Experts in Personalized Retirement Plan Design & Administration Newsletter 11.08.17

Six Steps to a Debt-Free Retirement Some retirees are completely debt-free as they enter their golden years. There’s a unique comfort in paying off all your debts before you retire. Here are six steps you can take to ensure a debt-free retirement. Source:

What You Should Know When Establishing a 401k Plan: A Guide for New Plan Sponsors Installing a 401k plan is a challenge whether the company is a startup, or an established firm. This article gives an overview of some of the most common practical issues and compliance problems that plan sponsors should be aware of when first establishing a 401k plan. Source:

FBI Raids, Shuts Down TPA The Federal Bureau of Investigation has raided the offices of Vantage Benefits Administrators “amid concerns that money may be missing from retirement accounts the company manages,” according to the Dallas Morning News. Source:

Missing Your 401k Check? The Government Wants to Help Uncle Sam wants to reunite workers with money they may have left behind in retirement plans over the years. The three government agencies regulating retirement plans — the Internal Revenue Service, Pension Benefit Guaranty Corporation, and Labor Department — have all made recent strides to help employers and workers match up money that was left behind. Source: (registration may be required)

Key Ways to Help Your 401k Participants Become Better Investors Here are some of the 401k investing errors your participants often make and suggestions on what you can do to help them avoid the most common 401k investing mistakes. Source:

Chart: Retirement Saver’s Credit Limitations for 2018 Taxpayers who make eligible contributions to an employer-sponsored retirement plan or IRA may be able to take a tax credit on their income tax return. They may use this chart to calculate their Saver’s Credit. Source:

403b Plans

University 403b Plan Fees and Investments Under Scrutiny Over the past year, 16 private universities became the target of lawsuits alleging breaches of fiduciary duty with respect to 403b plan fees and investment options. This article reviews some of the key topics covered by the allegations in the cases grouped by trends in the district courts’ rulings to date. Source:

Insight: Studies, Research, and White Papers

Decumulation in Defined Contribution: The Second Act The 401k era is entering a new and expanding phase: the era of retirement income and asset distributions. A demographic “tipping point” arrived in 2013/2014 with assets leaving 401k plans exceeding assets being contributed or entering plans. This trend is expected to remain until 2030, peaking at $40 billion annually in 2019. Source:

Average 401k Balance Reached $99,900 in Third Quarter In the third quarter, the average 401k balance that Fidelity Investments administers reached $99,900, a 2.25% increase from $97,700 in the previous quarter, and a 31.27% increase from the average $76,100 balance five years ago. Source:

Fixed Income in DC Plans: What’s on the Menu? The fixed-income offerings in a typical defined contribution menu can sometimes seem uninspired, but it doesn’t take much to improve the selection. The right combination can enhance core fixed-income allocations, providing diversification and reducing risk. Source:

Items of Special Interest to Service Providers

DOL and SEC Uniform Advice Standard May Not Be Far Off Leadership at both the DOL and SEC have signaled a willingness to work together to find complementary approaches to managing advisers’ conflicts of interest, but it will be a heavy lift to accomplish a uniform standard. Source:

Best Practices for Reaching a Busy Plan Sponsor There is more to the process when it comes to reaching out to plan sponsors. This article puts together a few strategies to consider when getting in front of companies and how to successfully reach out. Source:

Employer Retirement Plans Comparison Table for Small Businesses-2018 Plan Year This table provides a comparison of the features and benefits that apply to retirement plans that can be sponsored/adopted by small business owners. Source:

Clients Facing Late-Career Job Loss Can Tap 401ks Early At 59 1/2, a client can take penalty-free withdrawals from their retirement savings. However, a withdrawal from an IRA or 401k before that age may be subject to an additional 10% penalty, one of the last things an unemployed worker needs. There are some solutions. Source: (registration may be required)

TPA Alpha: Why Quality Ingredients Matter Not knowing all the pertinent details when making important decisions can have a dramatic impact on desired outcomes. Some details are more critical than others, but studying the elements and getting all the relevant information available can help you make the most informed and prudent decision. With that idea in mind, this article looks at how financial advisors can receive a high level of consulting and avoid future headaches by choosing to partner with high quality TPAs. Source:

Target-Date Funds

2017 Target-Date Fund Buyer’s Guide The 2017 TDF Buyer’s Guide represents $1.6 trillion in assets as of June 30. Of the target-date fund market reported, 60% of products are in mutual funds, 37% in collective investment trusts, and 3% in variable portfolios. The analysis is based on the 71 off-the-shelf, or prepackaged, products and custom solutions are excluded. Source:

Court and Legal

GE Hit With Second Lawsuit Over 401k Plan Investments, Fees General Electric faces a second lawsuit challenging the allegedly imprudent investments in proprietary mutual funds included in the company’s $28 billion 401k plan. GE’s selection of in-house mutual funds for the plan allegedly provided its financial services subsidiary, GE Asset Management, a constant source of fees and helped inflate GEAM’s market value for a subsequent sale of the subsidiary, according to a lawsuit. Source: (registration may be required)

Plan Sponsor Fee Litigation Cases on the Rise There are three main types of excessive fee litigation: 1) Excessive fee litigation involving lawsuits against large corporate plan sponsors challenging fees and expenses associated with employee plans. 2) Excessive fee litigation involving lawsuits against financial institutions who also happen to be plan sponsors. 3) Excessive fee litigation involving university-sponsored 403b plans. This article examines each of these three types of excessive fee lawsuits. Source:

Chapter 13 Debtor Can Put Earnings Into 401k Chapter 13 debtors can deduct 401k contributions in calculating their disposable income that must be contributed to a payment plan, even if they weren’t contributing in the six months prior to the bankruptcy, an Illinois bankruptcy judge ruled Oct. 30. Source: (registration may be required)

Legislative and Washington DC

Tax Reform Contemplates Changes to Employee Benefits The House Committee on Ways and Means publicly released a working draft of the Tax Cuts and Jobs Act. In the weeks leading up to the release of the draft, speculation has swirled as to whether it would eliminate or otherwise limit the ability to make pre-tax employee deferrals into 401k plans. The current draft of the bill would not impact 401k deferrals, but would bring other changes to employee benefit plans and programs beginning in 2018, as described in this article. Source:

Tax Reform Bill Contains (Other) Retirement Plan Changes While much of the focus has been on the potential “Rothification” of 401k plans, the Tax Cuts and Jobs Act included a number of other retirement plan-related provisions, including changes that impact hardship withdrawals and loans. Source:

Tax Reform Update — A (Mostly) Good First Step House Republican leaders on Nov. 2 released their much-anticipated tax reform plan that left 401ks and IRAs alone, but contained a number of proposals to modify various pension and retirement savings provisions. Source:

Initial House Tax Reform Bill Proposes Limited Changes to Retirement and Savings Arrangements While it is understood that the version of tax reform released by the House Ways and Means Committee this week could change both in House deliberations and in a conference committee process with the Senate, it is worth taking note that the bill would not propose limiting the availability of pretax retirement savings contributions. Source:

Marcia Wagner’s 10-Minute Take on Trump Tax Plan “There are no adjustments to 401k plans,” Wagner, principal of The Wagner Law Group, told advisors in the audience in a rapid-fire recap at the start of a regulatory-focused session. “We have somehow avoided Rothification,” although she noted it doesn’t mean that the final version of the bill will not include some form of Rothification. Source:

Limiting Pre-Tax 401k Contributions May Be a Good Idea The author writes, “Would 401k plan participants be disadvantaged as a result of a much lower cap on pre-tax 401k contributions? The answer, in all likelihood, is no. Here is why.” Source:

Cybersecurity Issues

Cybersecurity as It Relates to Retirement Plan Data As cybersecurity threats increase, so should plan fiduciary efforts to combat these threats. Fiduciaries can work with service providers to strengthen existing protections and can work internally to create and document procedures that demonstrate prudent process. Source:

DOL’s Fiduciary Rule

408(b)2 Disclosures and the Fiduciary Rule 408(b)2 Provider Disclosures have created confusion for employers who sponsor 401k and 403b plans ever since the rules first requiring them took effect in 2012. This article seeks to clear up some of the confusion in the interest of helping employers stay compliant and ensure plan participants are well served. Source:

Compliance and Regulatory

More IRS Relief for Hurricane Maria and California Wildfires Victims The IRS has released Announcement 2017-15 detailing more relief available for those affected by Hurricane Maria and the California wildfires. This relief is in addition to previous disaster-related announcements. Source:

Missing Participants With Unpaid Required Minimum Distributions The IRS publicly released guidance, previously provided to its Employee Plan auditors, establishing the criteria that the auditors should use to determine if a plan under audit has a qualification issue when required minimum distributions (RMDs) under Section 401(a)(9) of the Internal Revenue Code have not been timely paid to missing participants. Source:

It’s Audit Time — Do You Know Where Your Participants Are The DOL has announced that it has expanded to the whole country a pilot program in which it asks plan administrators to provide current contact information for selected participants. The DOL considers it a breach of fiduciary responsibility if the plan doesn’t know how to reach them. It is an IRS issue, too. On October 19, the IRS issued a memo explaining when examiners will not find a qualification failure if required minimum distributions haven’t been made because participants couldn’t be located. Source:

Missing Participants and Beneficiaries and Required Minimum Distributions This IRS memorandum directs EP examiners not to challenge a qualified plan as failing to satisfy the required minimum distribution standards under Internal Revenue Code Section 401(a)(9) in the circumstances set forth in the memorandum. Source:

Cashing-Out Terminated Employees From Your Company’s Retirement Plan This article focuses on one aspect of the employment termination process as it relates to defined contribution retirement plans. More specifically, it examines the involuntary cash-out provisions included within most DC plans. Source:

What You Should Know About the Hardship Withdrawal Process In these difficult economic times, more participants are considering the option of taking a hardship withdrawal. A participant can only take a hardship withdrawal if it is permitted by the plan and they have an immediate and heavy financial need. This checklist can be used when faced with the task of reviewing and approving hardship requests. Source:

Year-End Compliance Issues for Single-Employer Retirement Plans By year-end 2017, sponsors of calendar-year single-employer retirement plans must adopt necessary and discretionary plan amendments to ensure compliance with the statutory and regulatory requirements of ERISA and the tax code. This bulletin looks at key areas — including administrative compliance issues — that sponsors of such DB or DC plans should address by December 31, 2017. Source:

Missing Participants and Beneficiaries and Required Minimum Distributions The Internal Revenue Service has released administrative guidance regarding how qualified retirement plans may satisfy RMD standards when the participant or beneficiary to whom the payment is due cannot be located. Source:

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