Experts in Personalized Retirement Plan Design & Administration Newsletter 10.04.17

Projected 401k and Retirement Plan Limits for the Tax Year 2018 Based upon the actual and projected CPI, there is little doubt that we will see some increases in the pension limits for 2018. Here are our projected changes. Source:

Less Is More When Designing a 401k Plan Behavioral finance has taught us a lot in recent years about how people make decisions. Just as importantly, it has taught us how plan sponsors can help participants make better decisions while still providing them with choices. However, providing people with too many choices can overwhelm them and lead to decision paralysis. Source:

The Advantages of Roth 401k Contributions Has your organization considered a plan amendment that would allow Roth contributions? Or, if you already permit Roth contributions, do you feel like you can easily converse with your employees who have related questions? This 4-page white paper is designed to help in both situations. Source:

403b Plans

Lawsuits Targeting 403b Plan Fiduciaries Fiduciaries of 403b plans are increasingly facing the same type of litigation that mirrors other retirement plan fiduciary lawsuits. This results in fiduciaries facing liability from plan members even without the stricter ERISA standards. Source:

Fiduciary and Plan Governance Material

Standard Items Appearing in an Investment Policy Statement Although not required by the Employee Retirement Income Security Act, drafting an IPS is a fiduciary best practice. The IPS serves as a policy guide that can offer an objective course of action to be followed when emotional or instinctive responses might otherwise motivate less prudent action. Here are some standard items appearing in an investment policy statement. Source:

Operational Risk Is the Achilles’ Heel of DC Plans Investment risk and longevity risk tend to receive the most attention from the media and stakeholders alike. However, as DC plans continue to grow in size and complexity, sponsors need to strengthen their focus on operational risk. Source:

Tips to Keep You and Your Recordkeeper on Track One of a plan sponsors many fiduciary responsibilities is to monitor its service providers. But how do plan sponsors and recordkeepers have productive and positive relationships? This paper reviews how a plan sponsor can be sure that they are getting the most out of their service providers. Source:

Using Funds From Only One Family Is an Awful Idea When you have thousands of mutual funds out there and hundreds of mutual fund companies, it’s just amazing that any plan sponsor thinks it’s prudent that every fund on the plan’s lineup is from the same mutual fund company. Source:

Insight: Studies, Research, and White Papers

How Do You Know If Financial Wellness Is Paying Off As more companies add financial wellness to their suite of benefits, one question persists: How do you know whether it’s paying off for the company? Those who offer financial wellness plans saw a direct correlation to employee well-being, retention, and productivity. Source:

American Dream Redefined as Savings Rate Skids Americans are showing a significant shift in how they define the American Dream as the U.S. savings rate drops to a five-year low. A new national survey from PurePoint Financial finds that 71 percent of respondents feel the American Dream has changed, and the majority (64 percent) say they define financial success as simply not living paycheck-to-paycheck. Source:

The Problem of Small 401k Accounts (And What to Do About It) It’s generally accepted that the small-balance accounts of terminated 401k plan participants are a problem. For plan sponsors, they result in increased plan costs, fiduciary risk and other ancillary problems, such as missing participants and uncashed distribution checks. Now, based on new information from EBRI and other sources, we’re learning that small accounts are a significant and growing problem for active participants, as well. Source:

Company Stock Loses Its Luster in 401k Landscape Employee stock purchase plans are becoming more popular among larger public companies at the same time employees have reduced the amount of company stock they purchase within their 401k plans. Source: (registration may be required)

Deloitte 2017 Defined Contribution Benchmarking Survey Deloitte’s 15th Annual Defined Contribution Benchmarking Survey found that with current regulatory uncertainty and increasing litigation from plan participants, defined contribution plan sponsors are focusing on their fiduciary responsibilities by shifting investments to lower cost options, utilizing direct fees and simplifying investment approaches. These actions aim to help participants tackle their future retirement income needs. Source:

Retirement Assets Total $26.6 Trillion in Second Quarter 2017 Total US retirement assets were $26.6 trillion as of June 30, 2017, up 1.9 percent from March 31, 2017. Retirement assets accounted for 34 percent of all household financial assets in the United States at the end of June 2017. Source:

Can Knowledge Empower Women to Save More for Retirement? Retirement-account balances are lower among women than men. Differences between men and women in financial knowledge and motivation contribute to gender gaps in retirement savings. Financial knowledge and motivation can be augmented by multimedia financial education. Source:

Items of Special Interest to Service Providers

Private Equity Firms See Hidden Value in 401k Recordkeeping Most 401k industry experts claim there isn’t money to be made in the recordkeeping business. But some heady private equity firms backing providers like Ascensus, Alight Solutions (the business Aon Hewitt recently sold to Blackstone Group), Newport Group, Aspire Financial Services, and a few robo-advisers are betting against the conventional wisdom. Source: (registration may be required)

SEC Chairman Hopes to “Properly Tailor” Approach to Fiduciary Issues Securities and Exchange Commission (SEC) Chairman Jay Clayton hopes that his agency can “properly tailor” an approach that will best address issues related to those the DOL’s fiduciary rule concerns. Clayton made his remark during his Sept. 26 testimony before the Senate Committee on Banking, Housing and Urban Affairs. Source:

FT 401: Full List of the Top US Retirement Advisers This is the Financial Times third annual line-up of leading retirement plan advisers. The list represents an elite group of professionals, with the average FT 401 adviser managing $1.6 billion in DC plan assets, up five percent from last year, and having 19 years’ experience with DC plans. The average number of DC plan clients per FT 401 adviser rose from 50 to 55. Source:

Target-Date Funds

Target-Date Fund Selection — Actively Selecting a Passive Offering It is important that plan sponsors understand that choosing a passive target-date option is far more complicated than opting for a passive option in a straightforward, single-style strategy. This 4-page paper highlights the key issues surrounding passive target-date funds, including how they differ from active strategies and how to differentiate between passive offerings. Source:

Court and Legal

Supreme Court May Have First ERISA-Free Term in Six Years The U.S. Supreme Court returns next week with nary an ERISA case on its docket and only a handful of significant petitions to watch. This is the second year in a row the justices have started their term with no Employee Retirement Income Security Act cases slated for oral argument. Source: (registration may be required)

401k Lawsuit Attacks Excessive Advisory Fees Paid to UBS A company sponsoring a $157 million 401k plan has been sued for allowing unreasonably high fees to be charged for plan services, including advisory services provided by UBS. Source: (registration may be required)

GE Hit With Lawsuit Over High Fees in Its $28 Billion 401k General Electric is accused of filling its $28.5 billion 401k plan with high-cost, poorly performing in-house mutual funds, causing its employees to lose hundreds of millions of dollars in their retirement savings. Source: (registration may be required)

Penn Succeeds in Dismissing Retirement Plan Proposed Class Action Since August 2016, sixteen elite colleges and universities have faced class action lawsuits related to management of their 403b retirement plans. After five cases previously survived motions to dismiss, the University of Pennsylvania became the first college to secure a complete victory when accused of retirement plan mismanagement. Source:

Dismissal of Case Against UPenn Good News for 403b Plan Sponsors Colleges and universities have finally received some encouraging news in the recent spate of class action suits against higher education 403b plans. Last week a federal judge dismissed all claims against the University of Pennsylvania, marking the first time that one of these recent law suits has been be dismissed in full. Source:

Legislative and Washington DC

Tax Reform Proposal Could Undermine Incentives for Small Business Plans More than 90% of businesses are organized as “pass-through” entities. More than 320,000 of these entities sponsor a retirement plan. Unfortunately, many of these businesses may reconsider adopting or maintaining a qualified retirement plan because of significant financial disincentives woven into the fabric of the tax reform proposal. Source:

No 401k Promises in GOP Tax Reform Framework Republicans rolled out their framework for tax overhaul with a passing mention of encouraging retirement savings. They didn’t specifically address possible 401(k) changes, but that doesn’t mean change isn’t coming. Source: (registration may be required)


Retirement Plans at Risk for Identity Theft While many cyber threats have special names, your retirement plan’s data may be most at risk from common things an employees do every day that put themselves at risk for identity theft. It is those common things, discarding paperwork with personal information, postings on various websites and other information that can be available in the public domain that identity thieves may use to gain access to an individual employee’s retirement plan account. Retirement plan accounts have been stolen by identity theft in several incidents. Source:

Five Cybersecurity Best Practices Regulators want to ensure advisors safeguard client and business information online. Implement these best practices to reduce the risk of your data being compromised. Source:

DOL’s Fiduciary Rule

DOL’s Fiduciary Rule — An Overview of the Marketing and Sales Implications for Investment Managers The DOL’s fiduciary rule will impact the way many investment managers market their products and services to these types of clients. This is an overview of the fiduciary rule with a focus on the marketing and sales implications for investment managers. Source:

BICE and Related Exemptions: Limiting Providers’ Liability Until Full Implementation In August, the DOL proposed to extend the transition period by 18 months for the full implementation of the BICE, the PTE, and PTE 84-24. In this uncertain environment, a critical and bottom-line question for financial advisers and financial institutions serving employer-sponsored retirement plans is, “What do I do during the transition period”? Source:

Compliance and Regulatory

Improving Audit Quality Through Enhanced Financial Reporting In response to the DOL’s findings regarding ERISA plan audit deficiency rate, the AICPA has embarked on an initiative to improve audit quality through auditor badge certification programs, enhanced peer review checklists, and changes to auditing standards by strengthening the audit report. Source:

IRS Issues Guidance to Ease Assistance for Hurricane Recovery While Hurricanes Harvey and Irma have subsided, recovery efforts have just begun. In an effort to help bring timely assistance to beleaguered residents of areas hard hit by the storms, the IRS has issued guidance loosening restrictions on certain distributions from qualified retirement plans and the donation of paid leave benefits. Source:


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