRS issued guidance amending the safe harbor explanations for notices that plans must provide to recipients of eligible rollover distributions. These amendments reflect recent updates to the rules governing the allocation of pretax and after-tax amounts and distributions in the form of in-plan Roth rollovers. They also remove redundant and out-of-date language and make other clarifications. Employers can use the updated explanations to satisfy their 402(f) notice obligations. Source: Xerox.com (PDF File)

2015 Compliance Calendar for Defined Contribution Plans This 2015 compliance calendar for defined contribution plans shows recurring compliance and notice requirements for qualified defined contribution plans. The deadlines are for plans with calendar-year plan years and is intended to provide plan sponsors with a list of notable deadlines. Source: Vanguard.com (PDF File)

IRS Issues Guidance on Distribution Allocation Rules and Updated 402(f) Notice The IRS recently released guidance on the allocation of pre-tax and post-tax amounts distributed from certain tax-qualified plans. In connection with this change, the IRS issued revised safe harbor rollover notices to satisfy the notice requirements under Code Section 402(f). The guidance accompanying the notices also describes changes that should be made to the existing model notices to reflect tax law changes since 2009. On and after December 8, 2014, plan administrators who rely on the safe harbor rollover notices must use the revised notices. Source: Troutmansanders.com

401k Nondiscrimination Tests Explained With acronyms like ADP, ACP, NHCEs, and HCEs, the technicality of 401k plan nondiscrimination testing may seem overwhelming. Even though nondiscrimination testing is likely performed by a plan’s recordkeeper or third-party administrator, plan sponsors need to understand the basics of the tests, including the types of contributions that are tested, the methods used and the consequences of failing. Source: Plansponsor.com

IRS and DOL Provide Additional Electronic Filing Guidance In late September, both the IRS and DOL issued regulations regarding certain electronic filings related to employee benefit plans. The IRS guidance is final and effective September 29, 2014, but generally not applicable until 2015. The DOL guidance is proposed and open for comment but may be followed immediately. Source: Prudential.com (PDF File)

IRS Changes Safe Harbor Explanations for Recipients of Rollover Distributions From Qualified Retirement Plans Internal Revenue Service Notice 2014-74 amends the two safe harbor explanations in Notice 2009-68 for notices that must be sent to recipients of eligible rollover distributions from qualified retirement plans as required under Section 402(f) of the Internal Revenue Code. Source: Practicallaw.com

Updated Model Eligible Rollover Distribution Notices IRS has updated the model notice for Sponsors of 401(a), 403(a), 403(b) and governmental 457(b) plans to notify participants of rollover options for their distributions from Roth and non-Roth accounts, including the right to direct pre-tax and after-tax amounts to separate destinations (Notice 2014-74) Source: IRS (PDF File)

DOL Issues New Guidance on Locating Missing Participants Reviews DOL guidance on locating missing participants. While FAB 2014-01 specifically applies to locating missing participants in connection with a DC plan termination, it may provide useful guidance in other similar circumstances involving missing participants, such as un-cashed checks and required minimum distributions. Source: Wagnerlawgroup.blogspot.com

Fixing Common Plan Mistakes — Failure to Obtain Spousal Consent A common plan mistake is the distribution to a participant of a benefit approved automatically via an electronic distribution request, and the plan sponsor not realizing that it is responsible for securing the spousal consent. Article provides more detail and how to correct such errors. Source: Belfint.com

2014 Plan Year-End Compliance Reminders for DC Plans Subject to ERISA Every year, plan sponsors must make sure their plans meet certain compliance requirements. This publication identifies the materials you need to review and will help you prepare for year-end. This information applies to qualified defined contribution plans and 403(b) plans that are subject to Title I of ERISA. Source: Prudential.com (PDF File)

Final Regulations on Qualified Longevity Annuity Contracts The final regulations contain numerous requirements and possible traps in order to achieve the requisite status under the RMD rules. Given all of these requirements and the overall complexity of explaining annuities generally to participants, it remains to be seen how quickly plan sponsors adopt these vehicles in their plans and even if they are permitted under the plan, how quickly participants embrace these products. Source: Thompsoncoburn.com

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