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BPP401k.com Newsletter 03.21.12

Why Your Employees May Balk at Their 401k Fees In the months   ahead, when employees across the country open the quarterly statements from   their 401k retirement savings plan, the executives overseeing those plans may   face some tough questions. Source: Washington Post

Current Challenges and Best Practices for ERISA Compliance for 403(b) Plan Sponsors The 2011 ERISA Advisory Council studied the current   challenges for ERISA compliance for 403(b) plan sponsors and heard testimony   supporting the proposition that there is a need for additional clarification and   guidance for plan sponsors who maintain and/or offer 403(b) plans. The   objectives of this report are to (1) identify areas where guidance is confusing   or lacking relating to complying with the new 403(b) regulations and (2) to   determine what actions the DOL could take to enhance compliance with the   regulations issued by DOL, as well as to ease certain regulatory burdens for   403(b) plan sponsors, especially smaller employers. Source: U.S. Department of  Labor.

Are   You Ready for a DOL Audit? 401k and Pensions Plans are in the Crosshairs Plan administrators often prepare for IRS audits by doing their own   plan compliance audits, but fewer prepare for a possible DOL audit in the same   way, even though these audits are becoming more common. Source: Littler   Mendelson PC

401k   Outsourcing: The Next Big Thing Outsourcing is the hiring of   a consultant from outside the company to complete a task or provide a service   that they are better suited to do then your own employees. Many small to mid   sized plans are beginning to outsource 401k fiduciaries. Source: Forbes

Eight   Steps to Reduce Risk Through Good Governance of Benefit Plans Employers take risks every day in the normal course of their businesses. But the   employer who sponsors an employee benefit plan, such as a 401k or medical plan,   assumes additional risks. Here are eight steps to a sound governance process   that will help reduce the risk. Source: Warner Norcross & Judd LLP

Conerly  on the Economy for March 2012 “Conerly on the  Economy” displays charts of the most important economic indicators, with  Bill’s comments on the charts and the outlook. Bill Conerly connects the dots  between the economy and business decisions, helping corporate executives and  small business owners make more profitable decisions. Source: Conerly  Consulting

Re-Enrolling:   Doing Well While Doing Good The article notes that in recent   years, plan sponsors have become aware of the importance of improving the   quality of participant investing. As plan sponsors have focused on this issue,   many have learned that the most effective and immediate way to improve   participant investing is to “re-enroll” the 401k plan. Source: John Hancock

America’s   Dying Corporate Pension System Corporate pension plans have   been undergoing a massive change in the last twenty to thirty years. Instead of   funding a pension plan, which rewards a career of service with a lifetime of   payments when a retiree reaches a certain age, companies are funding 401k plans,   which place the employee in control of his or her financial future. What do   these changes mean? Source: U.S. News & World Report

Administration’s   Budget Proposals Would Limit Some Retirement Deductions    President Obama’s fiscal 2013 budget proposal, unveiled on February 13, 2012,   would trim the deductions for certain retirement plan contributions by   upper-income taxpayers. Source: CCH

How   Early is Too Early to Make a Matching Contribution Is it a   matching contribution if the employer makes the contribution before the   participant makes the elective deferral for that pay period? Source: Pension   Protection Act Blog

Complexity   of Design in Target-Date Funds Plan sponsors now are expected   to apply the same process to target-date funds that they apply to other   investments. Because of the complexity of the design of TDFs, that job is more   difficult than with traditional investments. Source: Plansponsor.com

PIMCO   Deploys Derivatives in Race for Target-Date Fund Investors   Invesco and Pacific Investment Management Co. are adding riskier assets and   complicated strategies in target-date funds as they seek to gain ground on   Fidelity Investments and Vanguard Group Inc. in this fast- growing segment of   the U.S. retirement market. Source: Bloomberg

Privacy   and Security Issues Affecting Employee Benefit Plans The 2011   ERISA Advisory Council studied Privacy and Security Issues Affecting Employee   Benefit Plans (other than health care benefit plans). The Council focused on the   privacy and security of benefit data and personal information in light of the   dramatic changes in technology and its use in the last decade in employee   benefit plan management. The Council examined issues and concerns about   potential breaches of the technological systems used in the employee benefit   industry, the misuse of benefit data and personal information, and the impact on   plan sponsors, service providers and participants and beneficiaries. Source:   U.S. Department of Labor.

Hedge   Funds and Private Equity Investments The 2011 ERISA Advisory   Council examined the investment of ERISA plans in hedge funds and private equity   funds, the risks associated with these investments, and the process plan   sponsors are taking to evaluate their appropriateness as investments in pension   benefit plans. The purpose of the Council’s examination is to provide   recommendations to the Department of Labor on guidance for plan sponsors, such   as suggested best practices, for purposes of evaluating the investment   strategies for and monitoring the investment of retirement plan assets in these   investment options in a manner that is consistent with the obligations of plan   sponsors as fiduciaries under ERISA. Source: U.S. Department of Labor.

VIDEO:   EBRI’s Dallas Salisbury Discusses the Future of Retirement    EBRI’s Salisbury discusses the future of retirement including the latest data   from the largest integrated DC and IRA databases, the 21st Retirement Confidence   Survey. Source: Pensions & Investments

IRS Provides Tips on   How to Determine If a Plan Loan’s Interest Rate Is “Reasonable” When a retirement plan allows participant loans, that loan is an   investment of plan assets and must bear a “reasonable” rate of interest. In the   latest issue of Retirement News for Employers, the IRS provides guidance on how   to determine if a retirement plan loan interest rate is reasonable. Source:   CCH

District of   Columbia Revises New Withholding Rule for Retirement Plan Distributions The District of Columbia has revised its recent requirement regarding  increased withholding from retirement plan distributions to D.C. residents,   making this rule applicable only to lump sum distributions. Source: Seyfarth   Shaw LLP

Labor   Department Will Continue to Focus on Disclosure Initiatives    The Semi-Annual Regulatory Agenda released by the Labor Department reflects a   continued emphasis on disclosure. With the issuance in January 2012 of final   regulations under ERISA Section 408(b)(2) that govern the disclosure of   compensation received by plan service providers, the Agenda reveals that further   regulatory action will be focused on the Annual Funding Notice, Target Date Fund   disclosures, a guide for the Section 408(b)(2) disclosures, and Pension Benefit   Statements. Source: Benefitslink.com

Form   5500 Filing Rejections For the past couple of years,   significant attention has been paid to complying with the electronic filing   requirements of EFAST2. Far less attention, however, has been paid to how the   DOL will handle the more immediate access to Form 5500 information. Source:   Sungard/Relius

DOLs   Exemption for Use of Proprietary Mutual Funds Recently, the   DOL published a proposed exemption for the Principal Financial Group. The   proposed exemption is important because it modifies or clarifies existing relief   afforded by class Prohibited Transaction Exemption (PTE) 77-4 and permits   Principal to invest client plan assets into proprietary mutual funds through   target-date funds or other insurance company pooled separate accounts. Source:   Plansponsor.com

IRS   Issues Interim Report on 401k Compliance The results of an   extensive survey of 401k plan sponsors have been published by the IRS in an   interim report and provide a snapshot view of the design and operation of plans   across the country. Highlights of the interim report are illustrated in this   article for easy comparison to your own plan. Source: Warner Norcross & Judd   LLP

Time to   Prepare for Participant Fee Disclosures With Department of   Labor guidance now complete and a new firm deadline in place, it is time for   plan administrators to start preparing to distribute fee disclosures to all plan   participants. This article explains the new deadline, summarizes the disclosure   requirements, and describes the options for paper or electronic distribution of   the disclosures. Source: Davis Wright Tremaine LLP

A   Checklist for Participant Fee Disclosure The fee disclosure   regulations for participants are dense and contain an overwhelming amount of   information. It seems likely, particularly in multivendor situations, that there   will be plenty of participant confusion leading to questions of the plan   sponsor. As the industry drives towards the implementation of these new   regulations, plan sponsors might wish to speak with their advisors to understand   the disclosure information for responding to participant questions and to   confirm that they are on track to fulfill their fiduciary responsibilities.   Source: Society for Human Resource Management

Just   How Much Are You Paying for Your 401k? If you work for a   small employer, you’re likely paying more for your 401k than you would be if you   were working for a large employer. That’s because small employers don’t get the   economies of scale that large employers get. Source: Yahoo Finance

When 401k   Fees Become Transparent After more than four years of   deliberation, public comments and delays, the Labor Department’s disclosure rule   is finally set to take effect July 1. But the 70 million plan participants won’t   see the results until they receive their 401k statements for the third quarter  in late fall. The question is: What will they do with this new information? And   how will financial advisers respond to the questions that will be triggered?   Source: Investmentnews.com

The   403(b) SPARK Standard Is Not a DOL Disclosure Solution There   appears to be a number of parties that are touting SPARK’s ISA standards as the   solution to 408(b)2 and 404a-5-compliance; that the SPARK standards will provide   a solution to these new DOL disclosure rules. Source: Business of Benefits

FSI Lays   Into Labor Department on Fiduciary Proposal The Financial   Services Institute and the Financial Services Roundtable have upped the volume   in their latest exchange with the Labor Department over its plans to expand the   fiduciary universe. This time, the advocacy groups are demanding a progress   report from the federal agency. Source: Investmentnews.com

White Paper   Addresses Issue of Broker-Dealers as Fiduciaries Citi   announced it has released a white paper on the top issues that financial   advisors will likely face in the wake of potential new rules recommended in an   SEC Staff study on uniform fiduciary standards for both broker-dealers and   registered investment advisors, entitled “Broker-Dealers as Fiduciaries? How the   SEC Staff’s Study Could Raise the Bar for Investment Advice.” Source:   401khelpcenter.com

Broker-Dealers   as Fiduciaries? The shift from a suitability standard to a   fiduciary one recommended by the SEC staff study is more than a cosmetic change.   Potential changes could have a profound impact on business practices. This white  paper reviews the issue. Source: Citi Group

Employers   Open to Higher Defaults and Auto Escalation in DC Plan Design    Small and midsize employers are willing to adopt higher default deferral rates   and to include automatic escalation in DC plan design if it will increase plan   participation, according to a Harris Interactive poll. Source: Pensions &  Investments

US   Stock & Bond Mutual Funds See Net Inflows of $46B in February 2012 –   Summary: An uptick in confidence amid positive indicators on the economy meant   that investors cautiously put an estimated $46 billion in net inflows into stock   and bond mutual funds in the US in February 2012. That marked an increase from   January. Source: 401khelpcenter.com

Vanguard   Reports Target-Date Fund Usage Continues to Skyrocket Among 401k   Participants Nearly one in four 401k participants invest   solely in target-date funds — a six-fold increase over the past five years,   according to new Vanguard research. Adoption among new participants is   considerably higher, with 64% of employees entering their plan for the first   time investing in a single target-date fund. Source: 401khelpcenter.com

Target-date   Fund Adoption in 2011 In 2011, one-third of all Vanguard   participants were invested in a single, professionally managed account option,   including 24% in a single target-date fund. Use of target-date funds in defined   contribution plans continues to grow rapidly. At the end of 2011, 82% of plans   offered a target-date fund, 47% of participants had a position in the funds, and   the funds accounted for 27% of total contributions. This Vanguard research note   examines the factors behind the growing popularity of TDFs and their impact on   participant portfolios. Source: Vanguard

Retirement   Confidence at Near Record Low The survey found that 14% of   workers and 21% of retirees are very confident of having enough money to live   comfortably throughout their retirement years, down substantially from   confidence level highs of 27% and 41%, respectively, in 2007. Source:   Financial-planning.com

The 2012   Retirement Confidence Survey Americans’ confidence in their   ability to afford a comfortable retirement is stagnant at historically low   levels in the face of more immediate financial concerns about job uncertainty   and debt, according to the 22nd annual Retirement Confidence Survey (RCS), the   longest-running annual survey of its kind in the nation. Source: Employee   Benefit Research Institute

March   2012 ERISA Litigation Newsletter Lead article discusses the   Sixth Circuit’s recent decision in Pfeil v. State Street Bank & Trust, a   potentially significant opinion in the field of employer-stock litigation. The   article examines the Pfeil court’s suggestion in dicta that the presumption of   prudence — i.e., a presumption insulating plan fiduciaries’ decisions to permit   participant employer-stock investments where plan terms permit or require them —   does not apply at the motion to dismiss stage. Source: Proskauer Rose LLP

Massachusetts   Creating Country’s Largest Open Multiple Employer Plan The   Massachusetts Senate passed HB 3754, which authorizes the Massachusetts State   Treasurer to set up a multiple employer plan for not-for-profits in   Massachusetts containing employee and employer contributions. If HB 3754 becomes   law, it has the potential to create the largest open multiple employer plan in   the country. The bill is a little light on details. Source: Pension Protection  Act Blog

Massachusetts   Bill Will Allow a Multiple Employer 401k Plan for Nonprofits    The Massachusetts state legislature passed a bill that would allow the state   treasurer to set up a 401k plan for not-for-profit agencies. The bill gives the   state treasurer the power to do research regarding the status of retirement   programs available to not-for-profit employees and see if there is any appeal to   creating a program for their benefit. Source: Benefitspro.com

Employer and Owner Liable   for Failing to Roll Over Employee’s Money In a recent case, a   Federal District Court in New York found an employer, its sole owner & plan   fiduciary, and the 401k plan sponsored by the employer, liable for damages for   failing to roll over an employee’s 401k account in a timely manner. Source:   Benefit Consultants Group

Purchaser   Need Not Duplicate Shut-Down Benefits When Mirroring Seller’s Pension   Plans In Shaver v. Siemens Corporation, 2012 U.S. App. LEXIS   4081 (3d Cir. Feb. 29, 2012), the U.S. Court of Appeals for the Third Circuit   issued a precedent-setting opinion addressing the complex relationship between    ERISA’s anti-cutback rules and common corporate transactions. This decision is   important for employers considering acquiring another employer’s assets and   workforce because it addressed the employee benefits issues related to the   common practice of providing transition benefits under the seller’s pension plan   after the closing date of an asset purchase. Source: Littler Mendelson PC

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