Experts in Personalized Retirement Plan Design & Administration Newsletter 09.18.17

Three Ways Participants are Driving a New Era of Menu Design  The industry has put immense effort into introducing new participants to retirement education and help preparing resources to assist in participants’ long-term needs. While the effort on behalf of those participants can and should continue to be a large focus, there needs to be an additional layer of planning, preparation, and servicing to those participants who are near or at retirement with a shorter time horizon, and full of diverse needs. Source:

Employers Looking to “DBification” of DC Plans as Industry Matures  As the defined contribution pension industry continues to mature, Canadian employers are considering ways to improve their DC plans by introducing elements of defined benefit plans, according to an industry expert. Source:

403b Plans

How to Do a 403b Collective Trust  The University of California made news when it announced that it has found a way to apply the collective trust rules in such a way to make just such an offering to its 403b plan. For sophisticated state universities with large plans, or even those large consolidated K-12 plans, this could be a very real option. Source:

Are 403b Plans Evolving Fast Enough?  Traditionally 403b plan sponsors have been uncomfortable with change, at least much more so than their 401k plan sponsor counterparts. But while 403b plans have lagged in adoption of some plan improvements, they’re striving to catch up. Source:

403b Litigation Concerns  Over the last year, many colleges and universities have been the subject of lawsuits over the management of their 403b retirement plans. The complaints in the lawsuits have common threads and they identify patterns of high-risk practices. The courts have begun to weigh in on some of these issues, but their interpretations of the issues vary. Source:

403b Plans Must Be Universally Available — Is Yours?  Plan sponsors sometimes run into confusion regarding which employees may be excluded from making salary deferral contributions under their plan. This article discusses the rules to help clarify which employees may be excluded. Source:

Fiduciary and Plan Governance Material

Eight Tips to Build and Run Yours Retirement Plan Committee Effectively  There’s no one size fits all formula for building the “perfect” committee. A lot depends on the size and design of your plan, and the demographics of your participant population. Here are eight tips to help you set up and structure a committee that benefits your plan and acts in your participants’ best interests. Source:

Fiduciaries: “Can Someone Just Tell Me What to Do?”  Eight of ten employers say they’re concerned about an increase in fiduciary litigation. And more than a quarter listed fiduciary liability and litigation as their top 401k concern. Who can blame a fiduciary for thinking, “Can someone just tell me what I have to do?” Source:

Fiduciary Duties in an Age of Impact Investing  This article describes “impact investing” and reviews how fiduciary duties applicable to managers of pension plan assets and charitable institution assets permit and restrict the use of nonfinancial factors in managing those assets. Source:

White Label Fund Options for DC Plans  The core lineup of most plans has remained largely unchanged over the past 20 years. The author suggests that it’s time for DC plan sponsors to rethink these legacy investment lineups. This paper focuses reframing the design of actively managed options with an emphasis on fewer, broader investment options to ease participant decision making. Source:

ESG and Fiduciary Responsibility: Complementary or at Odds?  Running the plan and investing its assets in a way mindful of environmental, social and governance (ESG) concerns is a practice some plans follow. But a recent commentary questions whether that complements — or compromises — fulfilling fiduciary responsibility. Source:

ERISA’s Reasonable Fee Requirement  Plan fiduciaries must review service provider fees annually against reliable indicators as part of proper plan governance. The efficacy of any such review depends upon the ability to break out fees for each service and to utilize acceptable benchmarks, rather than self-serving benchmarks supporting excessive fee arrangements. Source:

Insight: Studies, Research, and White Papers

Are Saving More and Working Later the Only Options to Improve Retirement Readiness?  In a Pension Research Council working paper, Catherine Reilly, senior investment strategist, defined contribution, at State Street Global Advisors, and Alistair Byrne, head of investment strategy, European defined contribution, at SSGA, state that expected low market returns paired with increasing longevity will make it tougher for future retirees to have sufficient income replacement rates in retirement. Source:

Webinar Replay: NEPC 12th Annual DC Plan and Fee Survey  NEPC’s Ross Bremen, CFA, Partner, and Kevin McCullough, CFA, Analyst, hosted this review of NEPC’s 12th Annual DC Plan and Fee Survey. NEPC conducted the Survey to capture data and trends around plan design, and to help plan fiduciaries better understand and measure the investment and administrative costs of their plans. Source:

Millennials Engaged in Retirement Saving, but Challenge Norms  Millennials are taking steps to save early for retirement, but they also have higher expectations that employers should be offering access to a retirement savings plan and socially responsive investments, according to new survey results. Source:

Most DC Plan Participants Don’t Understand Roths, Survey Finds  Amid all of the recent talk about tax reform and the potential move toward Rothification, Cerulli Associates has come out with a new report showing that only one-third of DC plan participants can correctly identify the benefits of Roth contributions. Source:

Assessing Americans’ Financial & Retirement Security  The ACLI study analyzes data from 4,500 U.S. households to provide a comprehensive picture of Americans’ current state of financial and retirement security. It finds that 65 percent of U.S. households are on track or nearly on track to be financially secure. Among households considered to be the most financially secure, 25 percent earn $50,000 or less. Among households that need significant financial improvement, 25 percent earn $72,000 or more. Source:

Items of Special Interest to Service Providers

Retirement Plan Advisers Need to Start Marketing to Providers  Resources are shrinking as margins get thinner, with more assets moving into target-date funds and passive investments, forcing providers to make tough decisions on who they can support. As a result, advisers need to start “selling” providers on why they deserve support and treat them like true business partners rather than vendors. Source: (registration may be required)

Fiduciary Liability Defenses for Advisers Under ERISA  If an investment adviser makes a recommendation to a retirement plan sponsor or investment manager, who then follows that recommendation and later challenges it as a breach of fiduciary duty, there are several types of defenses available to the adviser. Source: (registration may be required)

Court and Other Legal Issues

Voya Charged Big Fees to Small 401k, Lawsuits Says  Voya Financial is accused in a new lawsuit of charging excessive recordkeeping and administrative fees to a small 401k plan. Source: (registration may be required)

Legislative and Washington DC

Warren Ups War of Words in 401k Fiduciary Fight  Elizabeth Warren fired off yet another letter last week, this time to Labor Secretary Alexander Acosta, urging the latter to implement the fiduciary rule post haste. She cited comments made by financial services companies during earnings calls to bolster her case, noting “that they are prepared to comply with the rule in its current form and that many believe it to be in the best interests of their customers.” Source:


Cybersecurity Must Be C-Suite Concern at RIAs, Brokers and Managers  Cybersecurity attorney and former SEC staffer Marlon Paz suggests it is absolutely essential for advisory firms to have a senior executive “not just appointed but also empowered” as the chief information security risk officer. Source:

DOL’s Fiduciary Rule

Fiduciary Rule Should Be Largely Positive for Investors  In a comment letter to the SEC, Morningstar’s Aron Szapiro explores what changes the fiduciary rule has had on the asset management industry and what the SEC can do to help investors. Source:

DOL’s Fiduciary Rule: Death By A Thousand Cuts?  Every now and then one wakes up with a thought along the lines of, “How the heck did we get to where we are?” Such a thought may easily be suggested by the present state of play regarding the new fiduciary regulation promulgated by the DOL and the related amended and new “prohibited transaction” class exemptions. Source:

Compliance and Regulatory

A Fresh Look at Mid-Year (aka “Projected”) 401k Testing  It’s that time of year again, when many clients and their advisors map out a strategy for the remainder of the year to try to maximize 401k deferral rates for their Highly Compensated Employees. Often, mid-year, or projected, compliance testing is the tool that they use to devise that strategy. This article focuses on how mid-year nondiscrimination testing can be a disservice to advisors, clients, and participants alike. It then reviews how to use 401k test results in a more constructive manner. Source:

Like Harvey, Retirement Plans Can Make Loans, Hardship Distributions to Victims of Hurricane Irma  The Internal Revenue Service announced that 401ks and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Irma and members of their families. This is similar to relief provided last month to victims of Hurricane Harvey. Source:

Book Offers Comprehensive ERISA Compliance Insights  Readers of a new publication from Research and Markets are taken step by step through ERISA regulations to help ensure that their plans are properly structured, qualified and implemented. Source:

IRS Preapproved Retirement Plan Program Modestly Modified to Accommodate More Designs  The modifications are designed to further the IRS’s stated intention to encourage sponsors of individually designed plans to transition to a preapproved plan format. However, the changes are relatively modest and most large plan sponsors will likely find other ways to mitigate their higher compliance risk. Source:

IRS’ Pre-Approved Plan Program Gets a Make-Over (With Extensions)  The IRS recently issued Rev. Proc. 2017-41, which streamlines and enhances the pre-approved plan program in light of the drastic changes that were made to the determination letter program for individually designed plans. Many of these changes were in response to the benefits community comments on ways to help improve the program and facilitate transition of plan sponsors to these pre-approved programs. Source:

Staying Out of Trouble: How to Avoid IRS and DOL Audits  This presentation discusses IRS and DOL audit triggers, the process for each, and what to do if your plan is audited. It also discuss the top audit issues and actionable steps companies can take to avoid audits and compliance issues. Source:

Three Loan Errors that Might Be Occurring in Your Retirement Plan Right Now  Loans are among the most complex transactions to administer for defined contribution retirement plan recordkeepers and plan sponsors. This article reviews the three most common administrative errors. Source:

SEC Accuses 403b Plan Advisory Firm of Conflicts-of-Interest  The SEC has instituted a cease-and-desist order against Envoy Advisory. Envoy is accused of breaches of fiduciary duty, inadequate disclosures and compliance deficiencies. Most of its clients are small to medium-sized non-profit, faith-based organizations that sponsor ERISA Section 403(b) retirement plans for employees. Source:

Hurricane Irma Affects Retirement Plan Administration  The arrival of Hurricane Irma in September significantly affected individuals and businesses in Florida, Puerto Rico, and the U.S. Virgin Islands. Recognizing this impact, the IRS, DOL, and the PBGC have granted extensions of certain deadlines for both plan sponsors and participants directly affected by this disaster. The IRS has also provided special rules for plan sponsors that want to offer hardship distributions or plan loans to employees or former employees that have been affected by Hurricane Irma. Source:


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