Experts in Personalized Retirement Plan Design & Administration

August 26, 2013

The Essential Plan Providers for a 401k Plan Plan sponsors need to make solid choices of retirement plan providers because it’s their neck on the line if they don’t. So this article is about the essential plan providers to hire and what to avoid when hiring them. Source:

Automatic Contribution Increases Your plan can automatically increase salary deferral contributions for participants if it has or adopts an automatic contribution arrangement feature. An automatic-contribution-increase feature can periodically increase the amount employees contribute from their wages to the plan, and help employees save more for their retirement. Source:

Making 401k’s Saver-Friendly Center for American Progress, a liberal-leaning, nonpartisan think tank, proposed a new way of structuring 401k’s. The new plan would provide guaranteed lifetime payouts while relieving employers of management costs and fiduciary responsibilities. Source:

Ten Attributes of a Retirement-Ready 401k Plan As a 401k plan sponsor you have no doubt embraced the concepts of retirement readiness. A significant part of helping employees achieve retirement readiness is providing a 401k plan with features that guide participants down the path to retirement readiness. This article lays out the plan attributes are generally felt to promote employee retirement readiness. Source:

401k Loans May Hurt Your Bottom Line Taking multiple loans from a 401k plan will diminish the final account balance significantly, because the money is not invested and people tend to contribute less to their 401k while they are paying back the loans. Source:

One Dip Into a 401k Often Leads to Another After workers borrow money from their 401k retirement account, they may find that it becomes easier to come back for another loan — and perhaps even another. And yet another one after that. Some people can’t seem to stop at just one. Source:

Are We Headed to Mandatory Retirement Savings Accounts? The U.S. retirement system of Social Security supplemented by private retirement savings is often thought to be in crisis, because of questions about the solvency of the former and the adequacy of the latter. But the U.S. approach is not the only way — Australia and Chile, for example, have high mandatory contribution rates of 9% and 10%, respectively. And while these alternate approaches may seem remote and exotic, a piece of legislation gaining traction in the largest U.S. state may move the U.S. significantly in that direction. Source:

403(b) Plans

Complications for 403(b) Plan Fiduciaries Under the TIAA Class Action A little noticed class action law suit first filed against TIAA-CREF in 2009 is finally coming home to roost for many fiduciaries of 403(b) plans-without many affected plans even having a clue that they have become members of that class action. The lawsuit challenges the manner in which TIAA manages what is commonly known as the “gain-loss” processes related to the untimely fulfillment of participant investment instructions in the “separate account” under TIAA’s ERISA variable annuity contracts. Source:

Fiduciary Material and Insight

Adviser Identifies Ways Plan Sponsors Can Manage Fiduciary Risk Because employers want to avoid litigation, which could result in personal liability for investment committee members, many plan sponsors are seeking ways to manage the risk associated with serving as an ERISA fiduciary. Article outlines four options that may help DC plans sidestep high-profile class-action lawsuits alleging breach of fiduciary duty on investment selection and monitoring. Source:

401k Plan Sponsors Who Fail to Properly Evaluate Fees “at Risk” Interview with Fred Reish on why “high” fees are not necessarily “bad” fees. You’ll also see why plan sponsors who don’t understand this may be in for trouble. Source:

Plan Administrator Breached Fiduciary Duty: Fifth Circuit The US Court of Appeals for the Fifth Circuit held a plan administrator liable for breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA) for failing to produce plan documents even though the participant did not submit a written request for the documents. The court also declined to adopt a bright-line rule that discovery requests for plan documents in unrelated litigation proceedings constitute written requests for documents under ERISA. Source:

Plan Fiduciaries Provided Guidance on Tactical Asset Allocation Strategies There has been little guidance for plan fiduciaries to help them understand the different types of core TAA strategies or on how to evaluate the suitability of a particular strategy for their individual plans. This white paper provides the analytic framework for evaluation and includes a checklist of best practices and key considerations for plan fiduciaries. Source:

Insights: Studies, Research and White Papers

Will Regulators Act in Investors’ Best Interest? A new survey finds 79% of financial advisors support the ERISA fiduciary standard for advice to investors on rollovers from 401k and IRA retirement accounts. The finding comes as the U.S. Department of Labor prepares to propose new fiduciary rules that could draw a wider range of financial advisors under the ERISA fiduciary standard when they advise retirement investors. Source:

2013 Defined Contribution Plan Sponsor Survey Findings In examining plan sponsors’ goals and actions, survey found that plan sponsors are taking steps to strengthen their DC plans and provide better retirement outcomes for their employees. At the same time, there are addressable issues that may be impeding progress toward plan objectives, as well as a need for a closer alignment between plan sponsors’ evolving goals and the strategies currently in place to achieve them. Source:

Participants Taking Command of Retirement In a recent, nationwide survey of more than 1,000 401k plan participants, the majority of respondents seem aware that they are primarily on their own for their retirement saving, and they plan to rely mostly on their defined contribution plan to get there. However, according to the Schwab poll, many find information on their 401k confusing and lack confidence on managing their retirement savings. Source:

Employee Stock Consideration in 401k Plans This paper will provide an overview of the various considerations for plan sponsors that currently include employer stock or are thinking about doing so should be aware of. Paper includes an overview of: employer stock in 401k plans today, fiduciary considerations for plan sponsors, the human capital dynamic, and other risks associated with holding an individual security. Source:

Employer Stock Ownership in 401k Plans and Subsequent Company Stock Performance Employer stock is still a common investment in 401k plans, although it is becoming less common. Past research has noted mixed findings regarding the potential benefits and costs associated with owning employer stock. This paper explores the historical relationship between employee stock ownership in 401k plans and subsequent company stock return. Over the time period studied, authors find that firms with comparatively high allocations to employer stock in 401k plans have tended to underperform those without. Source:

Tactical Asset Allocation and ERISA Plans: Best Practices for Finding the Right Strategy for Plan Participants Looking for ways to stabilize returns and manage downside risk, plan sponsor and investment advisor interest in Tactical Asset Allocation strategies has increased. Plan fiduciaries face unique challenges when evaluating the actual benefits of TAA as a whole, as well as different TAA strategies. This white paper provides an analytical framework that is intended to assist plan fiduciaries in their assessment of TAA investment strategies. Analysis includes a discussion of the legal standards and core principles that govern how plan fiduciaries should evaluate TAA, as well as suggested “best practices” for evaluating an Asset Allocation Investment’s particular TAA strategy. Source:

Items of Special Interest to Advisors

Best-Practice Series Part 2: Offering Individual Consultation Plan sponsor’s benefit from providing participants with professional advice. By delegating fund selection as well as investment advice to an advisor who accepts fiduciary levels of responsibility for providing both, you can minimize your personal liability and streamline your administrative tasks. Source:

SEC to Review Advisor’s Business Continuity and Disaster Recovery Planning “With hurricane season underway, and with the problems from last year fresh in mind, we trust that our member firms will review their business continuity planning procedures against these best practices.” Source:

Court, Legislative and Washington DC

Krueger v. Ameriprise Financial: DC Fiduciary Litigation Krueger v. Ameriprise Financial involves a decision by the United States District Court District of Minnesota in a suit by three current and four former Ameriprise employees. Authors will focus here solely on the more general issue of the application of ERISA’s prudence standard to the selection and monitoring of funds in a 401k plan fund menu, and the application of the rules laid out in Hecker v. Deere & Co. in that regard. Source:, August 2013

Seventh Circuit Finds No Fiduciary Liability for Financial Service Provider Receiving Revenue Sharing In Leimkuehler v. American United Life Insurance Co., the Seventh Circuit Court of Appeals addressed the receipt by a 401k plan’s financial service provider of revenue sharing payments from mutual funds. The Seventh Circuit affirmed the district court’s award of summary judgment to the defendant financial service provider, finding that the provider was not a functional fiduciary. Source:

DOMA Decision Has Wide Range of Effects on Employers The U.S. Supreme Court ruled that the definition of marriage under the Defense of Marriage Act is unconstitutional and therefore states will determine who is a spouse. This decision has a ripple effect that will impact various retirement plans and health and welfare plans sponsored by employers. Two of the biggest questions relating to this decision relate to the general application of the change. Source:

Compliance and Regulatory Related

Stop: You May Be Guilty of Excessive Plans Fees Marc I. Machiz, Director of the Philadelphia Region of the Department of Labor Employee Benefits Security Administration indicated plans to focus on fees during audits. Machiz stated that he expects the investigations will attempt to determine who is at fault for excessive fees and why the excessive fees were incurred. Machiz proffered six questions that the Philadelphia Region believes are important in relation to this project. Source: 401k Advisor Digest

IRS Retirement News for Employers — August 20, 2013 Edition Covers topics like hardship distributions tips for employers, how and why to use the Voluntary Correction Program, self-employed adjusting net earnings from self-employment to determine plan contribution/deduction, and more. Source:

Chart: EP Examination Program Chart provides a brief description of the Internal Revenue Service’S Employee Plans examination program for conducting a typical examination from start to finish. Source:

Service Provider 408(b)(2) Change Disclosures Everyone who reads this article probably heaved a sigh of relief on July 1 of last year when they completed their initial wave of 408(b)(2) disclosures. However, there are now questions about the little-publicized 408(b)(2) requirement for subsequent disclosures of changes. Source:

DOL Issues Guidance on Plan Asset Status of Revenue Sharing Payments The DOL recently issued guidance on whether accounts holding revenue sharing payments constitute “plan assets” under ERISA. Prior to the issuance of the DOL guidance, it was unclear whether these amounts would be deemed to be ERISA plan assets. If such amounts were treated as ERISA plan assets, they would be subject to various requirements under ERISA. The DOL also addressed the responsibilities of plan fiduciaries in evaluating revenue sharing agreements. Source: McDermott Will & Emery

Groups Support PBGC’s Efforts to Create Missing Participant Program for 401k and Similar Plans The ERISA Industry Committee, the Plan Sponsor Council of America, and the U.S. Chamber of Commerce submitted these comments to the Pension Benefit Guaranty Corporation supporting the agency’s efforts to implement a missing participants program in 401k and similar plans. Source:

Council Letter Responding to PBGC Request for Information on Missing DC Plan Participants This is a letter from the American Benefits Council in response to the PBGC’s request for information on missing participants in individual account plans. They note that solutions to the problem of missing participants are crucial as we increasingly see plans adopt automatic enrollment and small employers sponsor 401k and other individual account plans. Source:

The 80-120 Rule: Does Your Retirement Plan Require an Audit? Weather your company is growing and you are adding employees or if you are downsizing and possibly considering eliminating your benefit plan, the number of participants in your plan can significantly fluctuate from year to year. As a result, you may now be required to have an audit of your plan or, maybe your plan is small enough that and audit is no longer required. In order to determine the audit and filing requirements for qualified retirement plans, it is necessary to be aware of what has become known as the 80-120 Participant Rule. Source:


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