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Daily Article Digest - Updated Throughout the Day

This 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, 403(b) 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.

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Defining "Best Interest" Standard in Fiduciary Debate a Head Scratcher

Summary: Two industry trade groups and the Financial Industry Regulatory Authority came out recently with uniform best interest standards in an attempt to squelch what they say will be competing fiduciary plans to be issued by the Department of Labor and the Securities and Exchange Commission.

Source: Thinkadvisor.com, June 2015

IRS Makes Permanent Relief Program for Delinquent Form 5500-EZ

Summary: Revenue Procedure 2015-32 made permanent a pilot program that ended June 2nd that provided administrative relief for delinquent Form 5500-EZ for owner-only plans with over $250,000 in plan assets. Here's the back story.

Source: Retirementplanblog.com, June 2015

The Plan Auditor Selection and Monitoring Process

Summary: After a recent DOL study found significant errors in auditor reviews of 5500 filings, plan sponsors should anticipates increased scrutiny around their process for choosing an auditor and evaluating their work. This white paper explains the DOL’s findings and provides recommendations for how to think about the auditor hiring process and where to ask questions when reviewing the final audit results.

Source: Lockton.com, June 2015

The Mutual Fund Marketplace Is Broken. Time to Fix It

Summary: According to this article, Wall Street and Washington have it wrong. The most important debate today isn't whether financial professionals should adopt the suitability standard or the fiduciary standard. The more flagrant issue to address is the mind-boggling array of share classes that exist only to hide fees paid by mutual funds to brokers in exchange for feeding them business.

Source: Investmentnews.com (registration may be required), June 2015

Retirement Assets Total $24.9 Trillion in First Quarter 2015

Summary: Total U.S. retirement assets were $24.9 trillion as of March 31, 2015, up 1.3 percent from $24.6 trillion on December 31, 2014. Retirement assets accounted for 36 percent of all household financial assets in the United States at the end of the first quarter of 2015.

Source: Ici.org, June 2015

SEC's Proposed Reporting and Disclosure Changes: What Investment Companies and Advisers Should Know

Summary: These two SEC proposals are intended to modernize and enhance disclosures for the investment management industry. Additionally, the proposals would further the SEC's use of technology in its efforts to monitor risks as the primary regulator of registered investment companies and registered investment advisers.

Source: Datasrvr.com , June 2015

Things in a 401k Plan That Don't Look Right

Summary: Today, if something doesn't look right in a 401k, someone will assume that it isn't right and that may mean some harm for the plan sponsor. This article is about seven things that don't look right in retirement plans and how plan sponsors should avoid these.

Source: Jdsupra.com, June 2015

Canada Gets a Pension Proposal No One Asked For

Summary: Both cynics and more trusting analysts are crying electioneering to explain an out-of-left-field policy pronouncement on voluntary retirement benefit options in Canada. On May 26 Canadian Finance Minister Joe Oliver offered a proposal that would allow Canadians to make greater voluntary payments to the Canada Pension Plan (CPP). There would be no change in the mandatory contribution.

Source: Institutionalinvestor.com, June 2015

Custodians' Payments to RIAs for Fund Picks Raise Eyebrows

Summary: Registered investment advisers like to promote themselves as being on the side of investors, but a growing number are quietly accepting money from custodians in exchange for recommending certain mutual funds. Critics say that the disclosure may not be enough, even if it is meets the legal standard.

Source: Investmentnews.com (registration may be required), June 2015

Using Alternatives in Defined Contribution Plans

Summary: Alternative investments have been used by DB plans for decades and it may be time for DC sponsors to consider a multi-alternative strategy to diversify plan line-ups. To the DC plan sponsor, offering a diversified set of alternatives can help increase the probability that participants reach their desired long-term return targets. For participants, a strategic allocation to alternatives may provide reduced volatility, a hedge against a variety of market risks and potentially improved total returns.

Source: Cloudfront.net , June 2015*

Selecting Service Providers, Competitive Bidding, and RFP's Importance in a Fiduciary Investment Process

Summary: Industry expert, Roger Levy, writes about fiduciary duties and how important it is to follow a formal due diligence process when hiring service providers, including investment advisors, to a retirement plan and other institutional accounts.

Source: Cloudfront.net , June 2015

Addressing Retirement Plan Data Security

Summary: An emerging area of compliance concern for retirement plan sponsors is the protection of plan data and they have an additional responsibility to protect participant data. When plan sponsors engage in a vendor search, cybersecurity risks should be addressed early on in the selection process.

Source: Plansponsor.com, June 2015

Economic Analysis in Fiduciary Monitoring Disputes Following the Supreme Court's "Tibble" Ruling

Summary: Our objectives of this paper are twofold. First, to explain that an economic assessment as to whether plan fiduciaries have engaged in appropriate monitoring must be performed through a case-specific lens. Second, to discuss some of the complexities involved in calculating economic damages from allegedly imprudent monitoring.

Source: Pensionriskmatters.com , June 2015

Eighth Circuit Reinforces That Plan's Deadline for Filing Suit Controls

Summary: A plan that does not specify a deadline for filing a lawsuit risks application of state statutes of limitations, which, as seen here, can be quite long. Establishing a plan-specific deadline allows the plan sponsor to impose an earlier deadline and provides uniformity for plan sponsors operating in multiple states.

Source: Ebia.com, June 2015

Deferential Review Appropriate When Plan Incorporates SPD Containing Grant of Discretionary Authority

Summary: The standard of review applied by the court in a benefits lawsuit can make the difference between winning and losing the dispute. As illustrated by this and other cases in which proper delegation of discretionary authority is at issue, it is important to ensure that a grant of discretionary authority is included in the formal plan document -- not just in the SPD.

Source: Ebia.com, June 2015

Federal District Court Allows Most Claims to Proceed in Stable Value Product-Related Litigation

Summary: In Teets v. Great-West Life & Annuity Insurance Company, the district court declined to dismiss claims under ERISA challenging the offering of an insurance company's guaranteed investment contract as an investment option to 401k plan investors.

Source: Goodwinprocter.com, June 2015

Ninth Circuit Again Wrestles With Fifth Third v. Dudenhoeffer, and Again Reverses Dismissal of Stock Drop Case

Summary: The Ninth Circuit, which was the first appellate court to substantively address the Supreme Court's decision in Fifth Third v. Dudenhoeffer, has divided over the implication of Dudenhoeffer when plan fiduciaries are alleged to have breached duties by allowing a plan to hold employer stock during a time of alleged artificial inflation of the share price.

Source: Goodwinprocter.com, June 2015

Solicitor General Urges Supreme Court to Decline to Hear Breach of Fiduciary Duty Case

Summary: The Solicitor General has urged the Supreme Court to decline to hear an ERISA fiduciary breach case (Tatum v. RJR Pension Investment Committee) concerning which party bears the burden of proof on loss causation.

Source: Goodwinprocter.com, June 2015

Target-Date Funds: How to Monitor and Communicate These Black Boxes Needs Rethinking

Summary: Is there an objective way to select and monitor target-date funds and then realistically communicate how to use them to 401k investors? After the Supreme Court’s decision in Tibble v. Edison, 401k fiduciaries and their advisors must take this question seriously, even though Congress sanctioned the use of TDFs as qualified default investment alternatives.

Source: Investmenthorizons.com , June 2015

Sloppy Benefit Plan Audits Putting Employers at Risk

Summary: Up until recently, employee benefit plan audits were a routine matter for CFOs -- something you had to have done each year to comply with ERISA, but nothing to worry about overmuch. Well, not anymore.

Source: Cfo.com, June 2015

IRS Determination Letter Program to Be Curtailed

Summary: The IRS plans to sharply curtail the determination letter program for all individually designed retirement plans starting in 2017. If the changes proceed as planned, sponsors of individually designed retirement plans will face significantly higher compliance risks.

Source: Towerswatson.com, June 2015

DOL Report on Quality of Benefit Plan Audits Performed by CPAs Finds Deficiencies

Summary: The DOL's Employee Benefits Security Administration has issued a report on the quality of benefit plan audits performed by certified public accountants (CPA). The report, "Assessing the Quality of Employee Benefit Plan Audits," reveals serious problems with the current system.

Source: Wolterskluwerlb.com , June 2015

The Brokerage Option in DC Plans

Summary: This paper examines the self-directed brokerage feature in defined contribution plans at Vanguard where 16% of DC plans offered a self-directed brokerage option. Larger plans were somewhat more likely to offer the feature and 28% of plan participants had access to the option. Twenty-two percent of plans with a brokerage option were law firms, and on average 7% of law firm plan assets were invested in brokerage.

Source: Vanguard.com , June 2015

Why Poorly Performing Funds Remain in 401k Plans

Summary: Most 401k plans include funds that are affiliated and unaffiliated with the plan's service provider. A recent analysis of U.S. Securities and Exchange Commission 401k data by the Pension Research Council at the University of Pennsylvania's Wharton School found that there is significant favoritism toward affiliated funds in 401k plans.

Source: Usnews.com, June 2015

When Procurement Is Involved in the RFP Process

Summary: Frequently requests for proposals for retirement plan service providers are going through procurement departments. Procurement departments can help with the efficiency of the RFP process, but they shouldn't just be left to their own devices.

Source: Plansponsor.com, June 2015

Advisers Need to Pick Up Their Game When Calculating Clients' Retirement

Summary: More and more companies, both traditional financial services firms and robo-advisers, offer retirement calculators but finding one that inspires an effective retirement plan customized to each individual's financial situation has become challenging.

Source: Investmentnews.com (registration may be required), June 2015

Why Aren't More Plan Sponsors Adopting the "Ideal Plan"?

Summary: After 100 educational programs conducted by The Plan Sponsor University in a little over two years, it's clear that few if any plans have adopted the "ideal plan" -- even though the benefits are enormous and the risks are low. So what's keeping employers from moving forward?

Source: Napa-net.org, June 2015

Senate Appropriations Bill Targets Fiduciary Proposal

Summary: Appropriations subcommittees on Capitol Hill -- first in the House and now in the Senate -- have taken a shot at blocking the Labor Department's fiduciary proposal by denying funding for the measure.

Source: Napa-net.org, June 2015

TDFs Remain an Investment Mystery to Employees

Summary: Many retirement experts believe target-date funds are the best option for retirees and the majority of workplace retirement money is funneling into them, but most employers and plan participants don't truly understand how they work.

Source: Benefitnews.com, June 2015

Plan Sponsors' Loyalty Shows Slight Declines According to Chatham Partners

Summary: Plan sponsors' loyalty to their retirement service providers has declined slightly from 2014 levels, according to Chatham Partners' annual Provider Loyalty Index. The Provider Loyalty Index measures loyalty among plan sponsors with decision-making authority for their organizations' retirement plans.

Source: 401khelpcenter.com, June 2015

Prudent Target-Date Fund Decisions for Fiduciaries

Summary: The objective of a target-date fund should be to preserve a plan participant's savings, rather than to boost their value by taking on too much risk. The benefits of TDFs are diversification and risk control, preferably at a reasonable price, so trustees should base their TDF selection on the basis of more than just one or two criteria.

Source: Targetdatesolutions.com , June 2015

Auto-IRAs: How Much Would They Increase the Probability of 'Successful' Retirements and Decrease Retirement Deficits?

Summary: This paper analyzes the potential of a generic auto-IRA proposal to increase the probability of a "successful" retirement and decrease retirement deficits. Results were provided for all age groups from ages 35-64, but the primary focus was on the youngest cohort (ages 35-39), as they would have the longest period to benefit from this change and thus provide a better sample to assess the long-term effects of this proposal.

Source: Ssrn.com, June 2015

IRS Issues VCP Submission Kit

Summary: The Internal Revenue Service issued a Voluntary Correction Program submission kit for plan sponsors who failed to make timely required contributions to money purchase pension plans or target benefit pension plans.

Source: Practicallaw.com, June 2015

Financial Knowledge and 401k Investment Performance: A Case Study

Summary: Paper explores whether investors who are more financially knowledgeable earn more on their retirement plan investments compared to their less sophisticated counterparts, using a unique new dataset linking administrative data on investment performance and financial knowledge.

Source: Pensionresearchcouncil.org, June 2015

Six Questions to Ask at Your Next Investment Committee Meeting

Summary: Every plan, and every investment committee, is unique -- and yet, conducted properly, there are inevitably areas of commonality. Here are some questions that could enhance the discussion, if not the outcome, of your next meeting.

Source: Napa-net.org, June 2015

SEC to Examine Retirement Advice

Summary: The SEC is starting a multi-year examination initiative on how broker-dealers and advisors ensure their clients are prepared for retirement. The examinations will evaluate issues such as whether registrants, advisers and broker-dealers are selecting the appropriate account for their client and whether they are performing due diligence on investment options.

Source: Insurancenewsnet.com, June 2015

Don't Roll the Dice on Department of Labor Audits

Summary: This resource guide is meant to walk employers through the process of an audit from the DOL. The white paper includes valuable information about how to prepare for an audit, the best way to acclimate staff to the audit process, what the DOL wants, and the most important elements of complying with requests.

Source: Ihdbenefits.com , June 2015

Asset Allocation's Greatest Failure: Short-Term Investing

Summary: There's confusion when it comes to asset allocation. Is asset allocation a long-term tool or a short-term tool? Or is it both? Article examines the question.

Source: Fiduciarynews.com, June 2015

The Top Ten Fiduciary Errors

Summary: Fulfilling fiduciary responsibilities is essential, as errors can have serious consequences for both the organization and the individual fiduciaries themselves. Here are the top ten most common errors that fiduciaries make.

Source: Cammackretirement.com, June 2015

IRS on Minimum Required Distributions

Summary: The IRS has released its updated alert guidelines on required minimum distributions. The purpose of this worksheet and explanation is to assist the specialist in determining whether a plan satisfies the distribution requirements of Internal Revenue Code section 401(a)(9).

Source: Irs.gov , June 2015

How 401k Participants Can Avoid Sabotaging Their Returns

Summary: Recently Dalbar reported that the average equity mutual fund investor experienced returns of 5.5% in 2014 compared to the S&P 500 Index return of 13.69% -- more than 8% less. Dalbar conclude that the performance differences are attributable to bad investor decision-making. Author suggests four tips for plan participants to keep them from sabotaging their annual returns.

Source: Lawtonrpc.com, June 2015

Tackling the Challenge of 401ks for Small Businesses

Summary: One of the biggest challenges to retirement savings in America is having access to a 401k or similar savings plan at work. A new plan design and technology aims to expand access, reduce costs.

Source: Investmentnews.com (registration may be required), June 2015

A 403(b) Plan Termination Checklist

Summary: If a 403(b) plan termination is defective, individuals receiving amounts from the erstwhile termination may not meet the IRS criteria for having a distributable event for a 403(b) plan. That could have a further ripple effect if the individual has rolled over amounts to another eligible retirement plan or to an IRA. This article can assist employers who intends to terminate its 403(b) plan.

Source: Ntsa-net.org, June 2015

Employer's Excuses About Their Retirement Plan and Why They're Wrong

Summary: No one wants to accept responsibility for their ineptness; they just cling to these excuses. Plan sponsors don't have that luxury of clinging to an excuse because they are on the hook if a plan goes wrong. This article is about plan sponsor's excuses on why their plan is running correctly and why they are absolutely wrong.

Source: Jdsupra.com, June 2015

IRS on Section 401(k) Requirements

Summary: The purpose of this worksheet and explanation is to identify major problems that relate to plans that include a cash or deferred arrangement. Generally, a "Yes" answer to a question on the worksheet indicates a favorable conclusion, while a "No" answer signals a problem concerning qualification of the plan.

Source: Irs.gov , June 2015

IRS on Employee and Matching Contributions

Summary: The purpose of this worksheet and explanation is to identify major problems that relate to plans providing for employee and/or matching contributions. Generally, a "Yes" answer to a question on the worksheet indicates a favorable conclusion, while a "No" answer signals a problem concerning plan qualification.

Source: Irs.gov , June 2015

Supreme Court Clarifies Plan Fiduciary's Ongoing Monitoring Obligations Under ERISA

Summary: The U.S. Supreme Court recently vacated a Ninth Circuit ruling which held that an ERISA claim (a class action suit filed by employees alleging that 401k plan fiduciaries breached their duty of prudence by selecting retail investment funds as opposed to lower-cost institutional funds) was time-barred because the initial selection of imprudent investments was made more than six years prior to the employees' lawsuit.

Source: Icemiller.com, June 2015

Social Interaction Effects and Individual Portfolio Choice: Evidence From 401k Plan Investors

Summary: Paper finds that participants are influenced by their coworkers when they make equity investment decisions. Using a rich dataset of 401k plans, researchers find that individuals are likely to increase their risky share when they have lower equity exposure than their coworkers in the last period. The effect is especially strong when the difference in equity exposure is substantial.

Source: Pensionresearchcouncil.org, June 2015

Plan Design and After-Tax Contributions

Summary: Recent IRS guidance has created a new interest in "after-tax" contributions as a plan provision because they can be used to maximize plan contributions and reduce future tax liabilities. With proper plan design, after-tax contributions can be a valuable benefit to plan participants. This is a discussion of some strategies and caveats.

Source: Kravitzinc.com , June 2015

Blackout Period and Notice

Summary: Forms 5500, Annual Returns/Reports of Employee Benefit Plan and Forms 5500-SF have a two-part question about plan compliance with the blackout notice rules. The first part asks if an individual account plan had a blackout period. If the answer is yes, the follow-up question asks whether a blackout notice was provided or if one of the exceptions applied. The IRS is monitoring compliance with blackout period and notice rules. This is a review.

Source: Kravitzinc.com , June 2015

Plan Sponsor Survey: Focus on Automatic Plan Features

Summary: DCIIA recently completed its third biennial survey of DC plan sponsors' use of automatic plan features such as automatic enrollment, automatic contribution escalation and plan reenrollment. This survey of over 450 plan sponsors, ranging from sponsors of the largest plans (over $1 billion) to the smallest (under $5 million), found that the adoption of auto features is having its intended effect: more participants are saving for retirement, and saving at increasingly higher and more meaningful rates.

Source: Dciia.org , June 2015

2015 Defined Contribution Plan Sponsor Survey Findings

Summary: This 30 page report provides insight into plan sponsors' interpretation of the roles of their DC plans, goals and philosophies in providing retirement benefits, considerations driving plan-related decisions and actions underway to help employees reach retirement success.

Source: Jpmorganfunds.com , June 2015

DOL Releases Plan Audit Quality Report, Recommends Stricter Plan Audit Standards

Summary: Plan administrators and plan sponsors should be aware of this DOL report and its recommendations, because it may result in plan auditors significantly increasing the rigor of their annual audit procedures.

Source: Franczek.com, June 2015

Ever-Increasing Duties for Plan Sponsors

Summary: There is little doubt that the fiduciaries of employee benefit plans are under closer scrutiny than ever before. As a result, the duties that are imposed on those fiduciaries are increasing. Two recent additions to the list of duties have emerged from guidance issued by a regulator and from a judicial decision.

Source: Eisneramper.com, June 2015

Canadians Confused About TFSAs

Summary: Six years after TFSAs (Tax-Free Savings Account) were introduced, a Mackenzie Investments survey finds many Canadians still don't understand how they work. They're still not familiar with the basic elements of the program, meaning they risk not using their accounts to the fullest.

Source: Benefitscanada.com, June 2015

10 Best Practices for Global DC Plans

Summary: This 24 page paper provides a list of 10 best practices for global plan sponsors to help companies better capitalize on the potential of DC plans to further both their own business objectives and the retirement readiness of their participants around the world.

Source: Ssga.com , June 2015

Money Market Funds Changes - Implications for Fiduciaries

Summary: New SEC money market funds rules that go into effect in 2016 will impact nearly every retirement plan that uses such funds as investment options or to facilitate plan administration. Plan sponsors, investment committees, those who advise them, and plan administrators should understand the upcoming changes in order to determine what steps that will be required or may be beneficial to take regarding such funds, and to consider their alternatives.

Source: Reliance-Trust.com , June 2015

DOL Report on Plan Audits Shows That Plan Sponsors Must Continually Monitor Plan Compliance

Summary: DOL's findings are significant for plan sponsors and fiduciaries, because they illustrate the importance of continually monitoring employee benefit plans for compliance with the requirements of ERISA and the Internal Revenue Code. Moreover, plan sponsors have a fiduciary obligation to ensure their plans are properly maintained and administered beyond what is required to complete the annual audit.

Source: Mwe.com, June 2015

Analysis and Recommendations Regarding 403(b) Plans

Summary: In this 258 page report, the Employee Plans Subcommittee of the ACT did a reexamination of the current state of the 403(b) community seven years after the issuance of the 403(b) final regulations. Specifically, the EP Subcommittee endeavored to identify the key issues that are plaguing the ability of the 403(b) plan sponsor to remain in compliance with requirements of the Internal Revenue Code.

Source: Irs.gov , June 2015

Impact of Tibble Ruling on Target-Date Monitoring

Summary: All 401k fiduciaries should be asking themselves a question now that the U.S. Supreme Court's Tibble decision has made it perfectly clear that no investment option, regardless of how prudently it was chosen, can be set on autopilot and forgotten. The question therefore is how should target-date funds be monitored?

Source: Investmenthorizons.com , June 2015

Frequent and Collective Trading Are Uncommon and Not a Significant Concern

Summary: 401k plan participants often face trading policies that restrict frequent or collective trading in mutual funds, but the GAO found that this type of trading by plan participants is uncommon. Further, there is general agreement among industry representatives, participant advocates, and other stakeholders that current regulation strikes an appropriate balance between a participant's ability to manage his or her retirement investments and the duty of plan fiduciaries to operate and manage their plans prudently.

Source: Gao.gov, June 2015

Using Your IRA to Buy a Business: Still a Risky Strategy

Summary: The use of assets in an IRA to finance a new business is sometimes known as a ROBS or rollover for business startups. In a case where a ROBS was used, the Eighth Circuit concluded that a prohibited transaction occurred because the payment of compensation to the individual was essentially an indirect payment by the IRA to the individual.

Source: Benefitsnotes.com, June 2015

Five Hot Trends in Retirement Planning

Summary: Retirement planning might be based on a few fundamental financial concepts, but the specifics are constantly changing. Technology and federal regulations have brought several big changes for employers and employees. Here are five trends in retirement planning every retirement plan sponsor and participant should know about.

Source: Bcigroup.com, June 2015

DOL Sets Fiduciary Regulation Hearing Dates

Summary: The DOL has announced public hearing dates of August 10-12, and August 13 if necessary, for its proposed conflict-of-interest (fiduciary definition) regulations.

Source: Ascensus.com, June 2015

Oregon Retirement Savings Bill Heads to Governor's Desk

Summary: The Oregon Senate passed legislation Tuesday that will ensure every Oregonian has access to a safe, easy and effective way to save for retirement. The bill cleared the Oregon House last week and will next go to the desk of Governor Kate Brown for her signature.

Source: 401khelpcenter.com, June 2015

Net Outflows Befall 401k Plans

Summary: Withdrawals from 401k plans are now exceeding new contributions as baby boomers age, a shift that could have profound implications for the U.S. retirement industry.

Source: Yahoo.com, June 2015

Will Investors Benefit From a Unified Fiduciary Rule?

Summary: The Department of Labor's proposed rule holding brokers and registered investment advisers to a higher fiduciary standard isn't the slam dunk that many claim. There are two possible problems with one uniform standard.

Source: Institutionalinvestor.com, June 2015

Three Insights About Bad 401k Plans From Recent Lawsuit

Summary: In this opinion piece, the author says the recent Ameriprise Financial 401k lawsuit provides several insights for investors and employers.

Source: Marottaonmoney.com, June 2015

CITs: The Truth About Regulations, Transparency and Eligibility

Summary: There's a lot of interest in collective investment trusts (CITs). CITs are pooled investment funds that are designed exclusively for qualified retirement plans. But, there's also a lot of misinformation and this article addresses some of the many misconceptions.

Source: Invesco.us.com, June 2015

On Float Generated by Funds Awaiting Disbursement From 401k Plans

Summary: Whether or not float generated by Funds awaiting disbursement is treated as a plan asset, plan sponsors and their advisors should be aware that this float will continue to be viewed as a component of a service provider's compensation. Accordingly, plan sponsors always will have a duty to ensure that this compensation, including float, does not exceed reasonable levels.

Source: Wagnerlawgroup.com , June 2015

Small 401k Plans Have More Problems Than Larger Ones

Summary: When it comes to 401k plans, most people would assume that larger plans would have more problems than smaller plans because of size and complexity. But, for many reasons, smaller 401k plans have more problems than larger plans. This article covers the reasons why.

Source: Jdsupra.com, June 2015

Supreme Court Decision in 401k Case May Have Profound Effect on Fiduciary Debate

Summary: At issue in Tibble v. Edison was whether an ERISA fiduciary has an ongoing duty to manage plan assets for statute of limitations purposes. The Court's ruling, while in line with the recent push toward a higher standard for those rendering investment advice to retail customers, appears to be at odds with the DOL's newly proposed rule expanding the definition of fiduciary under ERISA.

Source: Investmentnews.com (registration may be required), June 2015

Is Your ERISA Fiduciary Liability Insurance Up to Date?

Summary: ERISA fiduciary liability insurance policies protect fiduciaries and trustees of ERISA plans from personal liability. Companies should evaluate their policies and consider, depending on their needs, whether the items noted in this article are covered and/or should be covered under their policies.

Source: Haynesboone.com, June 2015

Locked Out of Retirement: The Threat to Small Business Retirement Savings

Summary: The DOL is expanding the definition of fiduciary investment advice under a federal law known as ERISA. The result would be that many traditional forms of compensation, such as commissions that vary from one investment to another, for financial advisors could become illegal under special provisions in that law called "prohibited transactions." According to this 13 page paper, a number of aspects of the proposal appear unworkable in actual practice, and would negatively impact how advisors assist small businesses in providing retirement benefits for their employees.

Source: Centerforcapitalmarkets.com , June 2015

The Duty of Prudence and the Net Cost of Investments

Summary: The Supreme Court decision in Tibble v. Edison International held that 401k plan fiduciaries have a duty to prudently monitor a plan's investment options ... in this case, whether retail or institutional share classes were prudent for the Edison plan. What does that mean for 401k plans?

Source: Drinkerbiddle.com, June 2015

SEC Proposes Changes to Form ADV

Summary: The SEC proposed amendments to Form ADV and Rule 204-2 under the Investment Advisers Act of 1940. The proposed amendments would require investment advisers to provide additional information on Form ADV.

Source: Thompsonhine.com, June 2015

The Supreme Court Upsets Precedent in Fourth and Eleventh Circuit

Summary: The Eleventh and Fourth Circuit Court of Appeals definitively rejected the "continuing breach" theory in recent disputes involving statute of limitations deadlines in ERISA cases alleging fiduciary breach claims. This precedent was short-lived.

Source: Southeastern ERISA Watch, June 2015

Two Important Items to Consider when Terminating a Retirement Plan

Summary: If you don't start the plan termination process before the acquisition takes place, you may be responsible for the plan. Consider these two important items when acquiring a company with a qualified retirement plan.

Source: Principal.com, June 2015

What Retirement Plan Committees Should Know and Discuss

Summary: Retirement plan committees need knowledge and continuing education about a number of key subjects. And they need ongoing support to stay abreast of industry regulations and trends.

Source: Plansponsor.com, June 2015

Is Your State Getting Into the Retirement Business?

Summary: At least 15 other states have also considered legislation that would create some kind of state-sponsored retirement plan for private sector employees to close the retirement savings gap.

Source: Nbcnews.com, June 2015

A Way Around Costly 403(b) Plans

Summary: In so-called 'open vendor' states, high-cost 403(b) plans may be side-stepped by turning to 457(b)s, explains plan-participant advocate Steve Schullo.

Source: Morningstar.com, June 2015

How Retirement Advisors Really Add Value to 401k Plans

Summary: Most people believe that the value of the retirement advisor is the ability to enhance returns, but the value of the retirement advisor is far greater than marginal investment returns. Understanding the real value requires stepping away from the investment itself and focusing on the outcome if the retirement advisor was not in the picture.

Source: Fiduciaryregistry.com , June 2015

Eighth Circuit Rules That Taxpayer Engaged In a Prohibited Transaction

Summary: In Ellis v. Commissioner of Internal Revenue, the taxpayers were appealing from the decision of the tax court finding a deficiency in their income taxes and imposing related penalties. Upon reviewing the case, the Eighth Circuit Court of Appeals concluded that taxpayer engaged in a prohibited transaction when he used an IRA to fund a business which paid him wages.

Source: Erisalawyerblog.com, June 2015

Deadlines to Correct for Failed ADP and ACP Testing

Summary: While a plan may occasionally miss the March 15th distribution deadline, the 10% excise tax is usually not a big issue- especially if the required refunds are small. However, going beyond 12 months to correct can result in severe and costly consequences for plans due to the disaggregated testing method no longer being available and the additional contribution that must be made for the NHCEs.

Source: Consultrms.com, June 2015

Fiduciary Rule Could Impact Brokers the Most

Summary: The proposed fiduciary rule will have a major effect on the retirement industry and brokers could be the most affected group. "They're going to be impacted by this probably greater than anyone else," said Managing Consultant Scott Brogan, one of three BridgePoint Group, LLC panelists that discussed the proposal's potential impacts.

Source: Benefitnews.com, June 2015

Death, Taxes and Plan Errors

Summary: Nothing can be said to be certain, except death, taxes, and retirement plan operational errors. Two decades of plan audits have shown time and time again that even the most accurate plan sponsor is not immune from making one of the common errors. The IRS has recently streamlined the correction of certain retirement plan defects.

Source: Belfint.com, June 2015

Redefining the Retirement Plan

Summary: This paper is a guide to trends and strategies to help employers get the most out of their defined contribution programs. Defined benefit plans and Social Security were the simple answer to retirement for the past century. Life expectancy has improved though and an added strain has been placed on plan sponsors to help their employees replace their incomes in retirement. Fortunately, employers are equipped with more tools than ever before to help their employees retire with dignity.

Source: Axiaadvisory.com (registration may be required), June 2015

DOL Pushing to Finalize Conflict of Interest Rule by May 2016

Summary: The DOL intends to finalize its re-proposed rule defining a fiduciary in May of next year, Groom Law Group Chairman Steve Saxon said on June 8. Saxon made his remarks at the SPARK Institute's annual conference in Washington, DC.

Source: Asppa.org, June 2015

66,000 401k Plans Up for Grabs in 2015, Cogent Reports

Summary: Just over one in ten (11%) of 401k plan sponsors report they are very likely to replace their current recordkeeper sometime over the next 12 months. The likelihood of switching is highest among Mid-sized (13%), Large (20%) and Mega (18%) plans. These figures put the total estimated number of current plans likely to turn over at 66,000.

Source: 401khelpcenter.com, June 2015

Vanguard Set to Gather $300 Billion in 2015

Summary: The giant asset vacuum cleaner that is The Vanguard Group Inc. sucked in a record-breaking $215 billion worth of inflows in 2014, and the Malvern, PA-based firm says it's on track to hit the $300-billion mark for asset inflows in 2015. But, could it succumb to its own success?

Source: Riabiz.com, June 2015

The Problem With SIMFA's 'Best Interest' Proposal

Summary: Ron Rhoades writes, "A close analysis of broker-dealer lobbying group SIFMA's new 'best interests' standard reveals highly disturbing aspects of the proposal that would, in essence, negate important consumer protections."

Source: Financial-Planning.com, June 2015

401k Service Models: The Complete Guide

Summary: As you move up-market, you have to provide a more robust suite of services in order to be competitive, provide the additional support larger plans need, and keep your competition out. But how do you create a service process that's appropriate for the market you're in?

Source: 401kbestpractices.com, June 2015

Which Is Better for 401k Retirees: Lifetime Annuities or Structured Withdrawals?

Summary: Far more workers are relying on 401k-style retirement plans than in years past. And while we know how to pay in to this new generation of retirement plans, we have not yet determined how best to structure the payouts. This paper examines the two basic methods put forth in professional literature and practice as opposing solutions to this problem facing retired households.

Source: Mercatus.org, June 2015

SCOTUS Invites Solicitor General to Submit Its View on ERISA Venue Selection Provisions

Summary: With a petition for certiorari pending, the U.S. Supreme Court has asked the Solicitor General to file a brief expressing the government's views on whether "ERISA's special venue provision and a plaintiff's choice of venue under that provision, may be abrogated by a more restrictive venue-selection clause in an ERISA plan."

Source: Erisapracticecenter.com, June 2015

Safeguarding Your Plan From Fraud

Summary: Have you reported a plan loss due to fraud or dishonesty on your annual Form 5500 return? The Internal Revenue Service found that Plan Sponsors are, in fact, reporting such losses on the Form 5500 at a troubling rate.

Source: Consultrms.com, June 2015

Participation in 401k Plans Rises as More Companies Automatically Enroll

Summary: Wells Fargo announced an uptick in the percentage of employees participating in 401k plans administered by the firm. The data show increasing participation rates among younger employees, new hires and lower-earning workers over the past four years. Participation in the 401k plan among millennials has reached 55% compared to 45% in 2011.

Source: 401khelpcenter.com, June 2015

Stuck in the Mud or Road to Success? DC Plans and Fee Lawsuits

Summary: The message is clear for DC plan sponsors: follow best practices established for plan fees or risk getting stuck in a costly and time-consuming lawsuit. In this article, Callan describes select fee lawsuits and best practices to help plan sponsors stay on the path to success.

Source: Callan.com , June 2015

Are Managed Accounts a Better QDIA?

Summary: The basic premise of a managed account is the construction of a completion portfolio with participants' defined contribution assets, built around their whole asset profile and individual circumstances. Paper posit that managed accounts, customized at the participant level, have the ability to improve retirement outcomes if designed and implemented appropriately.

Source: Towerswatson.com, June 2015

Improving Outcomes With Electronic Delivery of Retirement Plan Documents

Summary: Following the introduction in the House of Representatives of legislation to modernize the rules that apply to retirement plan communications, The SPARK Institute released a this 54 page white paper examining the rationales for allowing plan sponsors to make electronic delivery the default method for communicating with retirement plan participants.

Source: Sparkinstitute.org , June 2015

U.S. Recommends Denial of RJR 401k Stock Case Review

Summary: U.S. Solicitor General Donald B. Verrilli Jr. said the questions before the Supreme Court in RJR Pension Investment Committee v. Richard G. Tatum do not warrant the court's review.

Source: Planadviser.com, June 2015

Feng Shui of Defined Contribution Menu Construction

Summary: This paper addresses some of the issues that impact menu construction and investment product selection for defined contribution plans for the purpose of inspiring other sponsors to evaluate the harmony between their plan design and their menu construction.

Source: Multnomahgroup.com, June 2015

Bill Introduced to Modernize Retirement Information Communications

Summary: Representatives Jared Polis (D-CO), Phil Roe, M.D. (R-TN), Ron Kind (D-WI), and Mike Kelly (R-PA) introduced bipartisan legislation that would modernize the way employers communicate important retirement information by automatically opting participants into electronic delivery of documents.

Source: House.gov, June 2015

DOL Posts Public Comments on Proposed Fiduciary Rule

Summary: The DOL has created a page on its website that lists and links to the comments it has received on it's proposed fiduciary rule. The comment period is scheduled to run through July 20, so additional comments will be posted.

Source: Dol.gov, June 2015

Consider the Many Benefits of Postponing Retirement

Summary: Lately, many people are choosing to postpone retirement until after age 65, with an increasing number waiting until age 70 and beyond. If you are facing the question of when to retire, keep in mind that postponing retirement comes with a number of additional benefits that can directly affect your financial future.

Source: Brightscope.com, June 2015

SIFMA Releases Its Version of Fiduciary Rule

Summary: The Securities Industry Financial Markets Association, perhaps the most vocal opponent of the DOL's proposed conflict of interest rule, has released its own proposal for a universal fiduciary standard.

Source: Benefitspro.com, June 2015

IRS Says Self-Certification for Hardship Distributions Not Allowed

Summary: The IRS recently warned plan sponsors that plans may not authorize hardship distributions based on self-certification of hardship needs by participants. The agency also reminded plan sponsors that it is ultimately their responsibility to ensure that their plans are being administered properly, even if they outsource defined contribution plan recordkeeping to a third-party administrator.

Source: Towerswatson.com, June 2015

DOL Warns of Widespread Deficiencies in Benefit Plan Audits

Summary: More than 7,300 licensed CPAs nationwide audit more than 81,000 ERISA-covered employee benefit plans. The DOL's review found serious issues with the quality of these benefit plan audits. The report proposes that Congress amend ERISA's definition of "qualified public accountant" to include additional requirements and qualifications necessary to ensure the quality of plan audits, and allow the Secretary of Labor to issue regulations concerning the qualification requirements.

Source: Shrm.org, June 2015

How the Re-Proposed Fiduciary Rule Came to Be

Summary: The DOL published a proposed regulation to the definition of fiduciary within the meaning of ERISA. It has become the most controversial ERISA regulation in recent memory. This article is the authors attempt to put it all into context by providing a timeline of how it got to where it is today.

Source: Retirementplanblog.com, June 2015

IRS Establishes Penalty Relief Program for One-Participant Plans

Summary: In Revenue Procedure 2015-32 the IRS established a permanent program providing relief to plan administrators and plan sponsors of certain retirement plans from penalties for failing to timely comply with the annual reporting requirements.

Source: Practicallaw.com, June 2015

IRS Plans to Severely Curtail Determination Letter Program

Summary: Around two months ago, Sunita B. Lough, Commissioner of the IRS's Tax-Exempt and Government Entities Division, announced informally that the IRS determination letter system for qualified plans is expected to change as of 2017. While Ms. Lough made it sound like there would be ample time for public input, the IRS position seems to have hardened in recent weeks.

Source: Groom.com, June 2015

Fiduciary Challenges for Evaluating Plan Fees: Investment Expenses and Revenue Sharing

Summary: The allocation of revenue sharing in 401k plans is a fiduciary decision which was explored in detail in a recent Fred Reish white paper.

Source: Fredreish.com, June 2015

Form 5500-EZ - Late Reporting Penalty Relief Program

Summary: In Revenue Procedure 2015-32, IRS released a permanent penalty relief program for Form 5500-EZ filers. This revenue procedure provides administrative relief to plan administrators and plan sponsors of certain retirement plans from the penalties otherwise applicable under the Code for a failure to timely comply with the annual reporting requirements.

Source: Erisapedia.com, June 2015

Fiduciary Risks Involved in Transferring Assets From a Seller's 401k Plan to Buyer's Plan

Summary: In many corporate transactions, the buyer agrees to cause its 401k plan to accept a transfer of assets from the seller's 401k plan. However, if the seller's plan contains employer stock as an investment, the buyer should be aware of fiduciary concerns that may arise under ERISA.

Source: Employeebenefitsblog.com, June 2015

DOL Audit Quality Study and Recommendations for Improvement

Summary: It appears that there may be some changes coming very soon as the AICPA begins implementing the DOL's 6-point plan. Some of the eleven recommendations made by the DOL in its report may have more trouble being implemented, such as the recommended changes to ERISA needing congressional agreement. However, the increased focus on audits performed by firms in the lower strata is sure to be implemented more quickly.

Source: Belfint.com, June 2015

Workers See Regular, Roth 401ks As Same

Summary: Due to differing tax treatments, each $1,000 placed into a traditional, tax-deductible 401k costs less today than $1,000 placed into a Roth 401k, but that Roth will provide more money in retirement. New research indicates that workers don't recognize this difference between the two types of employer-sponsored retirement accounts when deciding how much to save.

Source: Bc.edu, June 2015

The Impact of the DOL's Fiduciary Proposal on Sales of Insurance Products

Summary: This paper explains the basis for the conclusions about the impact of the Department of Labor proposal to amend the fiduciary investment advice regulation and the prohibited transaction exemptions for sales of insurance products to plans, participants and IRAs.

Source: Drinkerbiddle.com, June 2015

The 403(b) QLAC

Summary: The QLAC seems to be in the 403(b) "sweet spot," considering that 403(b) annuities were originally designed to provide lifetime income in the first place. As with all things 403(b), however, there are a few unusual twists when trying to put a QLAC in a 403(b) arrangement.

Source: Napa-net.org, June 2015

The Dominance of DC and What It Means for Advisors

Summary: With the pending DOL fiduciary regs, less money will be rolled out of plans. And there is a movement by the industry, supported by plan sponsors, to help workers consolidate their DC and IRA accounts. So what does it all mean for today's plan advisors?

Source: Napa-net.org, June 2015

Non-Qualified Deferred Compensation Plan Vs. 401k

Summary: Using NQDC plans and 401k plans, employees can choose to postpone some of the income they've earned and receive it in the future. Under both types of plans, deferral provides income for retirement years. However, NQDC plans differ in a number of ways from 401ks.

Source: Investopedia.com, June 2015

Tibble and the Fiduciary Duty to Monitor (or the Only Foolish Question is the One You Didn't Ask)

Summary: What can a fiduciary do to minimize the risk of breaching his or her fiduciary duties? Remember that the only foolish question is the one not asked. Remember, too, that proving what was done and by whom is easier if you maintain a contemporaneous written record. Ask for written reports and signed opinion letters. Read them and, if you don't understand them, ask for an explanation.

Source: Natlawreview.com, June 2015

Seven Common Retirement Plan Mistakes

Summary: The headlines are all about revenue-sharing, conflicts of interest and statutes of limitation, but the things that are likely to get plans and plan sponsors in trouble are a lot more mundane. Here are seven that are more likely to gum up the works for your average plan sponsor.

Source: Napa-net.org, June 2015

401k's Got Short Shrift in Census Bureau Data

Summary: The U.S. Census Bureau's Current Population Survey is a primary source of income data for those whose ages are associated with being retired. Research has shown that this survey has misclassified certain types of income and generally under reported retirement income because the questions did not properly ask about retirement income sources.

Source: Napa-net.org, June 2015

Comparing Target-Risk and Target-Date Solutions

Summary: Even with the option to be more conservative or aggressive, most participants still stick to a moderate glide path. Similar to the shift from defined benefit to defined contribution plans, many in the retirement industry have been moving from target-risk to target-date funds. This reflects the trend toward automation as an answer to participant inertia, but are plan sponsors moving in the right direction?

Source: Planadviser.com, June 2015

Survey Shows Lack of Planning for Retirement Savings Distribution

Summary: A survey released today by Pentegra Retirement Services, among over 1,000 employed U.S. adults (not already retired), showed several surprising results, particularly when it comes to people's lack of planning for accessing their retirement savings.

Source: 401khelpcenter.com, June 2015

Form 5500 Update

Summary: In order to avoid delays in the preparation and filing of the form, article lists some things a plan sponsor can do to assist their service provider.

Source: Legacyrsllc.com, June 2015

Ramifications of Supreme Court Decision on 401k Fee Lawsuit Run Deep

Summary: Why is Tibble being treated as big news? A partial reason is that decisions of two lower courts were overturned in the process. But more importantly, the case has sharply focused the attention of plan fiduciaries on the facts that fiduciary breaches can have big consequences and that monitoring is inextricably connected to many other fiduciary duties.

Source: Investmentnews.com (registration may be required), June 2015

Don't Roll the Dice on Department of Labor Audits

Summary: A resource guide meant to walk employers through the process of an audit from the DOL. The white paper includes information about how to prepare for an audit, the best way to acclimate staff to the audit process, what the DOL wants, and the most important elements of complying with requests.

Source: Hubspot.net , June 2015

Helping Employers Choose Qualified Default Investments

Summary: Fiduciary responsibility requires the careful selection of default retirement investments. Benefit advisers can add value with knowledgeable advice on qualified default investment alternatives, including through the use of selection tools.

Source: Benefitnews.com, June 2015

Plan Fiduciaries' Duty to Monitor Investment Options

Summary: The DOL and most authorities have long advocated having a systematic process to periodically review a plan's investment alternatives and make changes when necessary. The Supreme Court has confirmed that to do any less leaves plan fiduciaries vulnerable to liability for poor performing funds or funds with excessive expenses.

Source: Bcgbenefits.com, June 2015


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