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Daily Article Digest - Updated RegularlyThis digest contains a wide variety of the freshest source material dealing with current trends, opinion, news, legislative action, investments, marketing, sales, consulting, and legal issues regarding 401k, 403b and other retirement plans. Each listing contains a headline (hyperlinked to the source document), description, source of the item, and the month and year posted to this digest. Use the SEARCH feature to located specific items from this digest and from our ARCHIVE. RSS feed of this page is available:
IRS Revises VCP Form and Updates Submission ProceduresAbstract: Now that VCP submissions may only be submitted electronically using the Pay.gov website, plan sponsors and advisors do not have to be concerned about submitting the correct Forms 8950 and 8951: the forms on the website are the correct (and only) permissible forms. The submission process has other technical requirements. Source: Thomsonreuters.com, August 2019
IRS Addresses Tax and Reporting Consequences of Failure to Cash a Qualified Plan Distribution CheckAbstract: The IRS has issued a revenue ruling that answers three basic questions about what happens when a tax-qualified plan (such as a 401k plan) mails a check for a fully taxable distribution, but the check is not cashed. The ruling describes a situation in which a plan must make a taxable distribution of $900 to an individual in 2019. Source: Thomsonreuters.com, August 2019
Does Your Plan use a Limited Scope Audit for Form 5500 Financial Reporting?Abstract: There has been a significant new development for employee benefit plan administrators of large plans who opt for a "limited scope audit" by the plan's auditor for Form 5500 reporting of the plan's financial information, as permitted by ERISA Section 103(a)(3(C). This new development only applies in the event that information on the plan's assets is provided by and certified to by a bank or other similar institution holding the plan's assets. Source: Wagnerlawgroup.com, August 2019*
Small Business and Retirement Savings: The Push for Multiple Employer PlansAbstract: Federal regulators and lawmakers have been moving toward making plans more attractive for small business by expanding a previously obscure concept: the "multiple employer plan," which is a single plan in which numerous small, unrelated companies sign up for a centrally administered retirement plan whose sponsor takes on the burdens of choosing investment providers, tracking contributions and account balances, communicating with participants, making distributions, dealing with government filing requirements, and resolving claims disputes. Source: Steptoe.com, August 2019
ERISA Complaint Questions Alternatives Use in Custom TDFAbstract: As it awaits the results of a Supreme Court appeal on another case scrutinizing its investment decisions, Intel Corporation now faces an additional lawsuit questioning the fees and performance of custom target-date funds offered to its defined contribution retirement plan participants. Source: Planadviser.com, August 2019
Lack of Transparency Is Hurting the 401k IndustryAbstract: After being burned by hidden fees and inherent conflicts of interest, defined contribution plan sponsors are waking up concerned about our industry's lack of transparency. They are less likely to adopt new products, even if they are beneficial, unless the industry can engender trust through transparency and elimination of conflicts. Source: Investmentnews.com (registration may be required), August 2019
Plan Sponsors Beware: The Importance of Retaining Employee Benefit Plan DocumentsAbstract: Fiduciaries and plan sponsors have a number of important tasks that they're responsible for each year, from making sure employees have help getting their benefit plans set up to handling the different transactions needed to maintain the plan's records and sending in all necessary paperwork and compliance reporting. Plan records, in this instance, constitutes a variety of documents including the plan's financial records, reporting paperwork, statement audits, benefit determination records, and plan governance records. Source: Hallbenefitslaw.com, August 2019
Administering Hardship Distributions Should Not Be a HardshipAbstract: According to a survey on Bankrate.com, 60 percent of Americans do not have sufficient funds saved to enable them to pay for an unexpected emergency expense. The failure to save money is at epidemic levels. One way that an individual can deal with desperate circumstances (or more-than-normal financial needs, in some circumstances) is to use his or her retirement savings. The Internal Revenue Code permits distributions from retirement plans in limited circumstances due to hardship. Those IRS rules are discussed here. Source: Ferenczylaw.com, August 2019
The Emerging Best Interest and Fiduciary Duty PatchworkAbstract: This year has seen a number of fiduciary and best interest investment advice regulations at both the federal and state levels. Firms subject to these regulations will face challenges in dealing with rules that will impose a host of new obligations, and that may overlap and conflict with one another. This chart is intended to help firms take stock of the evolving framework and aid firms in putting the pieces together. Source: Eversheds-Sutherland.com, August 2019
Auto Portability Preserves Retirement Savings, StudyAbstract: A new Employee Benefit Research Institute study addresses the potential benefits of using auto portability for handling 401k accounts upon termination of employment. The study examines automatically taking a participant's account from a former employer's retirement plan and combining it with their active account in a new employer's plan. This would help keep the defined contribution assets in the retirement system and -- in theory -- reduce leakage from cashouts upon employment termination. Source: Ebri.org, August 2019
What Is the Most Accurate Participation Rate for Retirement Plans?Abstract: A new study contends that American workers' participation in employer-sponsored retirement plans is significantly higher than suggested by the most commonly cited statistics. In fact, nearly two-thirds of workers between ages 26 and 64 participate in such plans, either directly or through a spouse, according to the Investment Company Institute. What's more, the participation rate rises to more than three-quarters if younger and lower-income workers -- those who are the least likely to be able to or want to save for retirement -- are excluded from the analysis. Source: Asppa.org, August 2019
Senator Introduces "Automatic IRA Act of 2019"Abstract: Sen. Sheldon Whitehouse has introduced the Automatic IRA Act of 2019 (S. 2370). The legislation would mandate that most employers that do not offer their employees another type of retirement plan, establish an automatic enrollment, payroll deduction program with contributions withheld from employee pay and contributed to an IRA or retirement bond. The legislation is intended to address the lack of a workplace retirement savings program for many private sector employees. Source: Ascensus.com, August 2019
IRS Guidance Addresses Retirement Plan UnCashed Check Withholding, ReportingAbstract: The IRS has issued Revenue Ruling 2019-19, which addresses the responsibilities of retirement plan administrators when a distribution check that represents a taxable amount is issued to a plan participant, but remains uncashed. Source: Ascensus.com, August 2019
How a More Strategic Eye on Retirement Plan Design Can Alleviate Readiness IssuesAbstract: As a growing number of America's aging workers delay retirement, employers should consider applying a multiyear strategy alongside their 401k plan to find ways to improve their employee's ability to retire on their own terms and minimize the higher costs associated with those who are forced to keep working. Source: Plansponsor.com, August 2019
403b Plan Sponsors Reveal Investment Preferences in SurveyAbstract: Sponsors of 403b plans are more concerned about market volatility than 401k plan sponsors, according to the 2019 BlackRock DC Pulse: 403b Report. Plan advisers can help 403b plan sponsors looking for downside protection, active strategies and target-date funds that can be used as a decumulation vehicle in retirement. Source: Planadviser.com, August 2019
U.S. Contemplates Joining California Secure Choice LawsuitAbstract: The lawsuit, alleging the act that created the program is preempted by ERISA, was filed less than a year after the Trump administration and Congress canceled an ERISA safe harbor established by the Obama administration. Source: Planadviser.com, August 2019
Walgreen Sued for Keeping Underperforming TDFs in 401kAbstract: A group of current and former participants in the Walgreen Profit-Sharing Retirement Plan, individually and as representatives of a class of participants and beneficiaries of the plan, have filed a lawsuit on behalf of the plan for breach of fiduciary duties under ERISA. Despite a market "teeming with better-performing alternatives," the plaintiffs say, Walgreen selected the Northern Trust Funds, which already had a history of poor performance. Source: Planadviser.com, August 2019
MEPs: A Timely RefresherAbstract: Multiple employer plans (MEPs) figure prominently in many discussions about workplace retirement plans today. And with those discussions including changes that would expand their availability and use, an Aug. 6 webinar provided a useful refresher on the federal rules governing MEPs which are summarized here. Source: Napa-net.org, August 2019
Cross-Selling Gaining Prominence in Retirement Plan LawsuitsAbstract: Cross-selling by recordkeepers has become a hot-button issue in retirement plan lawsuits, raising broader awareness and questions around how service providers can use participant data. Source: Investmentnews.com (registration may be required), August 2019
Walgreens Hit With $300 Million 401k Lawsuit Over Target-Date FundsAbstract: Walgreen Co. has been hit with a lawsuit alleging its "imprudent" decision to keep certain target-date funds in its 401k plan caused employees to lose $300 million in cumulative retirement savings. Plaintiffs claim the Northern Trust funds led to a "swift and devastating blow" to participants' retirement savings. Source: Investmentnews.com (registration may be required), August 2019
DOL Moves on Multiple Employer PlansAbstract: The structure of the DOL's final regulation is not significantly different from the proposed MEP regulation. Thus, the final regulation provides conditions under which a "bona fide" group or association or PEO may act as an "employer," as defined under ERISA, and sponsor a MEP. DOL states that the Final Regulation supersedes decades of prior sub-regulatory guidance. Source: Groom.com, August 2019
Still Time to Fix Your 403b PlanAbstract: The IRS is giving its approval on the form of your restated 403b plan document going back to the 2010 plan year. This program is great for eligible employers, but time is running out. Opinion letters are only effective for plans that are amended or restated before March 31, 2020. Source: Graydon.law, August 2019
The SECURE Act and Guaranteed Retirement Income in PlansAbstract: By now you have probably seen a number of articles about the SECURE Act and its safe harbor for guaranteed retirement income in 401k plans. Some have favored the safe harbor, while others have criticized it. In either case, the authors appear to contemplate that participants will be buying individual annuities at retail prices. Fred Reish writes here, "in my opinion, those articles -- on both sides of the fight -- are at best misleading and in some cases just plain wrong. I am writing this article to give you my views." Source: Fredreish.com, August 2019
DOL's Final MEP Rule: What It Means for the Retirement IndustryAbstract: To avoid the MEP commonality requirement entirely, employers and service providers will have to wait and see if the SECURE Act (or other statutory relief) becomes law. In the meantime, the DOL's Association Retirement Plans Rule provides relief for -- and a clear path toward -- plan sponsorship by trade associations and similar employer groups the members of which have industry or geographic ties. Source: Drinkerbiddle.com, August 2019
IRS Updates VCP Electronic Submission Procedures, Revises FormAbstract: On June 28, 2019, the IRS issued its June Employee Plans News, in which the agency announced comparatively minor changes to the submission procedures applicable to the IRS Employee Plans Compliance Resolution System. The changes include revisions to required Forms 8950 and 8951, along with technical changes to the electronic submission process itself. Source: Compliancedashboard.net, August 2019
Are Your Target-Date Funds a Lawsuit Waiting to Happen?Abstract: Target-date funds may be the ticking time bomb of ERISA litigation. If fiduciaries have any doubt that these funds are in the crosshairs, they should take a look at the website of litigation firm Cohen Milstein, which has a whole section titled "Investigation of Target-Date Fund Investments." Cohen Milstein says it is looking at four factors. Source: Cohenbuckmann.com, August 2019
How Will the SECURE Act Would Impact 401ks?Abstract: While 401ks are one of the most common retirement savings plans, there are still a lot of American workers who do not have access to a 401k or do not have any significant retirement savings. A new bill has passed the House that intends to increase access to retirement savings and accommodate older workers. Source: Bsllp.com, August 2019
Three New Surveys Show How Student Loan Debt Is Crippling 401k ContributionsAbstract: Student loan debt, that mortal enemy of retirement savings, is showing no signs of slowing its assault on workers ability to contribute (or contribute more) to their 401k. A trio of new surveys illustrate the hardships student loan debt is causing would-be retirement savers. Source: 401kspecialistmag.com, August 2019
Plan Administrator Deemed an ERISA FiduciaryAbstract: The Fourth Circuit Court of Appeals, in Dawson-Murdock v. Nat'l Counseling Group, Inc., has allowed a life insurance beneficiary to sue her husband's employer for breach of fiduciary duties concluding that she had sufficiently alleged that the employer was an ERISA fiduciary. Source: Wagnerlawgroup.com, August 2019
Report Says Rocky Road Ahead for RecordkeepersAbstract: While it's not exactly been a smooth road over the past couple of decades, a new report says an even bumpier ride could be ahead for recordkeepers. A report from McKinsey & Company notes that while the 10-year bull market has propelled DC asset levels, recordkeepers have had to navigate a series of structural shifts in the market that have pressured their economics. Source: Napa-net.org, August 2019
Long-Term Value Creation in US RetirementAbstract: Retirement is and will continue to be one of the largest growth opportunities for wealth managers, insurers, and asset managers. Recent estimates by the McKinsey Global Institute show retiring and elderly individuals in the developed world will contribute more to global consumption growth through 2030 than will Chinese consumers aged 15 to 59. Not surprisingly, leading firms from across the financial services industries are seeking to tap into this long-term growth opportunity. An 11-page report. Source: Mckinsey.com, August 2019
Quick Fixes for a 401k Plan Sponsor's Errors and ProblemsAbstract: The beauty of 401k plans is that no matter the problem that a plan sponsor may have, there is a rational solution to that problem. The only problem is that most plan sponsors are unaware of these fixes because they're unaware that what they have in their 401k plan may be a problem. This article is about quick fixes that a 401k plan sponsor may utilize to fix a problem they should be aware of. Source: Jdsupra.com, August 2019
Texas 403b Law Causes Adviser Concern Over Investor ProtectionAbstract: A Texas law taking effect next month is causing concern among some retirement plan advisers who are worried that the legislature has weakened investor protection for public schoolteachers in the state. Law taking effect Sept. 1 eliminates fee caps in place on some retirement products for teachers. Source: Investmentnews.com (registration may be required), August 2019
Retirement Plan Participation Continues to IncreaseAbstract: American workers' participation in employer-sponsored retirement plans is significantly higher than suggested by the most commonly cited statistics, with nearly two-thirds of workers between ages 26 and 64 participating in such plans, either directly or through a spouse, according to a new study by the Investment Company Institute. Source: Ici.org, August 2019
Rollover Period for Retirement Plan Loan OffsetsAbstract: If a participant defaults on a retirement plan loan after they separate from service, the plan will "offset" the outstanding balance of the loan, deducting it from the participant's account and treating it as a distribution. Prior to the Tax Cuts and Jobs Act of 2017, if a participant wanted to defer taxes on that unpaid loan balance, they had 60 days to roll the cash value to another eligible retirement plan or IRA. With the update in December 2017, that deadline was extended to the due date for the participant's tax return, including extensions, for the year in which the loan offset occurred. Source: Fidelity.com, August 2019
Retirement plans: 2019 Summer RecapAbstract: This article recaps recent defined benefit and defined contribution retirement plan developments. Highlights include IRS backing down on prohibiting voluntary retiree cash outs, PBGC tweaks to reporting and disclosure for single and multiemployer plans, SEC finalizing their broker-dealer investment recommendations rule, and several compliance refinements and reminders. Source: Buck.com, August 2019
Time is Running out for 403b Plan Sponsors to Meet March 31, 2020 Adoption DeadlineAbstract: In Revenue Procedure 2017-18, the IRS announced a deadline of March 31, 2020 for adopting pre-approved 403b plans in order to receive retroactive relief for any noncompliant plan provisions. Shortly thereafter, it began issuing opinions on plans submitted by sponsors of volume submitter and prototype 403b plan documents. Source: Benefitsnotes.com, August 2019
Scalia Possibly Barred from Fiduciary Rule RewriteAbstract: A potential conflict of interest could leave labor secretary nominee Eugene Scalia out of the fiduciary rule rewrite process. Ethics rules prevent government officials from involvement in issues in which they participated while in the private sector, and as The Wall Street Journal notes, Scalia, a Washington lawyer, handled a legal challenge to the Obama administration's version of the fiduciary rule. Source: 401kspecialistmag.com, August 2019
Vendor Fees: The Importance of RFPsAbstract: Investment advisor and recordkeeper searches are a very important aspect of the fiduciary duty of "procedural prudence," i.e., setting up and carrying out prudent processes that are intended to render beneficial results for participants. They provide 401k and 403b plan fiduciaries the opportunity to ensure not only that fees are reasonable, but also that the appropriate services, technology and education are being provided to the plan participants. Source: Sgrlaw.com, August 2019
A Simple Guide to 401k Participant DisclosuresAbstract: The table here outlines the general annual notices and deadlines for distribution. Financial advisors and plan sponsors should always work with qualified plan consultants to ensure that the plan is meeting all compliance regulations that pertain to their specific plan. There are other notices that may be required depending on the specifics of the 401k plan. It's important to stay on top of these required notices to avoid penalties and to ensure that employees have up-to-date information to make informed investment choices. Source: Rpgconsultants.com, August 2019
The Correct Approach for Controlling Retirement Plan FeesAbstract: When employees file complaints against their employers with the U.S. Department of Labor, fees for their retirement plan services is a very common reason. A burgeoning era of employee activism is underway in which plaintiff lawyers are finding fertile ground for litigation opportunities, catching many employers unprepared. Many other employers are ready, however, using an approach that offers a legally defensible result. Source: Rolandcriss.com, August 2019
Court Denies Dismissal of Kaleida Health Excessive Fee SuitAbstract: In a case alleging fiduciaries of Kaleida Health's 403b and 401k plans failed to take advantage of the plans' bargaining power by only offering actively managed retail mutual funds as investment options instead of identical investor class mutual funds with lower operating expenses, a federal court judge has denied motions to dismiss. Source: Planadviser.com, August 2019
Schlichter Says Retirement Savings "Squandered" in Quid Pro QuoAbstract: The law firm of Schlichter Bogard & Denton, LLP filed papers opposing a motion by fiduciary defendants of the MIT Supplemental 401k Plan for a summary judgement in the suit initiated in 2016 as one of the first university excessive fee cases. Not only did they file papers, they issued a press release, drawing attention not only to the filing, but to an allegation made in the initial suit -- one that distinguishes it from the nearly two dozen such cases filed and fought over the past three years -- that there was a quid pro quo between MIT and Fidelity, the plan's recordkeeper. Source: Napa-net.org, August 2019
Safe Harbor 401k Establishment DeadlinesAbstract: Although the greatest burden imposed on a plan sponsor who elects a safe harbor 401k plan design feature is usually perceived to be the funding of the safe harbor contribution, there are many other administrative requirements that must be satisfied in order to qualify for the ADP / ACP exemption. One such requirement relates to the plan year of a safe harbor 401k plan. Source: Legacyrsllc.com, August 2019
Connecticut Retirement Security Authority: Helping 600,000 Workers Save for RetirementAbstract: Following the path of state governments such as California, Oregon, and Illinois, Connecticut has enacted the Connecticut Retirement Security Program to help address the challenges surrounding retirement savings of workers in the state. The new state-mandated program, overseen by the Connecticut Retirement Security Authority (CRSA), stems from legislation that was enacted back in 2016 with the intent of helping more employees save for their retirement. Source: Humaninterest.com, August 2019
IRS Expands Determination Letter ProgramAbstract: When setting up a benefit plan, many businesses prefer to get the reassurance of an IRS determination letter to ensure their plan is compliant with all applicable laws and regulations. In a 2016 Revenue Procedure update, the IRS indicated that they were eliminating the program that allowed plan sponsors to request a determination letter for an individually designed plan. This created significant negative push-back from plan sponsors, who found determination letters useful in a wide variety of contexts beyond interactions with the IRS. Source: Hallbenefitslaw.com, August 2019
DOL Finalizes Regulations Expanding Access to MEPS by Small Employer GroupsAbstract: On July 29, 2019, the DOL issued final regulations intended to expand access to retirement savings plans (including 401k plans) for employees of small businesses, by allowing them to group together for purposes of establishing "multiple-employer defined contribution retirement plans," a type of "multiple employer plan.". The final regulations seek to accomplish this by allowing certain employer groups and/or professional employer organizations to be considered "employers" for purposes of ERISA. Source: Compliancedashboard.net, August 2019
DOL Releases Auto-portability Prohibited Transaction ExemptionAbstract: DOL has granted the proposed prohibited transaction exemption requested by Retirement Clearinghouse. RCH aims to help employees "consolidate small accounts held in a prior employer's individual account plan and rollover IRA into a new employer's 401k or other defined contribution individual account plan." Source: Buck.com, August 2019
Settlement in Johns Hopkins 403b Plan Lawsuit Includes Recordkeeper BidAbstract: The $14 million settlement agreement also requires the University to retain an independent consultant to assist plan fiduciaries in reviewing the plan's existing investment structure. With the assistance of the independent consultant, the plan's fiduciaries shall also issue requests for proposals for recordkeeping and administrative services. Source: Plansponsor.com, August 2019
Understanding the DOL's New Rule for Multiple Employer PlansAbstract: For decades, small businesses and their employees have been disadvantaged by the limited availability of high-quality, low-cost retirement plans. But this is all set to change by the end of third quarter this year, when a new rule from the DOL takes effect, seeking to expand the access of Multiple Employer Plans. Learn more here about the DOL MEP rule and some of the advantages businesses and their employees can realize from participating in a MEP. Source: Planpilot.com, August 2019
TPA Schemer Caught Stealing $3.3 MillionAbstract: A "third party administrator fee" was used to skim more than $3.3 million from employees' paychecks. From 2013 through 2017, some 300 workers at Plainville, CT-based Ferguson Electric and Ferguson Mechanical Ferguson had deductions of some $1.60 to $3.15 per hour taken from their fringe benefits package as a "third party administrator fee" for the employees' pension plans. Source: Napa-net.org, August 2019
Feds May Weigh in on CalSavers SuitAbstract: The Department of Justice has asked a federal court to hold off ruling on a suit challenging California's auto-IRA program for private sector workers. The suit in question is a challenge by the Howard Jarvis Taxpayers Association, claiming that the California Secure Choice Retirement Savings Trust Act, which establishes the CalSavers auto-IRA program for private sector workers "violates the Supremacy Clause of the United States Constitution because it is expressly preempted by the Employee Retirement Income Security Act of 1974...." Source: Napa-net.org, August 2019
Another Big University 403b Plan Settles With SchlichterAbstract: While disputing allegations and denying liability, plan fiduciaries have announced the second largest monetary settlement to date regarding a university retirement plan. This settlement -- for $14,000,000 -- involves the $4.3 billion Johns Hopkins University 403b Plan, a suit brought by the law firm of Schlichter, Bogard & Denton as part of the first wave of these suits. Source: Napa-net.org, August 2019
Seven Ways to Fix Wrong or Missing Beneficiary DesignationsAbstract: John Doe has died, leaving a substantial retirement account. Unfortunately, he never named a beneficiary for the account (or he named the "wrong" beneficiary). You are advising his survivors, his family, executor, and/or trustee. What are their options for fixing a defective (or missing) beneficiary designation? Here's a menu of seven cleanup options for these situations. Source: Morningstar.com, August 2019
IRI Research Demonstrates Need for Consumer Education on Retirement SecurityAbstract: Increasing the share of workers who participate in retirement plans has been a primary focus of retirement policy. As the retirement industry and policymakers try to increase participation, it is important to understand which workers currently participate in employer sponsored retirement plans and why certain employers offer, and certain employees desire, compensation in the form of retirement benefits. This 32-page report uses newly available data -- tabulations of administrative tax data published by the IRS Statistics of Income Division -- to analyze participation in employer-sponsored retirement plans. Source: Myirionline.org, August 2019
Fidelity Dogged Again by 401k Quid-Pro-Quo AllegationsAbstract: Fidelity Investments has again been accused of engaging in a quid-pro-quo type relationship with a 401k plan sponsor, which allegedly cost employee retirement savers millions of dollars in return for bigger profits. The latest episode involves the Massachusetts Institute of Technology, which has been accused of retaining Fidelity's 401k record-keeping services and investment funds, despite counsel to do otherwise from attorneys and consultants, with the expectation that Fidelity and co-owner Abigail Johnson would make a large donation to the university. Source: Investmentnews.com (registration may be required), August 2019
Who Participates in Retirement PlansAbstract: Increasing the share of workers who participate in retirement plans has been a primary focus of retirement policy. As the retirement industry and policymakers try to increase participation, it is important to understand which workers currently participate in employer sponsored retirement plans and why certain employers offer, and certain employees desire, compensation in the form of retirement benefits. This 32-page report uses newly available data -- tabulations of administrative tax data published by the IRS Statistics of Income Division -- to analyze participation in employer-sponsored retirement plans. Source: Ici.org, August 2019
Audit Survival Tips for Retirement PlansAbstract: Although only a small fraction of retirement plans are audited each year, over time it's almost certain that you and your plan will be audited by either the Internal Revenue Service or the Department of Labor. Your preparation for an audit and your approach to an audit will save your organization thousands of dollars in productive time, penalties, and interest. Source: Findley.com, August 2019
What Does a Fiduciary-Grade Advisor Cost?Abstract: Even though fiduciary-grade 401k financial advisors are bound by a higher standard of care than non-fiduciaries, their advice often costs less. Check out the latest fee study of fiduciary-grade 401k advisors here. Source: Employeefiduciary.com, August 2019
America's Biggest Loan-Related Problem Isn't Student Loans DebtAbstract: Student loans are a favorite topic these days and for good reason. We're a nation of spenders, and the level of student debt appears to be choking off credit in other markets such as borrowing for homes and cars. But student loans aren't the only debt employers should be worried about. Indeed, 401k loans may present an even greater risk to the millions of American workers that have them. Source: Benefitnews.com, August 2019
Final Regulations Expand MEP OptionsAbstract: In 2018, roughly 38 million private-sector employees did not have access to a retirement plan. This troubling statistic led the Trump Administration to issue an Executive Order, directing the DOL and the Treasury Department to issue guidance that would help increase participation levels in employer-sponsored retirement plans. On July 31, 2019, the DOL fulfilled this directive by releasing final regulations on association retirement plans, also known as multiple employer plans, or MEPs. Source: Ascensus.com, August 2019
Fidelity Ensnared in MIT 401k Quid-Pro-Quo AllegationsAbstract: The high-profile managing partner of Schlichter Bogard & Denton filed opposition papers Monday in Massachusetts federal court claiming MIT "ensured that Fidelity received millions of dollars of excessive payments from MIT's 401k Plan." MIT made those payments, the filing says, in part because of an expectation that Abigail Johnson, Fidelity Investment's CEO and co-owner, would donate to MIT. Source: 401kspecialistmag.com, August 2019
DOL Gives 401k Auto Portability Major BoostAbstract: The auto revolution in retirement plans (auto-enrollment, escalation, deferral) adds another option with the release last week of the DOL's final Prohibited Transaction Exemption for auto portability. Source: 401kspecialistmag.com, August 2019
Transferring 401k Funds to an IRA at Retirement Opens Up Some BenefitsAbstract: The 401k and other forms of employer retirement plans are important and useful while you are in the contribution phase of life. When you switch direction in retirement and begin making withdrawals from your savings and investment earnings, it can be helpful to roll over your employer retirement account to an Individual Retirement Account. Source: Thenewstribune.com, August 2019
DOL Finalizes MEP RegulationAbstract: This article briefly reviews the legal background and the final regulation. It then reviews DOL's discussion, in the preamble to the final regulation, of the fiduciary obligations of an employer that adopts a multiple employer plan. Finally, it concludes with a brief discussion of the separate Request for Information on Open MEPs also released on July 22, 2019. Source: Octoberthree.com, August 2019
DOL Publishes Final Rule on Association Retirement Plans and Other MEPsAbstract: The DOL has published its final rule clarifying the circumstances under which an employer group or association or a professional employer organization could sponsor a multiple-employer workplace retirement plan. Under the final rule, a bona fide group or association of employers or professional employer organization would be able to serve as the sponsor of a pension plan, within the meaning of Section 3(2) of ERISA. Although a majority of MEPs will likely be set up as 401k plans, the final rule applies to all "employee pension benefit plans" established under Section 3(2) of ERISA, which means that it could apply to non-401k plan arrangements, such as employee stock ownership plans. Source: Hklaw.com, August 2019
DOL Small Business Retirement Plan Rule Not the Cure-All That's NeededAbstract: In a nod to the small business community, the Department of Labor issued a final rule earlier this week that may nudge more employers to offer joint retirement plans -- MEPs -- but it's not all that employers were hoping for. "This is NOT the MEPs that everyone has been so excited about," says Nevin Adams, chief of marketing for the American Retirement Association. Source: Forbes.com, August 2019
How to Tell If Your 401k Is a Rip-offAbstract: Most every mutual fund -- in or outside of your retirement plan -- charges an expense ratio. This is the percentage the fund company will take from your investments for management fees every year. People will shop around to save a few cents on a gallon of gas or bananas yet have no idea that they can save tens of thousands on expense ratios. And when you save money on fees, particularly in your 401k or other retirement plans, that's money in your pocket that can compound over decades. That's why it pays to shop around. Source: Forbes.com, August 2019
DOL Seeks Nominations for Advisory CouncilAbstract: This article briefly reviews the legal background and the final regulation. It then reviews DOL's discussion, in the preamble to the final regulation, of the fiduciary obligations of an employer that adopts a multiple employer plan. Finally, it concludes with a brief discussion of the separate Request for Information on Open MEPs also released on July 22, 2019. Source: Federalregister.gov, August 2019
A Guide to Retirement Savings for the Self-EmployedAbstract: The self-employed have different approaches to consider in deferring income and investing some of their newly earned funds for retirement. This is a review some of the most common strategies a self-employed person could utilize and explore the pros and cons of each. Source: Belr.com, August 2019
Federal Judge Dismisses ERISA Fiduciary Breach Claim against University for Lack of StandingAbstract: A federal district court judge in Washington D.C. dismissed an ERISA fiduciary breach suit brought by a former employee of George Washington University, finding the former employee lacked standing to sue. The plaintiff, Melissa Stanley, participated in two GW administered retirement plans, and brought multiple claims for breach of fiduciary duty against the school. The case's dismissal comes amid increased litigation targeting higher education retirement plans for fiduciary breaches and follows a similar wave of litigation over private sector 401k plans. Source: Williamsmullen.com, August 2019
DOL Issues PTE 2019-02 on IRA Auto-PortabilityAbstract: The DOL issued Prohibited Transaction Exemption 2019-02, which permits Retirement Clearinghouse, LLC to receive certain fees in connection with its IRA auto-portability program, which transfers an individual's default IRA or eligible mandatory distribution account assets to an individual's new defined contribution plan account. Source: Westlaw.com, August 2019
New Access to Multiple Employer Retirement Plans and Potential New Protections for Participating EmployersAbstract: The new guidance from the DOL and the proposed compliance relief from the IRS have the potential to increase both the availability and the attractiveness of MEPs as an opportunity for small employers to pool retirement plan resources and collectively negotiate for better fees and services. Source: Sgrlaw.com, August 2019
Participants Need More Education About Distribution OptionsAbstract: Forty-two percent of those between the ages of 35 and 65 who left a job where they had money in a 401k plan were unaware that they could have left the money in the plan, and 28% didn't know that some retirement distribution choices trigger tax liabilities and penalties, a survey found. Source: Plansponsor.com, August 2019
Industry Reacts Positively to DOL's Association Retirement Plan RuleAbstract: Industry insiders believe that while the DOL's new rule on association retirement plans is somewhat disappointing in that it did not pave the way for open multiple employer plans for employers without a common nexus, it is a positive step in the right direction of providing yet another cost-effective option for small businesses to offer retirement plans. Source: Planadviser.com, August 2019
Trend of Excessive Fee Suits Against Smaller Plans ContinuesAbstract: When the wave of excessive fee cases began against retirement plan sponsors, most targeted large or mega plans, based on assets. However, a new case against TriHealth Inc. continues a trend of targeting smaller plans. Source: Planadviser.com, August 2019
CIT Target-Date Assets Surging as Mutual Funds Hit by OutflowsAbstract: Though some target-date managers are seeing net outflows from their mutual fund-based products, they are counting on their collective investment trust-based target-date businesses to pick up the slack. The target-date managers are capitalizing on growing interest among plan sponsors for CITs, which boast lower costs, greater flexibility and fewer regulatory/administrative requirements. Source: Pionline.com, August 2019
Tackling the Missing Participant ProblemAbstract: Missing participants, and the problems they cause, are becoming a more prominent problem for plan administrators, argues ERISA attorney Heather B. Abrigo. "It's really come to the forefront," said Abrigo, a partner at Drinker Biddle & Reath LLP, in a July 16 webcast offered by ASPPA. "Plan sponsors really need to start addressing the issue," she told attendees. Source: Napa-net.org, August 2019
Average 401k Balance Continues to BuildAbstract: According to estimates from the nonpartisan Employee Benefit Research Institute), the average 401k balance for those aged 25-34 with 1-4 years of tenure has gained rose another 2.5% in July, building on the 24.3% year-to-date gain registered at the end of Q2. Source: Napa-net.org, August 2019
Hot Topics for 401k Plan ProvidersAbstract: The beauty of the retirement plan business is that it's constantly changing, the bad part of it is that it's constantly changing. As a plan provider, you always need to be on your toes because it's such a competitive marketplace that you can't afford to be asleep at the wheel. If you're not ahead of the curve, you will certainly be behind it and the history of this business is littered with plan providers who failed, just because they couldn't adapt to a changing environment. This article is about some of the hot topics that you should be aware of and using these topics for marketing help and to better focus your service. Source: Jdsupra.com, August 2019
Reducing the Number of 401k Recordkeeper Partners Poses a Challenge for Plan AdvisersAbstract: Most retirement plan advisers work with dozens of recordkeepers because it's easier not to force new clients to change their 401k recordkeeper when the plan adviser is hired. But it's hard for plan advisers to manage working with so many providers. While consolidating their provider roster makes sense, the reality is that few advisers are taking major steps in that direction for practical reasons, and even fewer recordkeepers are focused on helping. Source: Investmentnews.com (registration may be required), August 2019
What Is a VFCP?Abstract: The DOL allows plan fiduciaries (including employers, plan officials, and parties in interest) to voluntarily comply with ERISA by self-correcting certain fiduciary breach violations under its Voluntary Fiduciary Correction Program ("VFCP"). Nineteen categories of transactions are eligible for correction under the VFCP, and the DOL has issued guidance explaining acceptable methods of correction and providing examples. Source: Boutwellfay.com, August 2019
The Pros and Cons of CalSavers, California's Solution to Employee Retirement SavingsAbstract: CalSavers is only required for employers who do not offer another type of retirement program for their employees. Alternative retirement programs may require administrative fees or mandatory contributions from the employer sponsoring the plan, but they also offer additional flexibility which allows for deliberate program design and, compared to CalSavers, may be easier to maintain and provides a better experience for business owners. Source: Benefit-Resources.com, August 2019
DOL Move Expands Definition of Employer for Multiple Employer PlansAbstract: The DOL published its highly anticipated Final Rule, which allows working owners with no employees and companies in unrelated industries to band together to create a single defined contribution retirement plan for their employees, known as a multiple employer plan (MEP). Specifically, the Final Rule expands the definition of "employer" under Section 3(5) of ERISA to allow bona fide employer groups and professional employer organizations to act as an "employer" for purposes of sponsoring a MEP. Source: Ballardspahr.com, August 2019
Service Provider's Auto-Portability Proposal Receives DOL BlessingAbstract: The DOL has published in the Federal Register a prohibited transaction exemption granted to a service provider that has proposed what it describes as an automatic portability program for retirement plan assets. This exemption -- PTE 2019-02 -- was considered necessary so that Retirement Clearinghouse could receive fee compensation in connection with the services it intends to provide in this automatic portability program. Source: Ascensus.com, August 2019
Bridging the Gap Between Fiduciary Advice and Annuity UsageAbstract: Adding protected lifetime income to an investment portfolio can improve the retirement security of many Americans. Providing fiduciary advisors with holistic tools and products can help them blend annuity- and investment-based income approaches more effectively. In this article, Milliman's Michelle Richter explores the opportunities and challenges advisors face as the financial services industry moves towards supporting a fiduciary standard of advice in the annuity space. Source: Advisorperspectives.com, August 2019 Looking for earlier information? Go to our Archive. 401khelpcenter.com, LLC is not the author of the material referenced in this digest unless specifically noted. The material referenced was created, published, maintained, or otherwise posted by institutions or organizations independent of 401khelpcenter.com, LLC. 401khelpcenter.com, LLC does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com, LLC. | |||||||
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