Experts in Personalized Retirement Plan Design & Administration Newsletter 03.19.18

Target, Microsoft Lead Move Away From 401k Stock Investments Verizon, Target, Comcast, and Microsoft are among the growing number of public companies rethinking the wisdom behind offering their own stock as an investment option in their workers’ 401k plans. In the last five years, some of the country’s largest employers have taken steps to reduce or eliminate the company stock held in their retirement plans, according to securities filings reviewed by Bloomberg Law. Source: (registration may be required)

All Auto Everything, Shlomo Benartzi on 401ks in the Digital Age The famed behavioral economist compares autoenrollment and escalation to autopilot, get the altitude and heading wrong and it’s all gonna crash. What’s just over the horizon for 401k saving nudges, and what dynamic will digital innovation play? Here’s what advisors need to know. Source:

Fiduciary and Plan Governance Material

Becoming a Retirement Plan Committee Member When a person is appointed or is being sought to be member of a retirement plan committee, the natural question is to understand exactly what the person is committing to. Simply stated, a committee member is a fiduciary, who is expected to always act on behalf of plan participants, using the care of a person familiar with retirement plans and investments. This article covers the specifics on the role and responsibilities of being a fiduciary. Source:

401k Fiduciaries: Is It Time to Hone Your Processes? Three key areas of vulnerability arise from last year’s ERISA litigation. This article discusses these vulnerabilities in detail and suggest ways plan fiduciaries can defend against them and reduce their exposure to liability. Source:

How Technology Is Transforming the Fiduciary Role While compliance pressures continue to rise for executives charged with overseeing their organizations’ employee benefit plans that are qualified under ERISA, sophisticated technology solutions are beginning to offer a reassuring light at the end of a seemingly endless regulatory tunnel. Source:

What You Should Know About Your Plan’s ERISA Fidelity Bond Coverage ERISA bonding requirements can often be confusing, so it is important that all plan fiduciaries understand the requirements in order to make sure their current fidelity bond is in compliance with the current rules and regulations. Plans should have ERISA fidelity bond coverage from an approved provider as of the beginning of the plan reporting period with a coverage amount in accordance with the regulations. Source:

Insight: Studies, Research, and White Papers

PSCA Study Finds Roth Usage Doubled in Past Decade Roth availability doubled in the last decade according to the Plan Sponsor Council of America’s 60th Annual Survey of Profit Sharing and 401k Plans. PSCA, part of the American Retirement Association, found Roth was offered in 63.1 percent of plans in 2016 compared to 30.3 percent in 2007. Source:

More 401k Plans Moving From Revenue-Sharing Model Annual surveys by Callan show a steady decline in the use of revenue sharing. Many 401k plans are moving away from revenue sharing as executives cite the need for greater transparency, simplicity and democracy in how fees are assessed to participants. But confusion remains among some plan executives. Source:

The Mobile Workforce’s Missing Participant Problem This 13-page survey on stale address records in employer-sponsored plans was conducted in collaboration with Retirement Clearinghouse. The report is the first of its kind to survey terminated participants themselves about the status of their accounts left behind in former-employer plans. Source:

Evaluating the Impact of a Retirement Managed Account Many DC plans today offer a managed account option. Yet there is no standard method for valuing these accounts that considers the full range of potential product features and their financial impact. This 16-page paper presents a method for valuing managed accounts and delineates the menu of features that may be offered through a managed account investment option in a DC plan. Source:

Brightscope and ICI Release Latest Edition of Comprehensive 401k Study An analysis from of newly available 401k data shows that employers are using a range of plan features and a diverse mix of investment options to encourage retirement saving among their employees. The study shows that large plans have ramped up target-date fund offerings in their investment lineups and that most plans are offering employer contributions and loan features. Plans also are increasingly using auto-enrollment to boost participation. Source:

Items of Special Interest to Service Providers

How 401k Advisors Can Use ETFs As the popularity of ETFs rise, 401k advisors must be ready to answer investors’ calls. To do so, it is important to understand what is driving ETF adoption and how to best implement them in a 401k plan. Source:

403b Plans

Litigation Against 403b Plan Fiduciaries The purpose of this article is to provide a brief overview of 403b plans, discuss when such plans are subject to ERISA, review the key allegations raised in ERISA breach of fiduciary duty lawsuits, and discuss the status of these cases. Source:

Court and Legal

Voya Escapes Lawsuit Over 401k Robo-Adviser Fees A 401k investor who accused Voya Financial and its subsidiaries of overcharging for investment advice from robo-adviser Financial Engines Advisors won’t get another chance to make her case. A federal judge on March 13 denied the investor’s request to amend her complaint, effectively ending the proposed class action. Source: (registration may be required)

Court Rules in Favor of DOL Fiduciary Restrictions on Annuity Products In the latest episode of what has become an ironic series of DOL enforcement and federal judicial events, the U.S. 10th Circuit Court of Appeals has ruled against plaintiffs who oppose DOL restrictions on annuity products sold to retirement savers. Source:

401k Service Providers Owe No Fiduciary Duty With Respect to Negotiating Their Fee Compensation Following the findings expressed in three other Circuits, the United States Court of Appeals for the Ninth Circuit recently held that plan administrators are not ERISA fiduciaries when negotiating their own compensation with prospective customers. Instead, because the employer/plan sponsor has the express duty under ERISA to defray reasonable expenses of administering a 401k plan, any claims that fully disclosed fee arrangements are unreasonable “lie against the employer, not the service provider.” Source:

Fiduciary Rule

DOL Fiduciary Rule Likely to Live on Despite Appeals Court Loss Despite suffering a major blow when it was struck down Thursday by a federal appeals court, the Labor Department’s fiduciary rule could still live on. Uncertainty, though, will continue to surround the measure as it morphs its way into the future. Source: (registration may be required)

Industry Reacts to Fifth Circuit Fiduciary Rule Ruling Groups representing both sides of the fiduciary debate were quick to respond to news yesterday that the Fifth Circuit Court of Appeals vacated the entirety of the Department of Labor’s fiduciary rule. Here’s what some of them had to say. Source: (registration may be required)

Fifth Circuit Court of Appeals Vacates DOL Fiduciary Rule The Fifth Circuit Court of Appeals vacated the Labor Department’s fiduciary rule in a split decision announced late Thursday afternoon, overturning a Dallas district court that was just as adamant in upholding the measure. By a 2-1 vote, the appellate judges held that the agency exceeded its statutory authority under ERISA in promulgating the measure. The rule requires that brokers act in the best interests of their clients in retirement accounts. Source: (registration may be required)

What’s Next for the DOL Fiduciary Rule? The Department of Labor fiduciary rule does not exist anymore after a late-Thursday court ruling. That court decision opens the door for the Securities and Exchange Commission and state insurance departments to take over rulemaking. The Fifth Circuit Court of Appeals’ 2-1 decision stunned the industry and has many asking the same question this morning: What now? Source:

Fiduciary Rule Shifts Power to Broker-dealer Compliance Departments The DOL fiduciary rule was a wake-up call for many broker-dealers, some of which had paid little attention to defined contribution plans like 401ks in the past. But no one is arguing that compliance departments gained greater power over how their advisers interact with 401k and 403b plan sponsors and their employees. Source: (registration may be required)

Compliance and Regulatory

Audit Guidelines on Missing Participants and RMDs This memorandum directs EP examiners not to challenge a 403b plan as failing to satisfy the required minimum distribution (RMD) standards under Internal Revenue Code Section 403(b)(10) in the circumstances set forth. Source:

Video: 401k Mirror Plan Can Solve Testing Issues 401k Mirror Plan Can Solve Testing Issues. Plan sponsors dread telling senior executives that their tax bill is higher than they expected because their 401k plan failed testing. But there is a solution beyond plan design. Source:

Rollover Period for Loan Offsets Extended If a participant defaults on a retirement plan loan after separating from service, the plan will “offset” the outstanding balance of the loan, deducting it from the participant’s account and treating it as a taxable distribution. Under a new rule, the rollover deadline to avoid taxation is now extended from 60 days to the due date for the participant’s tax return, including extensions, for the year in which the loan offset occurred. Source:

Can Bonuses Be Excluded From Retirement Plan Compensation? This article answers the question: “Is it possible to disregard signing bonuses from plan compensation or do we have to treat those the same as all other bonuses? If they must all be treated the same, could we carve out all bonus payments?” Source:

Form 5500 — Sponsors Forgetting to File Can Be a Costly Mistake It’s important for plan sponsors to know the timing and requirements for filing the Form 5500. Doing so can help you avoid fines and other unnecessary plan expenses. It can also help you keep tabs on your 401k provider to make sure they’re completing and filing the Form 5500 competently and on time, which is an important part of your fiduciary responsibility. Source:


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