Experts in Personalized Retirement Plan Design & Administration Newsletter 12.04.17

Tax Savings When Setting Up an Employee Benefits Plan There are a number of benefits to setting up an employee retirement plan for both employers and employees. This includes the ability to attract top talent and incentivize current employees to stay with the company to maximize their benefits. However, one of the most compelling reasons employers should consider for setting up an employee benefits plan is the tax savings for both employer and employee. Source:

Should Your 401k Plan Provide Hurricane Relief? You don’t have to have employees in the disaster areas to be able to provide relief for victims of the 2017 hurricanes through your 401k plan. IRS announcements and a new law enable participants to take withdrawals to help relatives who were seriously impacted by hurricanes Harvey, Maria and Irma if their plan permits hurricane distributions. Special rules also allow plans to permit loans for relief even if the plan terms don’t currently provide for loans. However, the agencies in charge aren’t making it easy for plan sponsors who want to help. Source:

Meet the Law Firms Fighting 401k, Health Plan Class Actions Morgan Lewis & Bockius gets a lot of business when big companies are sued for the way they manage their retirement and health plans. For the second year in a row, it’s the law firm getting the most ERISA class action business. Source: (registration may be required)

Top 25 Large Business 401k Plans The top 25 401k plans for large-size businesses in the United States. Companies have 1,000 or more employees and are ranked by end-of-year net assets. Source:

Fiduciary and Plan Governance Material

Fiduciary Considerations When Adding and Reviewing Managed Accounts Beyond the standard investment menu of mutual funds, and even beyond target-date funds, the introduction of managed accounts offers retirement plan participants a more personalized investment strategy and the opportunity to further refine their retirement portfolios. However, as plan sponsors review the benefits of adding managed accounts to their retirement plans, there are ever-present fiduciary considerations which must be addressed. Source:

How do 401k Participants Really React to Fee Levelization? Many have raise good questions and concerns about how your 401k participants might respond to fee levelization. Article looks at this so that you’re in a better position to make fee-related decisions around the organization’s retirement plan and, more importantly, help meet the related fiduciary responsibilities. Source:

401k Managed Account Push Rife With Conflicts of Interest Recordkeepers are looking to managed accounts to be their next 401k cash cow, but the way some firms are promoting the products to investors is rife with conflicts. Several providers offer incentive compensation to their advisers and representatives for getting plan participants to enroll in their paid managed account services. Source: (registration may be required)

Five Awkward 401k Questions Every Good Fiduciary Must Know the Answer To Retirement advisers can sometimes be taken aback by the nature of some of the questions plan sponsors and participants ask them. Here are three commonly asked questions that may initially merit a “pooh-pooh,” but upon further review actually open the door for teachable lessons. Source:

Insight: Studies, Research, and White Papers

Retirement Prospects for the Millennials: What is the Early Prognosis? This paper assesses retirement prospects for future generations, with a special focus on the late Generation-X and Millennial generations. Because retirement outcomes depend on how much people earned and saved when they were younger, the analysis compares trends in employment, earnings, pension coverage, and wealth during working ages across cohorts. Source:

Phased Retirement Largely Ignored Despite Flood of Retirees With 10,000 baby boomers retiring daily, it would seem that flexible retirement would be a staple benefit within the workforce. It’s not. Source:

Retirees Still Have 80% of Savings After Nearly Two Decades Research conducted by the BlackRock Retirement Institute and the Employee Benefit Research Institute found that after nearly two decades of being retired, the average retiree still has 80% of their nest egg intact. Source:

Data Show Ongoing Commitment to Retirement Saving Americans continued to save for retirement through DC plans during the first half of this year, according to a ICI study. The study tracks contributions, withdrawals, and other activity, based on DC plan recordkeeper data covering more than 30 million participant accounts in employer-based DC plans. Source:

DCIIA Fourth Biennial Plan Sponsor Survey This is a 12-page report on the results of a survey of plan sponsors’ use-of and attitudes-toward automatic plan features including automatic enrollment, automatic escalation and re-enrollment in default investment funds known as Qualified Default Investment Alternatives. The survey represents the views of 194 DC plan sponsors. Sixty-two percent of respondents are larger plan sponsors, defined as plans with assets over $200 million, and the remaining 38% are smaller plan sponsors, defined as plans with $200 million in assets or less. Source:

Items of Special Interest to Service Providers

What the New Form 5500 Means for 401k Advisors While the precise nature of any changes and the timing of implementation have yet to be finalized, proposals suggest that a ‘modernized’ Form 5500 will compel plan sponsors to deliver a trove of information — some of it new — in formats that facilitate data mining. The new Form 5500 has the potential to be a double-edged tool that both benefits plan sponsors and exposes plan vulnerabilities. Source:

Do Specialized Retirement Plan Advisers Even Need a Broker-Dealer? The past several years have seen 401k specialists, similar to wealth managers in the retail market, migrate toward compensation structured on level fees rather than commissions, due largely to the evolution of record-keeping technology. That dilutes the necessity of a brokerage affiliation from the standpoint of compensation. Source: (registration may be required)

New RIA Aggregator Enters 401k Market Hub International is a neophyte among so-called RIA aggregators focused on the retirement plan market, but it’s making a grand entrance that signals competitive heft and further hints at a growing consolidation trend among plan advisers. Source: (registration may be required)

403b Plans

Proprietary Funds: The New Lightning Rod for 403b Plans? In the large 403b plan space, the criticism of variable annuities has all but evaporated, since, with some low-cost exceptions, variable annuities no longer exist. But recent litigation has been highly cynical of recordkeepers’ proprietary fund offerings and the plan sponsors who select such offerings. Source:

Court and Legal

American Airlines Can’t Nix Retirement Plan Investment Lawsuit American Airlines must defend a lawsuit accusing it of violating federal benefits law by offering an allegedly poorly performing investment fund in the airline’s 401k plan. The participants have sufficiently pleaded claims to survive American’s motion to have the case dismissed Judge says. Source: (registration may be required)

Union 401k Retirement Plan Latest Target of Fee Litigation The flurry of litigation over 401k plan fees has reached a new frontier: a union retirement plan covering more than 27,000 Teamsters and other union workers. The proposed class action, filed Nov. 30 in a California federal court, targets the trustees of the Supplemental Income 401k Plan, a $921 million union retirement plan based in California. Source: (registration may be required)

The Latest Targets of 401k Fee Lawsuits A new front has opened in the retirement plan litigation battle, this one involving the 27,178-member Supplemental Income 401k Plan, a union-sponsored multiemployer plan with almost $1 billion assets. Source:

Legislative and Washington DC

Tax Reform and Retirement: What Plan Sponsors Need to Know Tax reform, and its impact on retirement plans, has weighed heavily on the minds of many plan sponsors since the new administration took office. Article looks at what has happened thus far, how the proposed changes could affect retirement plans, and what plan sponsors can expect moving forward. Source:

House Bill Would Bump Up Cashout Limit Legislation has been introduced in the U.S. House of Representatives that would boost the cashout limit for retirement plans, which its sponsors say will help make it easier for small businesses to offer retirement plans. Source:

Morningstar Recommends Policies to Increase Small Employer Retirement Plans In its latest policy paper, Morningstar suggests workers at large U.S. companies are served relatively well by the U.S. retirement system. However, half of employees at small companies don’t have access to a retirement plan at all. The paper notes that two policy proposals have attempted to rectify the issues plaguing the retirement system, but both proposals raise the risk of increasing fragmentation in the DC retirement plan system. Source:

House Bill Seeks Expansion of Open MEPs, Aggressive Plan Designs A bill introduced by House Ways and Means Committee Ranking Member Richard Neal, known as the “Automatic Retirement Plan Act of 2017,” is garnering the support of retirement plan industry lobbying groups. Among other adjustments viewed as vital to the expansion of open multiple employer plans, the bill would remove the “one bad apple” rule and the commonality requirement. Source:


Protecting Retirement Plans From Identity Theft Identity theft and related crimes are on the rise, and they can have a devastating impact on employer-sponsored 401k plans. Plans can have very large balances compared to other cyber targets such as bank accounts, and therefore, have become quite attractive to cyber criminals. Cybercrime related to retirement plans can occur because of threats such as phishing, ransomware, “social engineering,” and wire transfer fraud, among others. Source:

State-Based Retirement Programs

State-Based Retirement Initiatives and the AGES Principles This 5-page paper explores the public policy and regulatory framework that could apply to state-based private-sector retirement initiatives. It also considers how these programs potentially align with the American Academy of Actuaries’ Pension Practice Council’s Retirement for the AGES principles. Source:

DOL’s Fiduciary Rule

DOL Extends Fiduciary Rule Delay The DOL released the final rule that further extends the Transition Period and delays the applicability date of several of the prohibited transaction exemptions associated with the DOL’s revamped Fiduciary Rule that became applicable on June 9. Source:

DOL Finalizes Transition Period Extension to July 1, 2019 The DOL will move forward to finalize its proposed 18-month extension of the transition periods under the Best Interest Contract Exemption and the Class Exemption for Principal Transactions until July 1, 2019. The publication of the 18-month extension furnishes the regulated community with a much greater degree of certainty, at least in the near term. Source:

DOL Delays Parts of Fiduciary Rule About to Take Effect, Extends Enforcement Relief Finalizing its earlier proposal, DOL extended until July 1, 2019, the effective date for the written disclosures and fiduciary representations required under prohibited transaction exemptions to the expanded fiduciary rule. During this time, the department will consider possible changes and alternatives to the exemptions, as well as potential input from the SEC. The DOL similarly extended its “enforcement lite” policy for fiduciaries working diligently and in good faith to comply with the updated rule, which went into effect on June 9, 2017. Source:

Fiduciary Rule Extension: What This Means for Service Providers The DOL has extended the current Transition Period for the DOL Fiduciary Rule exemptions by 18 months. The Transition Period was scheduled to end on January 1, 2018, but now will end on July 1, 2019. Here’s what the extension means. Source:

Compliance and Regulatory

The Clock Is Ticking on 2017 Compliance Steps Ritual marks the onset of a new year, but it’s not just about revelry and pageantry. It’s also about making sure plan-related duties that are on a calendar-year timeline are fulfilled in time. Here is a reminder of what needs to be done before the ball drops. Source:

Treasury Issues New Guidelines on Searching for Missing Retirement Plan Participants The US Department of the Treasury recently issued guidance that retirement plan sponsors should consider as part of their obligation to take reasonable steps to locate missing participants. Specifically, the Treasury issued a memorandum which sets forth guidelines that prohibit auditors from challenging qualified plans as failing to satisfy the required minimum distribution standards. Source:


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