Experts in Personalized Retirement Plan Design & Administration Newsletter 02.26.18

Managed Accounts: You Can’t Always Get What You Want  Due to limited product availability on recordkeeping platforms, plan sponsors may not be able to get what they want. But in looking at the choices they do have, they may be able to get plan participants what they need. Source:

Expect Unexpected Events and Their Effects  Unexpected events can be expected. Or should be. And doing so can help a retiree to be prepared. So suggests a recent report that has implications not only for retirees but also retirement plan professionals. Source:

What Is a Solo 401k Plan?  Actually, there is no such thing as a “solo 401k” plan. You won’t find it in the Internal Revenue Code. Solo 401k is a marketing term that some plan providers, like financial institutions and recordkeepers, have created to explain what is really a tax qualified 401k plan that meets the IRS definition of a “one-participant plan.” Source:

Safe Harbor 401k Plans Make Sense for Many Businesses  According to a 2016 study by SHRM, 68% of 401ks are safe harbor plans. But while the rules are straight forward, and the benefits are significant, there are still many plans which have not yet implemented a safe harbor match of any kind. This article explores the requirements and share some examples of safe harbor plans. Source:

Fiduciary and Plan Governance Material

Fiduciary Liability Insurance, Why You May Need It  Fiduciary liability insurance isn’t the same thing as your ERISA bond and should never be viewed as a substitute for good fiduciary practices, but it is good to know you have backup if claims do arise. Source:

401k Investment Menu Best Practices  Does your plan’s 401k investment menu provide way too many investment options? Do you wonder how your 401k investment menu compares with the marketplace? This article takes a look at best practices regarding 401k plan investment menus. Source:

The Word on the Street on What 401k Plan Sponsors May Need  Thanks to the web and through great materials by plan providers, most plans sponsors are finally understanding what they really need to manage their 401k plan. But, still too many don’t, so this article is talking about things that 401k plan sponsor want or may need in running their plan. Source:

Section 404(c) Is the Exception, not the Rule  Section 404(c) is a historically misunderstood part of ERISA, with misconceptions rampant even before the 404(a)(5) participant fee disclosure regulations added to the confusion. The general rule is that ERISA plan fiduciaries are liable for all aspects of selection and monitoring of plan investments, and are on the hook for any participant claims for fiduciary breaches should something go wrong. Section 404(c) is a limited exception to this general rule. Source:

Investment Committees Misnamed Causing Confusion by 401k and 403b Plan Sponsors  Traditionally, the governing committee for 401k and 403b plans have been called “investment committees” which can cause confusion and might even be harmful. They should be called “retirement committees” or even “benefits committees.” Here’s why. Source:

Risk Exposure: Company Stock  PSCA’s recent survey shows that 18% of plans still offer company stock, and that 14% of all plan assets are invested in company stock. If you offer company stock as an investment option in your retirement savings plan, you may want to take another look at what you offer and how those investments are communicated to participants. Source:

401k Plan Sponsors Must Separate These Fiduciary Rule Facts From Fiction  An Interview with ERISA attorney David Levine. Sorting what is fact from fiction is something plan sponsors should focus on right now. His advice to plan sponsors and service providers is “that while there are compliance and litigation challenges for plan sponsors and service providers, the sky is not falling. Yes, there are bumps in the road but as the adage says, an ounce of prevention is worth a pound of cure.” Source:

Making Sure 401k and 403b Fees are Necessary and Reasonable – Part Three  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 wraps up the three-part series on the subject. Source:

Risk vs. Readiness: The 401k Plan Annuity Conundrum  Annuities present some hurdles for plan sponsors when it comes to plan administration and managing costs for the retirement plan and its participants. Fiduciary risk still looms large also. Because annuities must pay out over the lifetime of the purchaser, plan sponsors have to select a provider that will be able to pay benefits for a long time. Source:

Items of Special Interest to Service Providers

Fiduciary Conduct Is Good for Business  The focus on compliance obscures the compelling business case that fiduciary conduct (1) is what clients want, (2) is operationally efficient and reliable, (3) strengthens client-adviser relationships and makes them more enduring, (4) provides the adviser with greater pricing power, and (5) enhances the advisory firm’s brand and market valuation. Source: (registration may be required)

403(b) Plans

Which Employees Are Eligible for a 403b Plan?  This is a quick review of which employees are eligible for a 403b plan. Source:

Funds, Fees, and Annuities, a Guide to 403b Investment Options  Unlike qualified plans under Section 401, 403b plans are restricted to only three investment options. This article discusses the differences between these three options (annuities, custodial accounts, and retirement income accounts) including their legal definitions, permitted investments, asset commingling, contract exchanges and transfers, distributions, excise taxes, and fees. Source:

Target-Date Funds

Target Date Funds: Three Things to Consider  This article addresses three major features common to most TDF’s structure: asset allocation, management style, and fees. If not evaluated carefully — on a manager-by-manager basis — could result in a mismatch between an employer’s goals and participant investment results. Source:

Court and Legal

ERISA Class Actions Settlements Cost Employers Nearly $1 Billion in 2017  Class action settlements and court decisions related to 401k retirement plans in 2017 significantly affected the direction of ERISA litigation, according to the newest edition of an annual law firm report on workplace class action lawsuits. Source:

Fidelity Stable Value Fund Suit Gets Final Dismissal From Appellate Court  The court said the plaintiffs claim that Fidelity agreed to overly conservative investment guidelines in a failed effort to lock up all wrap coverage so that its competitors would not be able to obtain such coverage made little sense. Source:

Legislative and Washington DC

Tax-Reform Changes Lead Some Employers to Raise 401k Matches  A handful of large U.S. corporations announced they are raising the employer match for their 401k retirement plans or are making other changes in their benefit plans in the first month after a tax reform law was signed by President Trump. And nearly half of companies surveyed said they are considering taking such an action this year or next. Source:

Fiduciary Rule

Fiduciary Rule Myths  The best interest requirement may lead some to think that advisors have to meet an essentially impossible standard. As with a lowest-cost recommendation, a mandate to recommend the best investment is a myth…it just isn’t true. Even the DOL has said so. Source:

Firms May Need to Rethink DOL Rule After Scottrade Charges  A decision by Massachusetts’ regulators to file state charges against Scottrade by claiming it violated the Department of Labor fiduciary rule has surprised many industry analysts. In short, the state claims Scottrade ignored the policies and procedures it put in place starting June 9 to comply with the DOL rule. Source:

Massachusetts Heats Up Fiduciary Rule Discussion With Cold-Blooded Enforcement  Financial services firms occasionally implement programs for their representatives to receive incentives in connection with specific product or service offerings. For as long as firms have used such programs, securities regulators have scrutinized them. The latest iteration of regulatory attention to sale incentives signals a shift in strategy that carries broader implications for financial firms. Source:

Compliance and Regulatory

How Should We Handle It If We Accidentally Overfund Our 401k Match?  This year, when the plan’s TPA calculated the total match and profit sharing contributions for the year, it was discovered that employer funded more than was needed. What are the options for applying the amount overfunded? Can it be carried over and apply it to next year’s contribution? Source:

Bipartisan Budget Act of 2018 Brings Changes for Retirement Plans  The Bipartisan Budget Act of 2018 was passed into law on Feb. 9, 2018 and introduces some unexpected changes for retirement plans. The most significant of the Act’s changes for retirement plans reduces the existing restrictions on hardship distributions from 401k and 403b plans. Source:

Tax Reform’s Impact on 401k Plan Loan Offset Treatment  The recent Tax Cuts and Jobs Act of 2017, enacted on Dec. 22, 2017, contains a few rules that will impact benefit administrators. This article focuses on retirement plan administrators’ and HR benefits managers’ obligations relating to plan loan offset amounts. Source:


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