Experts in Personalized Retirement Plan Design & Administration Newsletter 11.01.17

401k Enrollment: How to Get More Employees Saving Despite efforts to bolster their employee’s retirement savings, many plan sponsors realize something is missing. While enrollment rates have improved in recent years, there are still plenty of employees who fail to enroll in the company 401k. When asked about the reasons for not saving into the plan, 28% of plan sponsors reported that a “lack of awareness or understanding” was the primary reason employees did not participate in their plans. Source:

Participant Site Retirement Educational Resources One of the most prominent trends in the digital retirement space has been the proliferation and evolution of retirement educational resources. Here are some tips for improving your participant site’s suite of educational resources. Source:

Failure to Log in: The Dirty Little Secret of Many Retirement Plans If employees of a retirement plan recordkeeper are not logging in to their own retirement plan website, then the chances are low that the average retirement plan participant has accessed their retirement plan homepage. And since most of the best material that recordkeepers utilize to engage participants is accessed via the website or mobile site, participants may not have the information they need to optimally save or invest. Source:

Ten Tips for Rolling Over a 401k When You Change Jobs Each time you change jobs you need to decide what to do with the money in your 401k plan. While you can typically leave the money in a former employer’s 401k plan, there’s also an opportunity to transfer your retirement savings to an IRA or a new 401k plan. Here’s how to roll over your retirement savings when you leave a job. Source:

The 401k: A Benefit for Employers and Employees Alike Since 401k retirement savings plans first appeared in the early 1980s, they have grown rapidly. Today, they are one of the most popular and widespread employee benefits. This article looks at some of the key benefits 401ks provide to both employees and employers, as well as some important practical considerations. Source:

403b Plans

Reach Out to 403b Participants Maintaining Outside Businesses Notifying 403b plan participants of annual additions limit rules under Internal Revenue Code Section 415(c) may not be just a best practice, it may be an affirmative obligation in the employer’s 403b plan document. Source:

401ks and 403bs Compared, Contrasted While 401ks are ubiquitous in the for-profit sector, 403bs plans rule the roost among non-profits. While 403bs and 401ks both serve as vehicles for retirement saving and employers can make contributions to both, there are key differences. Source:

Fiduciary and Plan Governance Material

Supervising Your Plan’s Investment Manager and an Atmosphere of Misinformation When a plan sponsor hires a Fiduciary Investment Manager, they have minimized their effort regarding plan investments and maximized their liability protection. However, they haven’t eliminated their potential liability. The sponsor must continue to monitor the service provider. If the sponsor fails to monitor their FIM, and the FIM makes a mistake, the sponsor can be ultimately held liable. This is where misinformation may come into play. Source:

Insight: Studies, Research, and White Papers

Americans Carry an Average Debt Load That Impedes Retirement Savings Americans carry an average debt load of $140,113, found in a survey. Yet, 64% of Americans say they have more saved than they have as revolving debt on their credit card. cautions that this should be taken in context, as an earlier survey the website conducted found that over half of Americans have less than $1,000 in their savings account. Source:

What Does Consistent Participation in 401k Plans Generate This 24-page paper provides an annual update of a longitudinal analysis of 401k plan participants drawn from the EBRI/ICI 401k database. A few key insights emerge including the growth in account balances for consistent participants greatly exceeded the growth rate for all participants in the database. Source:

401k Nudges and Course Corrections Behavioral economist Richard Thaler, winner of the 2017 Nobel Prize for economics, regards his field’s greatest contribution as showing that people are more likely to save if the saving happens automatically. To make saving for retirement easier, employers have increasingly turned to automated 401ks. Source:

Investors Who Held Steady After the Great Recession Have Been Rewarded Those who did not flee to cash but remained invested have portfolios that are 50% higher than those who sought safety, Fidelity found. However, 25% of people have reassessed how much risk they can handle and have moved to more conservative portfolios, where they have remained in the past 10 years. Source:

Plan Sponsors’ Use of Best Practices Continues to Climb Plan sponsors continue to embrace best practices when it comes to running their retirement plan. Automatic enrollment, higher initial deferral rates, and financial counseling are just a few that more employers are adopting. Source:

Study Says African-Americans Want More Financial Education Forty-five percent of African-Americans who bring home $75,000 or more say they feel less than financially secure compared with just 28% of other Americans in the same income category. Source:

U.S. Receives “C” Grade in Global Retirement Study In a new global study of retirement systems around the world, the U.S. received an overall grade of “C,” meaning the country’s system has some good features, but also has major risks and/or shortcomings that should be addressed, according to the classification. Source:

Research: Few Workers React Negatively to Higher Default Savings Rates Erring on the high side when choosing a 401k savings default-contribution rate won’t likely discourage employees from participating in the plan, new research suggests. Plan sponsors’ experiences seem to back up this finding. Source:

Items of Special Interest to Service Providers

Advisors Must Up Their Game in New Fiduciary Rule Era The fiduciary rule effectively puts generalist advisors on notice to incorporate significant capabilities — typically used by specialists — into their practice to excel in this new, post-rule world. Source:

Retirement Assets on the Move Here is one more reason for financial services firms to target Millennials: 50% are likely to roll money out of plans with former employers into an IRA in the next year. Source:

Do Advisory Boards Create Perceived Conflicts for DC Plan Advisers Many defined contribution plan advisers join the advisory boards of recordkeepers and asset-manager providers they use. But do these board memberships create perceived conflicts in the eyes of the Department of Labor and 401k or 403b plan sponsors? Source: (registration may be required)

Clock Is Ticking for Five Banks That Handle Retirement Money Deutsche Bank AG, Citigroup, UBS Assets Management, JPMorgan Chase, and Barclays Capital will all need the DOL’s approval by early next year to keep operating as “qualified professional asset managers.” The five banks are major players in the retirement industry, providing services to millions of retirement savers and managing billions of dollars in plan assets. Source: (registration may be required)

Here’s Where an Advisory Firm Gets in Trouble The SEC issued a cease-and-desist order against Envoy Advisory. Envoy agreed to pay disgorgement for failing to offer the lowest-fee mutual fund share classes available and failing to adequately disclose compensation paid to its affiliated broker-dealer. Source:

Court and Legal

Xerox Nixes Challenge to Robo-Adviser Fees in Ford 401k Plans Xerox HR Solutions escaped a lawsuit by participants in three Ford Motor Co. 401k plans challenging the allegedly excessive fees charged for investment advice provided by robo-adviser Financial Engines Advisors. Source: (registration may be required)

Eleventh Circuit Court of Appeals Holds ERISA Statute of Limitations Provision May Be Waived Upon reviewing the case, the Court agreed that Section 413(1) is a statute of repose, since the limit is based on the last time that the defendants acted, as opposed to when the claim accrued. However, the Court ruled that the statute of limitations provided by Section 413(1) may be waived, as a statute of repose is not nonwaivable. Source:

Northrop Grumman’s $16.8m Deal Leads to $5.6M in Attorneys’ Fees Law firm Schlichter Bogard & Denton was awarded $5.58 million in attorneys’ fees following the $16.8 million deal it reached earlier this year in a case involving Northrop Grumman’s retirement plans. Source: (registration may be required)

Legislative and Washington DC

The Impact of a Proposed Pre-Tax Contribution Cap The non-partisan Employee Benefit Research Institute using their Retirement Security Projection Model found that more than half of current 401k contributors would be impacted by a $2,400 contribution Roth, based on 2015 data. And, as you might expect, the impact reaches down to some very moderate income levels. Source:

Legislative Fixes Would Make MEPs More Attractive Option Previous regulatory actions by the Department of Labor have made open multiple employer plans a less attractive option for employers, but legislative fixes proposed by Congress could significantly improve the overall appeal of MEPs. Source:

401k Employee Contributions Above $2,400, a Possible Rothification Threshold There have been several press and other reports that some tax reform proposals might modify the tax treatment of 401k employee contributions. Considering this possibility, EBRI was asked to share its most recent information about the distribution of 401k employee contributions around the specified threshold, broken out by salary and by age. This release provides that information. Source:

Labor Department’s Employee Benefits Agency Keeps Shrinking The Employee Benefits Security Administration continues to see its staffing levels decline, with the number of employees dropping nearly four percent in the past quarter. Source: (registration may be required)

Why Congress’s Plan to Slash 401k Limits Was Never a Good Idea Personal finance and retirement-planning experts expressed concern that this would lead to a reduction in America’s already anemic retirement savings rate. What’s more, there’s a bigger problem with the GOP’s math, some experts say. Source:

Cybersecurity Issues

Nine Steps to an Effective Cybersecurity Program This article outlines some cybersecurity concerns including intentional hacking of files, unintentional release of files, and email phishing to steal information. It then reviews a nine-step approach to cybersecurity. Source:

State-Based Retirement Programs

Massachusetts Bill Sets Sights on a State-Run Open MEP The Massachusetts legislature’s Joint Committee on State Administration and Regulatory Oversight considered a bill that would set up a state-run multiple employer plan for private employers. The bill, Senate Bill 1701, requires the treasurer and receiver general of the state to sponsor a qualified defined contribution plan, which would then be available to private-sector employers to adopt for their own employees. Source:

DOL’s Fiduciary Rule

The Trump-Era Fiduciary Rule Where does the DOL’s fiduciary rule stand? What might we expect in the future? ERISA attorney Fred Reish provided an update on the former and shared his thoughts on the latter in an Oct. 24 workshop at the 2017 ASPPA Annual Conference. Source:

Best Practices Arising From the DOL Fiduciary Rule This article examines the manner in which the fiduciary rule, and in particular the BIC Exemption, affect business best practices regardless of whether any changes are made to the fiduciary rule and related exemptions. Source:

Watchdog Group Sues DOL to See Records for Fiduciary Rule Rewrite The independent watchdog group American Oversight filed a lawsuit in U.S. District Court for Washington to force the DOL to release records about revisions to the fiduciary rule now being considered. Source:

Compliance and Regulatory

DOL’s Form 5500 Modernization Proposal Faces an Uncertain Future Work on the Labor Department’s effort to expand, streamline and modernize the Form 5500 Series has been halted until a new head of the DOL’s Employee Benefits Security Administration (EBSA) is in place. Source:

Which Expenses Can Be Reimbursed From Plan Assets Though the regulations do not provide for a listing of all the possible type of plan expenses and whether or not they can be reimbursed from plan assets, the DOL has published guidance on the subject that does provide specific, real-world examples. Source:

Paying Employee Benefit Plan Expenses Chart This 6-page chart is a guide for employers to use in determining which types of expenses can be paid from the assets of an employee benefit plan governed by ERISA and the Internal Revenue Code. Source:

A Compliance Checklist for Plan Sponsors – Part 2 Part one described the methods the IRS will be using to achieve compliance in qualified pension and 401k plans, as set out in its recently issued 2018 Work Plan. This part two describes the specific issues identified in the Work Plan that will draw the interest of the IRS. Source:

Chart: Retirement Saver’s Credit Limitations for 2018 Taxpayers who make eligible contributions to an employer-sponsored retirement plan or IRA may be able to take a tax credit on their income tax return. They may use this chart to calculate their Saver’s Credit. Source:


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