Experts in Personalized Retirement Plan Design & Administration Newsletter 11.22.17

Spending Retirement Assets…or Not? The vast majority haven’t been spending their retirement savings, leaving nest eggs mostly untouched and living on ready sources of income. Future retirees may be less fortunate. Source:

What’s the Correct Measure of Retirement Income Adequacy? Current measures of the adequacy of retirement income provide diverse answers about the state of retirement income security in the U.S., but what is the correct level? Should the retirement replacement measure be based on meeting your basic needs in retirement, or is it maintaining your preretirement standard of living? Source:

Video: Why CITs Make So Much Sense The same allocation with lower fees certainly sounds appealing. Babu Sivadasan and Bill Chetney break it down. Source:

How to Save for Retirement (No Matter How Young) When your friends are still toiling away at 60, you’ll be the one laughing and thanking yourself for being so smart to have started saving for retirement in your twenties. That’s why it’s important to get into a practical savings plan on even the smallest of budgets. This guide will show you that it only takes a little bit of your paycheck to build a strong foundation now for financial security later. Source:

Six Tips to Take DC Plans to the Next Level Tax reform. Interest-rate hikes. Regulatory questions. Inflation. There’s always a reason to put off making changes to your company’s DC plan. But some improvements will be good for your plan and participants no matter what happens. Here are six tips to help you enhance your firms’ retirement-readiness offerings. Source:

Fiduciary and Plan Governance Material

Best Practices – Investment Menu Construction How can plan sponsors build an investment menu that will facilitate improved long-term participant outcomes? Investment Menu Construction discusses how findings from behavioral economists can help guide the construction of an investment lineup that will make participant decision-making easier. Source:

Fiduciary Standard Quandary: First Avoid “Harm”onization In the debate between suitability and fiduciary standards, reliance on disclosure may be viewed as a loophole and many see the “harm” emerging from harmonization. Reliance on more disclosure as a remedy will water down the fiduciary standard and provide weak consumer protection. The very term “harmonization” implies compromise. Source:

Evaluating Auditor Proposals Evaluating responses to your plan auditor request for proposals can be done simply and efficiently if you lay out the criteria you consider most critical in advance and assign a weight in terms of importance to each. This approach creates a framework of objectivity before you begin reviewing the proposals. Source:

Insight: Studies, Research, and White Papers

AICPA’s Progress Toward Improving Employee Benefit Plan Audits In 2014, the AICPA launched an initiative for improving the quality of audits by improving the overall audit process. The process for enhancing audit quality includes the following six steps: pre-licensure, standards and ethics, CPA learning and support, peer review, practice monitoring of the future and enforcement. The AICPA recently released a report detailing the highlights and progress of its initiative. Source:

Do Consumers Believe in Debt After Retirement? LIMRA Secure Retirement Institute finds consumers attitudes towards being in debt, even so called “good” debt, is negative during retirement. The Institute finds 67 percent of consumers believe retirees should avoid borrowing money for any reason. Source:

Study Finds Lower-Income Savers Benefit Less From 401ks Than Higher Earners While participation in 401k plans is high across the board for middle-income workers, the lower their income, the less likely they are to reap the full advantages from their employer’s retirement savings plan, according to a study by MassMutual. More education is needed to help workers tap existing strategies to make saving for retirement more affordable. Source:

Management Fees Paid by Sponsors Stay Steady, Callan Survey Finds The research features highlights of total fund-level fees, performance-based fees, and fee negotiation practices, but the heart of the questionnaire focuses on actual fees paid by asset owners to fund managers compared to published fee schedules at the asset class level. Source:

Participants Say More Information About Plan Investment Fees Would Be Useful Roughly four in five retirement plan participants said it would be at least somewhat useful to have additional information about investment fees, according to research from The Pew Charitable Trusts. Source:

Lack of Retirement Savings Causing Anxiety for Americans Health care, retirement savings and student loans are the top causes of investor’s financial anxiety, according to a survey by Rubicoin, a digital investment platform provider. Among all investors, mounting health care expenses and bills (23.5%) and a lack of retirement savings (22.6%) are the two biggest contributors of financial anxiousness. For Millennials, student loan debt, credit cards and health care expenses all measured equally as causes for “extreme” amounts of financial stress. Source:

Items of Special Interest to Service Providers

Wells Fargo Requires Advisers to Use Level Fees for New 401k Business Wells Fargo Advisors is requiring that financial advisers servicing 401k plans do so in a level-fee arrangement for new business, as have other large brokerage firms, in response to the Department of Labor’s fiduciary rule. Source: (registration may be required)

Target-Date Funds

Competition for Target-Date Funds Is Heating Up Competition for target-date funds in the DC market is showing no sign of abating. DC Specialists are looking outside the two-dominant target-date fund providers. While American Funds and Vanguard continue to square off for the greatest proportion of target-date fund dollars among this elite plan advisor segment, three investment managers are gaining ground. Source:

A Tipping Point for Target-Date Funds Vanguard plan participants reached a critical tipping point. Half of all Vanguard participants are invested in a single target-date fund. And 57% of all participants were solely invested in a professionally managed allocation: 4% were using managed account options, 3% held a single-risk-based balanced fund, and 50% held one TDF. Source:

Court and Legal

Fidelity Gets Industry Support in Stable Value Fund Appeal The Securities Industry and Financial Markets Association is urging a federal appeals court to reject a legal challenge to Fidelity’s stable value fund, which 401k investors accused of carrying excessive fees and using an unduly conservative investment strategy. Source: (registration may be required)

Legislative and Washington DC

Hatch Proposes “Mini-Rothification” for 401ks, IRAs Sen. Orrin Hatch will propose eliminating the current pretax 401k catch-up contribution, Fox Business reports. Hatch proposes raising the catchup limit to $9,000, but taxing those contributions when they are made and making them Roth 401k contributions, according to the network. Source:

401k and 403b Contributions Still on the Chopping Block The Senate is now considering cutting back on contributions under 401k, 403b and 457 plans, which remains bad retirement policy for many reasons. Here’s what is now under consideration. Source:

Senate Tax Reform Bill Seeks Different Reforms to Retirement Plans The Senate bill does not include any reductions to the most frequently referenced annual contribution limit, but the does impact catch-up contributions. Source:

State-Based Retirement Programs

Connecticut Pushes Back Implementation Date for State-Run Auto-IRA Program Connecticut was one of the first states to adopt such a program, requiring employers in the private sector over a certain size offer a retirement plan for their employees. But the Nutmeg State’s state-run auto-IRA plan for private sector workers isn’t going to be ready for business on Jan. 1, 2018. Source:

DOL’s Fiduciary Rule

Extension of Fiduciary Rule Transition Period Likely Official End of November Although the details of the notice are not yet known, the title suggests that the conditions of the named exemptions that are currently scheduled to become applicable on January 1, 2018, will be delayed by 18 months to July 1, 2019, as the DOL had originally proposed in August. Source:

Pause Ordered in Fiduciary Litigation Case The National Association for Fixed Annuities hasn’t had much success thus far in its litigation challenging the Department of Labor’s fiduciary regulation, until now. Source:

Compliance and Regulatory

Puerto Rico Governor Signs Executive Order Authorizing Rules for Retirement Plan and IRA Distributions The Governor of Puerto Rico signed Executive Order No. 2017-067 authorizing the Secretary of the Department of the Treasury to establish tax rules for distributions from qualified retirement plans and individual retirement accounts following Hurricane Maria and other natural disasters. Source:

Puerto Rico Treasury Department Finally Grants Relief to Participants Affected by Hurricane Maria The Puerto Rico Treasury Department issued Administrative Determination No. 17-29 to grant relief on eligible distributions (including, hardship withdrawals) and plan loans by participants in Puerto Rico tax qualified retirement plans who were affected by Hurricane Maria. Source:

2018 Planning for ERISA Single-Employer DC Plan Operations This paper will help you set up a yearly schedule of activities, so you do not miss important deadlines for your qualified plans. As you evaluate the various tasks, you can confirm suitable deadlines with your vendors for their completion. Identifies and addresses other activities that are event-based and participant-specific. Source:

Retirement Benefits on IRS Agenda in Priority Guidance Plan Retirement benefits are on the agenda in the IRS’ recently released 2017-2018 Priority Guidance Plan. The plan lists projects that the IRS says it hopes to complete by June 30, 2018, and sets forth guidance priorities for the Department of the Treasury and the IRS based on public input. Source:

Updated List of Required Modifications for DC Plans The IRS releases its updated list of required modifications for defined contribution plans. The information package contains samples of plan provisions that have been found to satisfy certain specific requirements of the Internal Revenue Code, taking into account changes in the plan qualification requirements, regulations, revenue rulings, and other guidance. Source:

Are You Up-to-Date on Qualified Plan Beneficiary Rules? Most TPAs don’t wake up first thing in the morning thinking about qualified plan beneficiary rules. However, improper payments due to lack of knowledge about these rules can have unwanted consequences. As the first in a series, this article covers the basic rules of the spouse beneficiary requirement for qualified plans. Source:

IRS Expectations of 401k Plans Hardship Withdrawals New substantiation guidelines for safe harbor hardship withdrawals have been issued by the IRS. The guidelines made it clear that hardship withdrawals must be substantiated with the proper form of documentation to be a valid distribution, so employers and third-party administrators must understand the guidelines prior to approving hardship distributions. Source:

Delaying the Inevitable: Required Minimum Distributions for DC Plans The rules governing required minimum distributions are complex, and exceptions to the rules abound. Plan sponsors should check their plan document to be sure RMDs are in operational compliance. Additionally, plan sponsors should educate account holders about the rules related to RMDs so that account holders are aware of tax implications and potential penalties related to RMDs. This article provides an in-depth look at RMDs. Source:


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