Experts in Personalized Retirement Plan Design & Administration Newsletter 03.05.18

How to Avoid Penalties on Unpaid 401k Loans While some employers do allow you to continue to make loan payments if you leave your job, one provision of the new tax law that hasn’t gotten much attention can make a huge difference to people who find themselves in a bind with an outstanding loan and no more job. Basically, if you default on your 401k loan, there is a way to still repay it, but the details matter. Source:

Five Ways to Save for Retirement Outside a 401k Your workplace 401k plan is typically the most convenient way to begin saving for retirement. But if you don’t have access to a 401k plan or it isn’t meeting all your investment needs, you may want to diversify your savings. The good news is there are quite a few ways to save money for retirement without completely relying on a 401k plan. Source:

What Makes the 401k So Popular? The 401k plan has been one of the most popular forms of qualified retirement plans because it offers a robust set of customizable features and elements to benefit the company sponsoring the plan and its employees. Flexibility is significant because it translates to customization. Source:

Tax Credit for Small Employer Start-Up Retirement Plans Although this particular tax credit has been available for over a decade, it is still surprising to see the general lack of awareness that most plan sponsors have regarding this tax saving opportunity. This article is intended to familiarize readers with this tax credit so that they can attempt to evaluate its application to their tax situation. Source:

Defined Contribution Plans Have Come a Long Way The changes plan sponsors have made such as offering Target-Date Fund, automatic enrollment and making Target-Date Fund the main default option have reduced the net return differential between DB and DC plans. DC plans have become better retirement savings vehicles than we thought they would be just a decade ago. Source:

Fiduciary and Plan Governance Material

Retirement Plan Best Practices: Plan Monitoring Monitoring your investment menu managers, your plan providers, and plan fees is an important part of your overall fiduciary responsibility. This white paper looks at best practices and the standards should you be following in your monitoring practices. Throughout the paper, you’ll find checklists that may be helpful in building and maintaining your plan monitoring processes. Source:

Insight: Studies, Research, and White Papers

More Employers Are Upgrading Their DC Plans Employers are upgrading their defined contribution plans according to a Willis Towers Watson. WTW found that more employers are adding automatic enrollment and Roth plan features to their 401k plans, increasing their contributions, reducing the number of investment choices and being more transparent about recordkeeping fees. Source:

Less Than Half of Workers Contribute to Their 401k Across the board, Americans could be doing better when it comes to saving for retirement. Much better, in fact. According to a study from Edward Jones, only 49 percent of U.S. workers are actively participating in employer-sponsored 401k plans. Just 37 percent are contributing to an individual retirement account. Source:

Participants Improving Response to Volatility Data from the February market volatility suggests that retirement plan participants may be improving their response to volatility. Although trading activity reflected significant outflows from equities when the Dow fell 1,175 points on February 5th, a significant amount of that money moved into balanced funds and target date funds. This represents a change from the past, when 80% of the money would go to cash and 20% would go to bond funds. Source:

IRI Issues Retirement Security Blueprint The Insured Retirement Institute has issued a Retirement Security Blueprint, meant to guide the group’s dialogue with Congress and the Administration about improving Americans’ retirement outlook. The detailed report is aimed at expanding opportunities to save and increasing access to lifetime income products, among other efforts. Source:

Top 30 401k Plans of 2016 Report BrightScope, a Strategic Insight company, is pleased to announce the Top 30 401k Plans of 2016 report. BrightScope’s Top 30 list is comprised of large 401k plans with high overall quality, as measured by the BrightScope Rating. Source:

Shake Up Financial Education, Paper Says Poor savings rates, high debt levels, and the frequent incidence of living paycheck-to-paycheck are among the ingredients in the recipe for financial stress. Financial education can be an antidote, but not in the traditional ways it is provided suggests a recent study. Source:

More Than Half of Americans Want to Save More Money – Retirement a Top Reason A new LIMRA Secure Retirement Institute survey found the top financial priority for 54 percent American household is to save more money. Other financial priorities include paying down debt, creating a long-term financial plan and building better spending habits. Of those who said they wanted to save more money, 56 percent cited retirement as a top reason. Source:

Two-Thirds of Millennials Have Saved Absolutely Nothing for Retirement Most U.S. millennials aren’t saving for retirement, and those who are saving (only 5%) are falling short of the mark, according to a new report from the National Institute on Retirement Security. The study found that 66.2% of employed millennials have nothing saved for retirement, and only 34.3% of them participate in their employer’s retirement plan. Source:

Retirement Offerings in the Fortune 500: A Retrospective The last two decades have witnessed a sweeping shift in retirement offerings from large employers. This study takes a historical look at the primary retirement plans offered by current Fortune 500 companies between 1998 and 2017, thus showing how their retirement programs have evolved over the last 20 years. Source:

Mechanisms Behind Retirement Saving Behavior This TIAA Institute study identified the behaviors that influence employees’ decisions regarding their retirement plans. In opt-in plans, efforts to get employees to increase their savings above the default rate are likely to be fruitful if they focus on improving financial literacy and understanding of exponential growth. While in automatic enrollment environments, efforts targeted at procrastination tendencies are likely to be particularly effective. Source:

Americans Saving Nearly 8% for Retirement In a survey of 1,000 adults, PenFed Credit Union learned that Americans, on average, are saving 7.6% of their salaries for retirement. This increases to 8.9% for men and decreases to 6.4% for women. Source:

Items of Special Interest to Service Providers

How Low Can 401k Advisory Fees Go? Lowering plan costs got many experienced advisers in the door and became one of their major value propositions. But that strategy has affected not just recordkeeping and money-management fees; it has also affected advisory fees, and it shows no real signs of letting up. There are market forces at play that could continue to depress advisers’ fees even further. Source: (registration may be required)

Plan Automation

Improving Participant Outcomes Through Re-Enrollment A defined contribution plan “re-enrollment” has become a retirement plan industry best practice. This 8-page white paper addresses the most common preconceived notions around re-enrollment’s and provides fiduciaries the context, data, and legal support to evolve toward an informed embrace of a re-enrollment’s value. Source:

Court and Legal

Retirement Plan Sponsors Looking to Protect Themselves From Litigation Fee lawsuits have exponentially increased over the past two years. Retirement plan sponsors of all sizes must be vigilant this year to protect themselves from plan litigation relate to high fees, lack of investment options or poor investment options and breach of fiduciary duty. Source:

Appeals Court Declares Plan Service Provider Transamerica Not a Fiduciary, Not Guilty of Breach The plaintiffs, who were participants in several ERISA-governed retirement plans for which Transamerica provided investments and services, alleged that Transamerica was a plan fiduciary and breached its duties in that role. The breaches allegedly occurred in Transamerica’s negotiating with plans the compensation for its services, in withdrawal of fees from participant accounts, and in its receipt of revenue sharing payments from investment managers associated with the plans. Source:

Georgetown University Hit With 403b Excessive Fee Suit The suit alleges that rather than “…leveraging the Plans’ substantial bargaining power to benefit participants and beneficiaries, Defendants failed adequately to evaluate and monitor the Plans’ expenses and caused the Plans to pay unreasonable and excessive fees for investment and administrative services.” Source:

Legislative and Washington DC

Fiduciary Duties Would Expand Under Maryland Bills Legislation before the Maryland legislature would create a fiduciary duty for agents and investment advisers, as well as broker-dealers, to act “primarily for the benefit” of their clients. Source:

401k Plan Leakage and the Bipartisan Budget Act of 2018 The Bipartisan Budget Act of 2018 (H. R. 1892) contains several provisions that have potential implications when it comes to 401k plan leakage. Certain provisions could increase plan leakage by making it easier to take hardship withdrawals. Source:

Congress Enacts Changes to Hardship Withdrawal Rules The recently enacted Bipartisan Budget Act of 2018 included some unanticipated provisions that directly affect retirement plans. One such provision relates to the availability and amount of hardship withdrawals made under 401k plans. This article summarizes the impact of these new rules. Source:

Congressman Neal’s Automatic Retirement Plan Proposal This article we discuss Congressman Neal’s Automatic Retirement Plan Act of 2017, which would (with some very limited exceptions) require every US employer to maintain an “automatic contribution” retirement plan. The bill would also create a framework for “open” multiple employer plans. Source:

Bill Would Help Establish Database for Orphaned 401k Accounts Two senators are trying to help workers locate retirement savings they may have forgotten when they switched jobs. On Thursday, Sens. Elizabeth Warren and Steve Daines introduced the Retirement Savings Lost and Found Act, which would establish a national database of orphaned retirement accounts. Source: (registration may be required)


Cybersecurity and ERISA Retirement Plans: The Financial Consultant’s Role There is no explicit cybersecurity duty that applies to consultants under ERISA. Despite this, plan consultants need to become educated on the cybersecurity landscape surrounding plans, in order to assist plan sponsor clients in fulfilling their fiduciary duties. Source:

Securing Your Organization’s Data Data security is a major concern for all organizations. There are many elements involved in protecting your own employees’ and your clients’ personally identifiable information. Conducting a self-assessment and developing your organization’s internal policies are a good starting point. But it is important to recognize that the job of data protection will never be complete; there will always be new items to add to your security to-do list. Source:

Fiduciary Rule

Massachusetts Brings Enforcement Action Based on Violations of Fiduciary Rule Compliance Policies Although the Complaint alleges violations of state law only, it has the effect of challenging a financial institution’s compliance with the Fiduciary Rule and “Best Interest Contract Exemption,” which became applicable on June 9, 2017, and raises alarm bells that the states are stepping in to regulate the retirement advice market in the absence of enforcement by the DOL or private litigants to date. Source:

SEC Chairman Outlines Goals for a New Fiduciary Standard An SEC fiduciary rule should provide investors clarity about the role of their adviser, enhanced protection and offer regulatory coordination, Chairman Jay Clayton said Friday. The SEC and DOL have promised to work together on investment-advice standards. Source:

Is the New Fiduciary Rule Enforceable During the Transition Period? Among the “myths” surrounding the fiduciary rule is that the rule will not be enforced during the transition period. But that’s not the whole story, Fred Reish notes. Source:

Compliance and Regulatory

Missing Participants and Required Minimum Distributions Cause Headaches for Plan Fiduciaries Unfortunately for employers, the DOL has been aggressively challenging the adequacy of employer efforts to locate and contact missing participants. Numerous plan sponsors have received letters from the DOL during missing participant audits that threaten sanctions against plan fiduciaries for alleged violations of ERISA, despite a lack of definitive guidance on exactly how employers should follow up on a variety of challenges. Source:

Compliance Checklist 2018 for Plans That Are Subject to ERISA This 43-page Compliance Checklist incorporates defined benefit, defined contribution, and ERISA 403b requirements and provides information on the materials that will need to be file, filing due dates, and agencies to which the filings should be made. Source:

401k Hardship Withdrawals – Made Easier by the 2018 Budget Act Effective for hardship distributions that occur after January 1, 2019, employees will no longer be subject to the 6-month suspension period for contributions. Also, amounts eligible for withdrawal will be expanded to include earnings, as well as other employer contributions previously made to the plan. Lastly, the legislation would remove the requirement to take a loan before qualifying for a hardship withdrawal. Source:


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