Experts in Personalized Retirement Plan Design & Administration Newsletter 02.19.18

Evaluating Roth and Pretax Retirement Savings Options There are two ways to get Roth account exposure: a Roth IRA or through a retirement plan that has a designated Roth account. While Roth IRAs have income eligibility limits, those do not apply to contributions within a 401k plan. Pretax contributions are generally preferable for people who expect their income tax rate to decrease in retirement. Having Roth accounts may make sense for tax diversification, flexibility and as a hedge against higher tax rates. Source:

Why Defined Contribution Plan Innovation Is So Slow Major change comes with significant risk in the view of most senior managers while providing minimal benefit, not a recipe for success. That, in a nutshell, explains why innovation is so slow for 401k and 403b plans. Source: (registration may be required)

Blizzard of Debt Melts Into Retirement Debt is accumulating like snow in a blizzard, we have long been told. And that load may not melt away quickly, it may linger, extending its chill seasons ahead to retirement. Looks at its longer-term effects. Source:

Fiduciary and Plan Governance Material

401k Plan Sponsors Are Increasingly Hiring Fiduciary Advisers Employers sponsoring a 401k plan, especially small business owners, are increasingly hiring investment advisers who serve as fiduciaries to their retirement plan, new research suggests. About 70% of all 401k plans used an independent investment adviser — separate from the plan’s recordkeeper — to assist with fiduciary responsibility in 2016, according to a new study from the Plan Sponsor Council of America. Source: (registration may be required)

Making Sure 401k & 403b Fees are Necessary and Reasonable – Part Two As a plan sponsor, you are required to understand all of the fees that are associated your organization’s retirement plan benefit program. This article continues the series on the subject. Source:

Insight: Studies, Research, and White Papers

DC Plans in the US and the UK: Lessons From Across the Pond This 36-page paper addresses the differences between defined contribution plans in the US and the UK and the lessons that can be learned from these programs. The paper is a high-level overview of the legal, regulatory and policy framework governing DC plans in both jurisdictions. It provides an analysis of the shift away from defined benefit (DB) plans in the US and the UK, to the widespread use of DC plans by both countries as the primary way of providing workplace pensions. Source:

Gig Workers Saving for Retirement — What’s in Their Best Interest? If you are an active member of the gig economy, you don’t need to wait for Congress to act to start saving for retirement. You can begin saving right now. And, depending on your specific situation, you may just be able to save faster than you think. Source:

How Does Household Debt Affect Retirement? While there is extensive media coverage regarding Americans’ lack of retirement savings, a much less discussed topic is the growing amount of debt that Americans carry into retirement. Larger mortgages, higher student loans and a greater overall comfort with debt than displayed by earlier generations has increased the average debt for households approaching retirement by nearly 160%. Source:

Retirement Planning More a Focus for Those Participating in Retirement Plans An analysis from Pew Charitable Trusts of data from a nationally representative internet survey of private-sector workers shows a correlation between access to and participation in workplace-based retirement savings programs and more planning and saving. Source:

Workplace Retirement Plans Tend to Sharpen Focus on Financial Futures Are those without access to an employer-sponsored plan — those who do not participate in available plans — preparing for retirement in other ways? Are they prioritizing retirement savings outside of the workplace? This analysis of data from a nationally representative internet survey of private sector workers shows a correlation between access to and participation in workplace-based retirement savings programs and more planning and saving. Source:

Employees Cash Out 401ks in Record Numbers The Bureau of Labor Statistics reports that today’s mobile workforce is changing jobs nearly a dozen times. For 35- to 44-year-olds, a little over a third take jobs that last less than a year. It doesn’t allow for a lot of time to sock away money in a 401k account and as a result, many workers are cashing out what little they have. Source:

Items of Special Interest to Service Providers

Fee and Industry Shifts Mean Retirement Plan Providers Can Play Hardball A look back at how Fidelity will charge new plan sponsor clients on its platform who choose Vanguard products makes visible the hard-nosed competition that defines the retirement plan recordkeeping and brokerage industries. Source:

Self-Reporting to SEC of 12b-1 Conflicts of Interest Not Without Risk Offering some preliminary commentary on the SEC’s newly announced adviser 12b-1 fee conflict of interest “amnesty” program, as it’s being referred to in the trade media, Wagner Law Group attorneys warn of the inherent risks in the self-reporting of violations. Source:

How to Sell and Deliver a Financial Wellness Program Financial wellness. Financial literacy. Retirement readiness. These loosely-defined buzzwords have been cropping up across the world wide web in recent years. Whatever the term, more holistic services that were once reserved for private wealth clients have morphed, gained scalability and flowed downstream to participants in retirement plans. In a profession where differentiation is crucial, leveraging a financial wellness program can help you stand out. Source:

403(b) Plans

A (403b) Plan to Resolve Conflicts An employer with a 403b plan must have a written plan that identifies the plan’s investment arrangements in order to satisfy the IRS regulatory requirements. But what happens if the terms of the 403b plan document conflict with the provisions of an investment arrangement identified in the 403b plan? Source:

Plan Automation

PSCA Finds Faster Start for Auto Enroll Programs While the most common default deferral remains 3% of pay (used by 36.4% of plans), more than half of those with automatic enrollment now have a default deferral rate higher than 3%, according to a new survey. Source:

Court and Legal

Class Certified in ERISA Lawsuit Targeting NYU Retirement Plan The U.S. District Court for the Southern District of New York ruled this week to certify a sizable class of plaintiffs in ERISA lawsuit targeting two 403b retirement plans at New York University. The amended compliant explicitly names as a defendant one of the advisory firms supporting NYU’s retirement plans. Source:

Legislative and Washington DC

GROW Act Before the U.S. House The Give Retirement Options to Workers (GROW) Act, H.R. 4997, is intended to safeguard the multiemployer pension plan system by authorizing the creation of a new type of retirement option that combines key features of defined benefit and defined contribution plans. Source:

Recent Tax Acts Impacting Retirement Plans Over the past couple of months, there have been two tax acts signed into law that contain provisions related to retirement plans. This article reviews the tax acts and their impact on retirement plans. Source:

Fiduciary Rule

Lawyer Fighting DOL Rule Blasts Scottrade Fiduciary Charges Eugene Scalia, a partner with Gibson Dunn who represents the nine plaintiffs suing the Labor Department over its fiduciary rule, told the U.S. Court of Appeals for the 5th Circuit on Friday that Massachusetts’ action Thursday against Scottrade for allegedly violating the fiduciary rule’s Impartial Conduct Standards is “without merit,” and will spark “private plaintiffs…to exploit the rule to concoct state law claims.” Source:

Bay State Regulator Files Fiduciary Rule-Related Complaint The Massachusetts Securities Division has filed charges against a firm for knowingly violating its internal policies regarding implementation of the DOL fiduciary rule and taken a shot at the Department of Labor. Source:

Compliance and Regulatory

An Annual Retirement Plan Check-Up May be Just What the Doctor Ordered If you work with your employer’s tax-qualified retirement plans, such as a 401k or pension plan, now is the time to consider implementing operational checkups for those plans to ensure that the plan is being administered in compliance with the plan’s terms as well as applicable law. The article reviews what should be included in a retirement plan checkup. Source:

401k Loan Policy Best Practices Plans sponsors who want to provide the flexibility of 401k loans while helping their employees avoid savings setbacks can start with good plan design and education. A good loan program encourages employees to think carefully before borrowing against their retirement savings and may even provide disincentives to such borrowing. Here are seven tips for a successful loan program. Source:

Plan Compliance When the Watchdogs Are in the Dog House The IRS has decreased the number of returns audited to its lowest level since 2004, reduced staffing by 30 percent, and cut the number of criminal investigations initiated. This article focuses on the changes in the relationship of the IRS to the retirement plan administration community over this period of time. Source:

Hardship Withdrawal Changes Under the New Budget Act The Bipartisan Budget Act of 2018 contains changes to the ways in which hardship withdrawals from qualified retirement plans are administered. The changes reviewed here are effective for plan years beginning after December 31, 2018. Source:

2018 Key Administrative Dates and Deadlines for Calendar-year DC Retirement Plans This calendar provides key administrative dates and deadlines for defined contribution plans subject to ERISA and the Internal Revenue Code. Source:

DOL Settles With “Fiduciary Firm” Over $16 Million 401k Fraud The DOL announced that it has entered into a settlement agreement with U.S. Fiduciary Services and three of its subsidiaries that provide for payment of more than $7 million to 42 retirement plans that suffered losses because of investments in fictitious loans made by Florida-based First Farmers Financial. Source:

How to Think About Your 401k Vesting Schedule Your 401k plan’s vesting schedule provides another way to tailor employee benefits to produce the combination of incentives and rewards that best fit your business. Source:

New Tax Law Causes Uncertainty for Some Hardship Distributions The Tax Cuts and Jobs Act indirectly changed one of the safe harbor bases for hardship distributions. For tax years 2018-2025, the new law limits casualty loss deductions to those occurring in a federally declared disaster area. Plans that use hardship distribution safe harbors that reference this deduction should consider how they will address requests for losses that occur outside of a federally declared disaster area. Source:

Are Your Plan Files Complete? What an Auditor Will Want to See All plan fiduciaries should keep an “audit file” with the documents that determine how the plan is run and required disclosures. This file starts with the plan and all amendments, but should contain lots of other things. Source:


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