Experts in Personalized Retirement Plan Design & Administration Newsletter 02.12.18

Millennials Embrace ESG Option in Bloomberg’s 401k plan Millennials are the largest identifiable group that has elected to participate in the ESG-focused fund in Bloomberg’s $2.5 billion 401k plan, said Cathy Bolz, global head of benefits at Bloomberg. Just under 1% of the plan’s total assets are invested in the Parnassus Core Equity Fund, which focuses on socially conscious U.S. large-cap companies. Source:

Recordkeepers Kick Off the New Year by Enhancing Online Participant Education For the past two years there has been an industry-wide focus on employee retirement and financial wellness education, and the first weeks of 2018 indicate this trend will continue. Source:

Are HSAs a Better Investment Vehicle Than 401ks? When considering the tax advantages, an argument can be made that HSAs are a better investment vehicle, particularly when used only for qualified medical expenses, a new report claims. Source:

Can 401k Plan Sponsors Continue to Ignore the Benefits of Health Savings Accounts? Jamie Greenleaf recently discussed the benefits of Health Savings Accounts. Tax benefits alone are reason enough to add a Health Savings Account to a company’s benefits package. Source:

Fiduciary and Plan Governance Material

Don’t Make Your 401k a Litigation Target You are at risk because no plan is safe when there are so many class action lawyers out there aggressively looking for lawsuits to file. Some plans are more attractive lawsuit targets than others, and there are things fiduciaries can do to lower their risk of being hit with a 401k lawsuit. Source:

401k Best Practices: Decision-Making and Documentation Not following sound decision-making processes and procedures can result in plan disqualification, fiduciary breaches, lawsuits, and personal liability. This article outlines fiduciary best practices related to 401k plan decision-making and documentation. Source:

A Simple Guide for Meeting 401k Fiduciary Responsibilities It doesn’t need to be difficult for employers meet their 401k fiduciary responsibilities and avoid liability. They just need to understand these responsibilities and take action in six key areas. Source:

Plan Fiduciaries Need to Google Their TPA’s Principals Would you hire a plan provider with possible access to retirement plan assets that was convicted or sanctioned for financial improprieties? Sometimes you ask for trouble if you just don’t do something as simple as doing a quick online search of the plan provider you’ve hired or are about to hire. Source:

The Educated Fiduciary: How to Up Your Game For those fiduciaries self-aware enough to know there are things they need to learn, here are some suggestions for ways they can raise the bar in fulfilling their fiduciary responsibilities. Source:

Making Sure 401k & 403b Fees Are “Necessary” and “Reasonable” – Part One As a plan sponsor, you are required to understand all of the fees that are associated your organization’s retirement plan benefit program. This is a challenge because plan fee structures are often opaque, complicated (needlessly so) and, sometimes, downright misleading. Source:

Insight: Studies, Research, and White Papers

Financial Peace of Mind Is Major Financial Objective of Generation X 401k Savers T. Rowe Price has announced the results of the third installment of its Retirement Savings and Spending survey, revealing that 77 percent of Generation X retirement savers with 401ks view having financial peace of mind as a major financial objective, leading the 16 financial objectives scored in the survey. Source:

Retirement Income, Managed Accounts and “Shadow Fiduciaries” New Cerulli research shows the most common reason for which 401k plan sponsors offer participants a managed account service is that it can be positioned as a retirement income solution; also considered is the emergence of so-called “shadow fiduciaries.” Source:

Average Retirement Savings Balances Reach Six Figures in 2017 Fidelity released its quarterly analysis of 401k and individual retirement accounts. The analysis reveals that IRA and 401k accounts continue to hit record levels. Increasing contributions and a strong stock market drove both the average 401k and IRA balances over six figures. The average 401k balance rose to $104,300, 13 percent higher than Q4 2016. Source:

Retirement Savers Flee Stocks as Market Slides After racing into equities in January, they did an about-face as markets fell. Savers moved into money and fixed-income funds, trading at close to three times the norm, according to Alight Solutions’ 401k Index. Source: (registration may be required)

Fidelity Finds Increase in Retirement Plan Millionaires The number of 401k savers with at least $1 million in their 401k increased to 150,000 at the end of 2017, up from 93,000 a year ago. The number of investors with $1 million in their IRA account rose to 152,000, an increase from 109,000 at the end of 2016. Source:

Many Workers Unaware of Tax Credit for Retirement Savers Nearly two in three American workers do not know about the Tax Credit for Retirement Savers, the Transamerica Center for Retirement Studies learned in a survey. Source:

Items of Special Interest to Service Providers

How to Sell an RIA Practice in a Hot M&A Market Jamie Greenleaf recently discussed the benefits of Health Savings Accounts. Tax benefits alone are reason enough to add a Health Savings Account to a company’s benefits package. Source:

Court and Legal

RadioShack Defeats Challenge to Stock Losses in 401k Plan RadioShack executives defeated a lawsuit accusing them of violating federal benefits law by allowing workers to invest in company stock despite knowing of the company’s financial decline and impending bankruptcy. Source: (registration may be required)

Legislative and Washington DC

Tax Cut Spurs Employers to Boost 401k Contributions Following the Tax Cuts and Jobs Act that passed in December, many plan sponsors are contemplating plan changes as well as revisiting total rewards including wellness programs and benefits packages. Companies are also contemplating whether to issue a one-time bonus, discretionary 401k contribution or increase the plan match. Source:

Retirement Provisions Included in Federal Budget Deal The two-year budget agreement that Congress passed in the early morning hours of Friday, Feb. 9 includes several tax policy changes affecting retirement plans. Source:

Tax Reform Bill Includes Extension of Time to Repay Retirement Plan Loans With sweeping tax reform going into full effect last month, many 401k participants are wondering how and if their plans will be affected. The answer to that question is: not much. The biggest news for 401k owners with regard to the new tax laws is the extension of payback dates on outstanding loans. Source:

Cybersecurity Issues

Retirement Plans and Cybersecurity Cybersecurity is a topic that is routinely grabbing headlines across industries, and employee benefit plans are not immune to the risks of cybercrime. The best efforts to reduce these risks are multi-faceted approaches to protecting sensitive information, with employers, their plan participants, and their benefit providers all working in tandem to safeguard personal data. Source:

Fiduciary Rule

DOL, SEC Fiduciary Rules Likely in Fall The Securities and Exchange Commission and the Labor Department will likely release simultaneously in the fall their fiduciary rule proposals, prominent ERISA attorneys say. Source:

Past, Present and Future of the DOL Fiduciary Rule All three branches of government have been engaged on a variety of fronts in determining the future course of the DOL Fiduciary Rule. Those proceedings appear to have reached a temporary lull. This article reviews the current “lay of the land” with respect to the DOL Fiduciary Rule and to look forward to anticipate what may lie ahead. Source:

Compliance and Regulatory

New VCP Compliance Fees Will Increase the Cost of Correcting Some Plan Errors For many large plan sponsors, the new asset-based fee schedule could significantly reduce the VCP compliance fee for correcting certain plan errors. But, for all plan sponsors, the cost of correcting many of the most common plan errors will increase significantly. Source:

401k Plan Nondiscrimination Testing To ensure a 401k plan is not favoring owners or highly paid employees, the IRS requires certain nondiscrimination testing is performed. The ADP measures the employee deferral contributions and the ACP measures the employer matching contributions. ADP/ACP testing must be completed annually. Here is a quick review. Source:

Tips for Keeping Your Plan in Compliance It’s important to develop review procedures in order to prevent mistakes in administering your plan. Left uncorrected, mistakes could readily jeopardize your plan’s tax-favored status. Source:

2018 Pension Plan Limitations Not Affected by Tax Cuts and Jobs Act The Internal Revenue Service announced that the Tax Cuts and Jobs Act of 2017 does not affect the tax year 2018 dollar limitations for retirement plans announced in IR 2017-177 and detailed in Notice 2017-64. Source:

401k Plan Documents: Keeping All Your Ducks In a Row Many 401k tasks either require documents that should be retained or require documentation for future reference. This table lists several important documents that are smart to keep handy, either in the event of an audit, or to reference during the ongoing administration of the 401k. Source:

Hardship Withdrawals — An Attractive Nuisance Becomes More Attractive President Trump has signed the Bipartisan Budget Act of 2018 into law, avoiding another federal government shutdown. That law includes provisions that make hardship withdrawals more attractive: removing barriers, increasing available monies, and removing the suspension of contributions. Source:

Hardship Withdrawal Changes Included in Budget Deal The bill calls for the Secretary of Treasury to amend regulations to delete the six-month prohibition on contributions to a retirement plan following a hardship withdrawal. The allowance of hardship withdrawals is also extended in the bill to contributions to a profit sharing or stock bonus plan, qualified non-elective contributions (QNECs) and qualified matching contributions (QMACs) and earnings on the contributions now allowed. Source:


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