Experts in Personalized Retirement Plan Design & Administration Newsletter 02.02.18

Five of the Biggest 401k Changes of This Decade Over the past few years, the 401k industry has seen several sweeping changes take place, each of which has altered the core dynamics of how employees’ retirement plans are managed. New government regulations have modified how the industry is monitored for betterment of employees. Here are five of the biggest changes that have affected the responsibility, litigation strategies, fees and overall practices for providers. Source:

The Saver’s Credit The saver’s credit is an income tax credit of up to 50% of 401k employee contributions that is available for certain taxpayers with income that does not exceed $63,000. Source:

Fiduciary and Plan Governance Material

The Plan Committee: Appointing and Removing Committee Members This is an aspect of committees where there is generally a woeful lack of understanding of the commitment that is being made. This article discusses making a committee position offer (what plan sponsors should be thinking about), formalizing appointments, removals, and resignations. Source:

401k Best Practices: Fees Making sure you are paying reasonable 401k fees for your plan is one of your major fiduciary responsibilities as a plan sponsor, especially if you are using plan assets to pay 401k fees. Unfortunately, the DOL does not define reasonable fees, but there are a number of methods you can use to determine if they are. Source:

Avoid Sending Gifts to Plan Sponsors, It Just Doesn’t Look Right Like Don Fanucci in Godfather Part II, there will always be plan sponsor representatives that would like their beak wet. This type of bribery is something that will always be available in the retirement plan marketplace, but it’s up to the plan sponsor and its providers to make sure that any gifts are de minimis to avoid any prohibited transactions and under the board conduct that could put the plan sponsor in danger. Source:

Insight: Studies, Research, and White Papers

Optimizing Retirement Income by Integrating Retirement Plans, IRAs, and Home Equity In this 144-page report, the authors present a framework of analyses and methods that financial advisers, financial institutions, plan sponsors, and retirees can use to compare and assess strategies for developing lifetime retirement income. Source:

Will Millennials Be Ready for Retirement? It finds that Millennials — despite high education levels — are behind previous cohorts on many indicators that help boost retirement preparedness. This difficult start, combined with high levels of student debt, has delayed them from getting married and buying a home. Source:

Items of Special Interest to Service Providers

Fidelity Pushes Vanguard to Compete on Brand in 401k Plans Fidelity Investments’ move to impose an additional fee on Vanguard Group assets is going to test plan sponsors’ loyalty to the index-fund giant, according to retirement plan advisers, as employers are forced to choose between sticking with a trusted low-cost brand and paying less money for a similar investment product from a different provider. Source: (registration may be required)

Fidelity Charging New Fee on Vanguard Assets Held in 401k Plans Starting this year, Fidelity will charge all new 401k clients a 0.05% fee on participant assets invested with Vanguard, which has emerged over the past several years as an index-fund behemoth as investors have moved away from active investing. Source: (registration may be required)

Mike Alfred Exits BrightScope and Into Cryptocurrency Sphere Mike Alfred is out at BrightScope Inc. in pursuit of a shinier future and a reunion with his brothers. he moves by both brothers — who always boldly proclaimed that an IPO was BrightScope’s destiny — reflects a burning sense of unrealized success in their quest to build a truly large and dynamic organization. Source:

403(b) Plans

2018 403b Compliance Calendar This 403b Retirement Plan Compliance Calendar highlights critical compliance deadlines for defined contribution retirement plans. While we have covered all of the major dates, some may only apply to particular plan types (and are noted accordingly) and there may be additional deadlines for specific plans that are not covered here. Source:

Target-Date Funds

TDFs Have Improved Participant Diversification About a third of participants across Millennials, Generation X, and Baby Boomers who self-manage the investment of their plan accounts are more conservative than a typical target-date fund appropriate to their age. Source:

Plan Automation

Auto Features May Hold the Key to Improving Plan Participation Rates The Director of Administration of a 50-employee law firm discusses some of the challenges associated with mobilizing the entire workforce around the tax-qualified retirement plan. Source:

Court and Legal

Norton Healthcare Faces 403b Plan Excessive Fee Suit Plan fiduciaries have been charged with breaching their fiduciaries duties under ERISA by selecting more expensive share classes of investments than were available to the plan. Source:

New Ground(s) Emerge in NYU Excessive Fee Suit An amended claim in an excessive fee litigation treads some new ground, including naming the plan’s investment advisor as a defendant. New York University was one of the first of the university 403(b) excessive suits filed in August 2016, and representing the plaintiffs then (and now) was the law firm of Schlichter, Bogard & Denton. Source:

New Excessive Fee Litigators Emerge A new excessive fee suit has been filed — this time against a hospital’s retirement plan — and from a different direction. What is most interesting about this litigation is that the plaintiffs are represented by counsel that doesn’t appear to have a track record in ERISA litigation. Source:

Court Sets Method for Determining Damages Due to Breach of Loyalty in Fund-Mapping Case In a case that began 12 years ago, the trial court has again determined the method it will use to calculate damages for a breach of the duty of loyalty. The breach was committed by the fiduciaries of two 401k plans who replaced one of the plans’ investment funds with funds that produced more revenue sharing. Source:

Self-Dealing Lawsuit Targeting Capital Group Routed in District Court In a dense dismissal decision, the district court offers a reminder of the exacting pleading standards of ERISA and statues of limitations before roundly rejecting the plaintiff’s allegations for failing to state an actionable claim. Source:

Legislative and Washington DC

TCJA Changes Could Affect 401k Hardship Withdrawals In the wake of any new tax law, there are always issues that cause problems when they are actually put into practice. One such issue is that hardship withdrawals from a 401k plan to address a personal casualty loss of a principal residence may no longer be allowed unless the loss is attributable to a federally declared disaster area. Source:

RETIRE Act Promotes Electronic Delivery of Retirement Plan Information A year-end bill could significantly change how retirement plans deliver participant and beneficiary communications. The Receiving Electronic Statements to Improve Retiree Earnings (RETIRE) Act would allow plan administrators to use electronic delivery as the default delivery method for virtually any required plan document. Participants and beneficiaries could still opt to receive paper copies of this information. Source:

Pending Legislation Could Significantly Change the Retirement Plan Landscape A number of bills have been introduced in recent weeks that, in addition to simplifying some of the rules, could encourage employers to set up plans and help increase employees’ retirement savings. Many of these changes have been proposed in the past and enjoy bipartisan support. This article is a brief summary of some of the recently introduced bills. Source:

Tax Reform and a Retirement Plan Surprise The Tax Cuts and Jobs Act passed at year end contained relatively few retirement plan-related provisions. However, upon closer review of the more than 1,000-page bill, some of the provisions were found to indirectly affect retirement. Source:

State-Based Retirement Programs

Oregonians Start Saving With Auto-Enroll Retirement Plan A growing number of employees in Oregon are stashing away some of their earnings under a state-run retirement savings program, and four other states are set to follow. Source: (registration may be required)

Fiduciary Rule

SEC Inching Closer to an ERISA Fiduciary Standard Duane Thompson argues that “the SEC’s examination and enforcement arms appear to be moving closer to ERISA’s fiduciary standard mandating reasonable compensation for investment advice” by focusing on compensation received for rollover advice and on fees that result from the use of mutual fund share classes in retail and retirement accounts. Source:

The Fiduciary Rule: Mistaken Beliefs The myth is that broker-dealers and RIAs — and their advisors — must only recommend the lowest cost investments. For example, mutual funds with the lowest expense ratios. That is not correct. Source:

Compliance and Regulatory

2018 401k ERISA Retirement Plan Calendar This Retirement Plan Compliance Calendar highlights the critical compliance deadlines for ERISA 401k defined contribution retirement plans. Source:

Hunting for Retirement Plan Participants? The DOL has reportedly commenced a national audit campaign targeting plans with missing participants, and just last month, the Pension Benefit Guaranty Corporation issued final regulations expanding its existing missing participant program (previously limited to certain defined benefit plans) to a defined contribution plan. Source:

Hardship Availability Due to Modification of Deduction for Personal Casualty Losses The recently enacted tax reform legislation, commonly referred to as the Tax Cut and Jobs Act, made a change to the types of personal casualty losses that qualify for a casualty deduction under Section 165 of the Internal Revenue Code. This change affects many 401a, 401k, and 403b plans that permit hardship distributions to be made available to their participants and beneficiaries. Source:

How New Leadership at DOL Could Address Retirement Rules By all accounts, the administration of Donald J. Trump is slashing regulations across government. However, there are some exceptions to the rule, and a less ambitious deregulatory regime seems likely under new leadership at the Department of Labor. Source: (registration may be required)


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