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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Summary: Defined contribution plan sponsors are starting to think like defined benefit plan sponsors when it comes to their retirement savings and income culture. DB plans already are more likely to communicate with participants in terms of retirement income, as many traditional DB plan benefit formulas focus on income at retirement, rather than accumulation during one’s working years. DC plan sponsors are starting to include the importance of retirement income in their participant communications.
Source: Erisadiagnostics.com 
, July 2014
Summary: 403(b) plans are simplifying investment platforms by streamlining the options available for investors, according to the sixth annual PSCA 2014 403(b) Plan Survey. The survey found that more plans are offering target-date investment options as part of a slimmer overall investment platform and that more plan sponsors are retaining investment advisors, possibly reflecting a growing recognition of fiduciary responsibilities under ERISA.
Source: Wolterskluwerlb.com, July 2014
Summary: DC plan executives are wrestling with ways to improve participants' savings through automatic escalation. The struggle is between two philosophies: the opt-in approach, which requires participants to make a commitment to automatically raise their savings rate annually; and the opt-out approach, which includes participants in auto escalation unless they tell plan administrators to remove them from the program.
Source: Pionline.com, July 2014
Summary: Recently released IRS final regulations permit longevity annuities in retirement plans, and the DOL has an ongoing effort to encourage lifetime income and enhance retirement security. But will this guidance actually change participant behaviors? Or is it much ado about nothing? This article discusses the use of longevity annuities in retirement plans and examine the potential impact of the IRS guidance.
Source: Ntsa-net.org, July 2014
Summary: Ary Rosenbaum writes, "Leisure suits were once in style and while people claim style is cyclical, leisure suits never made a comeback. Revenue sharing is becomes a lot like a leisure suit, it's not going to come back in style and most plan sponsors and their plan providers are going to touch it with a 10 foot pole."
Source: Jdsupra.com, July 2014
Summary: The National Retirement Risk Index shows that half of today's working families are "at risk" of not being able to maintain their standard of living once they retire. This result is not surprising given that half of private sector workers do not have an employer-sponsored retirement plan and that many who do have a plan save relatively little. The question is how much households would have to save in order to maintain their pre-retirement living standards.
Source: Crr.bc.edu , July 2014
Summary: A first-of-its-kind ranking of 401k plans at the 250 biggest companies in the U.S. found that ConocoPhillips and Abbott Laboratories are among those that provide the most lucrative retirement benefits. Among the least generous are Facebook Inc., Amazon.com Inc. and Whole Foods Market Inc. The natural-foods grocer offers a maximum contribution of $152 annually.
Source: Bloomberg.com, July 2014
Summary: A new survey by TIAA-CREF shows that 78 percent of Americans who contribute to an employer-sponsored retirement plan receive matching contributions from their employer, and 77 percent of those who have matching contributions save enough to receive the full employer match. However, only 72 percent of women contribute enough to receive the full employer match, compared with 82 percent of men, and only 64 percent of those earning less than $35,000 a year receive the full match.
Source: 401khelpcenter.com, July 2014
Summary: Six page summary of TIAA-CREF's Perfect Match Survey, which was conducted among a sample of 1,000 adults currently contributing to an employer-sponsored retirement plan. Survey finds that many employees are leaving free money on the table if they don't make the most of savings match programs.
Source: Tiaa-cref.org , July 2014
Summary: Americans who have access to 401k plans can help to achieve a more secure retirement if they start early and save consistently over the course of their career, according to new research sponsored by Prudential.
Source: 401khelpcenter.com, July 2014
Summary: Many individuals think they have a financial plan in place, but in fact they don't. Here is a seven step approach to create a successful pre-retirement financial plan.
Source: 401khelpcenter.com, July 2014
Summary: Offering in-plan Roth conversions in your plan is a minor administration change that could potentially make a huge difference in how much your employees have available at retirement. Which participants could benefit from taking advantage of the new Roth in-plan conversion rule? Article reviews a few of the most compelling examples.
Source: 401khelpcenter.com, July 2014
Summary: This paper examines the range of professional services that a Plan Advisor can offer to fiduciaries of an employer-sponsored retirement plan. It is intended to raise awareness on the part of plan fiduciaries of the type of support they could expect by engaging a Plan Advisor who generally are hired to serve at least seven major functions.
Source: Strategicbenefitservices.com , July 2014
Summary: Several states are considering adopting legislation that would require private employers that do not provide a retirement plan for their employees to adopt some sort of retirement program, typically, an "auto-IRA." This article reviews three such initiatives, focusing mainly on issues that directly affect employers.
Source: Octoberthree.com, July 2014
Summary: The evidence is clear: employers need to provide their employees with a way to save for retirement that requires little effort on their part. They need an automated retirement program that ensures they are saving the right amount for retirement, with automatic contribution adjustments made as market fluctuations dictate.
Source: Xerox.com, July 2014
Summary: Retirement plan fiduciaries have many responsibilities, one of which is the identification and selection of a service provider through a formal request for proposals process. A fiduciary must test the waters every so often to meet its ongoing monitoring responsibility. An RFP provides the structure for a well-thought-out evaluation and leaves a written document trail as evidence of the fiduciary process.
Source: Wagnerlawgroup.com , July 2014
Summary: Examines preretirement lump sum distributions from pension plans, which have grown significantly in recent years. Most LSD recipients do not roll over the funds into qualified accounts, but the likelihood of rollover rises for larger distributions. This paper considers the role of one aspect of pension policy -- the tax treatment of lump sum distributions that are taken from pension balances before a worker reaches retirement age.
Source: Ssrn.com, July 2014
Summary: Due to the increased usage and popularity of target-date funds, investment managers and vendors are thinking about the next step. Traditionally, target-date funds were invested in underlying proprietary funds. Now managers are increasingly considering open architecture, incorporating funds of competitors with unique capabilities that complement their own. Some target-date managers are even exploring the inclusion of alternative investments and fixed-income sectors with low interest rate sensitivity.
Source: Moneymanagementintelligence.com, July 2014
Summary: Being an ERISA plan fiduciary is hard work, particularly in the current landscape of evolving plan and investment structures, coupled with increased regulation and scrutiny. In the age of constant evolution in technology and streamlining of processes, it can be hard to keep up with the latest plan trends. Here is a summary of just a few of them.
Source: Benefitsbryancave.com, July 2014
Summary: Report identifies key findings and provide an in-depth analysis of the current and future employee benefits market, helping your organization to proficiently navigate the uncertain terrain of an evolving employee benefits landscape. This executive summary provides a strategic, high-level overview of the survey results as well as separate analyses of each major benefits category.
Source: Ajg.com , July 2014
Summary: This 17 page publication reviews the current state of TDFs, pointing out trends in usage and changes in the types of funds available. It also suggest some tools that can help plan sponsors in evaluating the characteristics of TDFs and some tips on selecting an appropriate fund series for your specific plan.
Source: Nagdca.org , July 2014
Summary: The practice of throwing company shares into retirement plans has been waning for some time, but a recent Supreme Court decision could hasten its demise. ERISA experts say the blow to the Moench Presumption is just one more among many reasons to leave company stock out of retirement plans.
Source: Benefitspro.com, July 2014
Summary: Retirement savers transfer billions of dollars each year into Individual Retirement Accounts, typically when changing jobs. But sometimes you may be better off leaving your nest egg alone. It's big business too, with many financial firms urging you to make the switch and some even offering "bonuses" worth hundreds of dollars.
Source: Cnn.com, July 2014*
Summary: Close to 700,000 retirement plans filed a Form 5500 in 2011, representing $6 trillion in assets held by more than 130 million Americans. Given the form's role as a primary tool for enforcing the Employee Retirement Income Security Act, it's safe to say that no reporting instrument is as vital to the accounting of retirement assets. It's also safe to say that few have much respect for it.
Source: Benefitspro.com, July 2014
Summary: This Aon Hewitt research report analyzes the participant behavior of more than 3.5 million employees eligible for defined contribution plans offered by their employers. The data can be used to provide a comprehensive view of the defined contribution universe including participation rates, savings levels, plan balances, investment actions and account activity. This is a nine page highlight report.
Source: Aon.com , July 2014
Summary: In general, plan cashouts at job change have a much more serious impact on retirement savings than either plan loan defaults or hardship withdrawals, even taking into account the impact of a six-month suspension of contributions that generally accompanies those hardship withdrawals, according to new analysis by the nonpartisan Employee Benefit Research Institute.
Source: Ebri.org , July 2014
Summary: If you haven't been paying close attention to the administration of your company's 401k plan, the case of Tussey v. ABB Inc. should make you sit up and take notice. How can plan sponsors minimize fiduciary risk and avoid litigation? Experts advise following these seven tips.
Source: Cfo.com, July 2014
Summary: The recent record markets have resulted in increased retirement savings for millions of Americans according to a second quarter 2014 Fidelity analysis of its 401k and IRA accounts.
Source: 401khelpcenter.com, July 2014
Summary: By complying with ERISA section 404(c), sponsors and other fiduciaries of retirement plans with participant-directed investments may shield themselves from liability for poor investment decisions made by plan participants. This checklist will help you determine how well you are complying with ERISA section 404(c).
Source: Strategicbenefitservices.com, July 2014
Summary: The Treasury released final regulations on the use of longevity annuity contracts in DC plans. Under the regulations participants may take a portion of their account balance, no more than the lesser of 25% or $125,000 (indexed), and purchase a qualifying longevity annuity contract that provides for a set stream of payments starting no later than age 85.
Source: Relius.net, July 2014
Summary: An undercover GAO investigator looking into firms that offer pension advances received offers with effective interest rates that mostly ranged from 27 percent to 46 percent, at times far exceeding the legal limits set by states on the interest rates assessed for various types of personal credit, the GAO said in a new report.
Source: Pensionrights.org , July 2014
Summary: Target-date funds are on a growth trajectory that will take them to $4 trillion by 2020, from their current level of $800 billion. That's 30% per year growth over the next 6 years. On a percentage basis, TDFs will increase from 25% of all 401k assets to about half.
Source: Piktochart.com, July 2014
Summary: Attorney Ary Rosenbaum writes, "This article is an introduction to terms and services in the retirement plan industry that plan providers may try to trick you into using that either does not provide what you believe it promises or it's a little short on detail on what it really is."
Source: Jdsupra.com, July 2014
Summary: This 16 page fiduciary guide can help you understand and manage your fiduciary responsibilities through a better understanding of existing rules and regulations.
Source: Jpmorganfunds.com , July 2014
Summary: On July 1, 2014, Puerto Rico enacted into law the Tax System Adjustment Act, which, among other changes, amends the Puerto Rico Internal Revenue Code of 2011 to allow participants in both qualified and non-qualified retirement plans from July 1 to October 31, 2014 to pre-pay a 15% tax on all or part of the participant's accumulated and undistributed balance in the plan.
Source: Groom.com, July 2014
Summary: Fred Reish writes, "Several of my colleagues and I have provided comments to the DOL about its proposal to require a 408(b)(2) guide. Most other commentators have or will be addressing the policy issue -- is it a good idea to require a guide or not? We avoided the policy issues. Instead, our comments focused on making the requirements clear and implementable -- if the guide requirement is adopted."
Source: Fredreish.com, July 2014
Summary: Plan participants, who are age 50 or older by the end of the calendar year, are eligible to make catch-up contributions into their 401k plan (other than a SIMPLE plan), 403(b) plan, SARSEP or 457(b) plan. Watch this video to learn how to monitor catch-up contributions.
Source: Erisasunscreen.com, July 2014
Summary: While 2014 has been a relatively quiet year in terms of new rules affecting retirement plans, the January 1, 2015 effective date for the Affordable Care Act employer shared responsibility mandate is now in sight. This summary discusses a few key developments regarding employee benefit plans for employers to consider as they move into the second half of 2014.
Source: Employeebenefitsupdate.com, July 2014
Summary: The 2013-2014 term of the Supreme Court of the United States produced opinions that will have substantial effects on the design and administration of most employee benefits plans. This summary highlights three key decisions, one significant procedural ruling, and an emerging issue likely headed for Supreme Court review, all of which deserve the attention of employee benefits professionals.
Source: Employeebenefitsupdate.com, July 2014
Summary: According to the author, "The goal of a target-date fund is to provide a consistent risk-adjusted portfolio that takes a participant through their career and retirement. There may be good reasons for differing on appropriate risk exposure, asset mix, and other issues at retirement. But once human capital is exhausted, and retirement risk is properly understood, the case for the "to fund" approach is clear."
Source: Blackrock.com, July 2014
Summary: BP employees can sue managers of the company's retirement savings plan over losses related to the 2010 Gulf of Mexico oil spill, a U.S. appeals court said. The New Orleans-based appellate court today, citing a recent Supreme Court ruling, rejected Houston U.S. District Judge Keith Ellison's 2012 decision denying claims for millions of dollars in losses suffered by the plans.
Source: Benefitspro.com, July 2014
Summary: Many practitioners had hardwired language into the plan document mandating investments in company stock in order to place the fiduciaries in the best position to claim the Moench presumption of prudence. Given the demise of the Moench presumption, such language would no longer appear to be helpful, and may even prove detrimental in the situation in which the plan fiduciaries desire to discontinue the company stock fund.
Source: Benefitsbryancave.com, July 2014
Summary: More than half of the racial and ethnic differences in wealth accumulated in DC retirement plans can be attributed to compensation and job tenure. Plan design and participant behavior play a smaller, but still important role. Wealth differences by racial and ethnic group are largest among voluntarily enrolled participants. What can plan sponsors do to address this gap in retirement plan wealth?
Source: Vanguard.com , July 2014
Summary: The SEC appears to expand the oversight responsibilities of investment advisers that retain proxy advisory firms to provide proxy voting recommendations by establishing an ongoing duty to monitor these firms to ensure that they have the capacity and competency to adequately analyze proxy issues. The guidance reiterates and builds upon positions that the SEC has previously taken.
Source: Jdsupra.com, July 2014
Summary: To provide and maintain 401k plans, employers are required to obtain a variety of administrative, participant-focused, regulatory, and compliance services. All of these services involve costs. This updated study looks at those costs. Key findings include plan participants investing in mutual funds tend to hold lower-cost funds, the expense ratios that 401k plan participants incur for investing in mutual funds have declined substantially since 2000, and the downward trend in the expense ratios that plan participants incur for investing in mutual funds continued in 2013.
Source: Ici.org , July 2014
Summary: Reports indicate revenue sharing has been declining over the last few years, both in terms of the percentage of plans including it and as a portion of the expense ratio. Fee disclosure requirements have likely played at least some part in this trend, but market forces have been more influential in reducing the incidence of revenue sharing.
Source: Employeefiduciary.com, July 2014
Summary: On June 30, 2014, the SEC released guidance to address certain issues regarding proxy voting responsibilities of investment advisers and to clarify certain exemptions from the federal proxy rules relied on by proxy advisory firms. The guidance was released in a Q&A format and addressed a number of situations in which proxy voting rules and responsibilities may come into question. This article is a summary of the guidance.
Source: Dbr.com, July 2014
Summary: Survey respondents ranked several financial priorities that compete with their retirement account contributions including: paying off debt (29 percent), day-to-day expenses (23 percent), taking care of family (11 percent) and saving for college (4 percent) among others. But 55% said they would favor automatic annual increases to their contributions.
Source: 401khelpcenter.com, July 2014
Summary: The volume of retirement assets rolling out of defined contribution plans has gotten the Department of Labor's ERISA Advisory Committee's attention. In response, they said it plans to examine some of "the factors leading participants to leave their assets in or move them out of a plan."
Source: Thinkadvisor.com, July 2014
Summary: It remains to be seen how courts will apply the standards that the Supreme Court articulated for claims based on nonpublic information and for claims against the fiduciaries who purchase stock or retain the stock of a non-publicly traded employer. Nevertheless, it remains clear from the Supreme Court's decision that plan fiduciaries must actively monitor an employer stock fund in accordance with ERISA's prudence requirement and that fiduciaries remain personally liable if their failure to do so leads to financial harm to plan participants.
Source: Swlaw.com, July 2014
Summary: Both the number of employers offering target-date funds as an option in their 401k plans, and the number of workers using these funds, continue to increase.
Source: Squaredawayblog.bc.edu, July 2014
Summary: Author writes, "I take no issue with those who opt for passive management, if they have done thorough research and analysis on what's the best investment solution for their participants. I do have concerns with sponsors who base their decision to go passive because of a fear that higher fees for actively managed funds could expose them to potential lawsuits or put them in a fiduciary bind."
Source: Russell.com, July 2014
Summary: Does educating participants on savings behaviors and investments have an actual, measurable effect that can drive better retirement outcomes? Does it encourage employees in a sponsored retirement plan to save more, and does it help them learn more about investments and other aspects of the plan, or is it a waste of time? A survey of advisers and providers shows lack of consensus in the industry on these questions and others surrounding employee financial education efforts.
Source: Planadviser.com, July 2014
Summary: Participants in 401k plans incurred lower expenses investing in long-term mutual funds (equity, hybrid, and bond funds) in 2013 than in 2012, the Investment Company Institute found in an annual research report found here. The decline in these expenses is consistent with the downward trend of the past decade.
Source: Ici.org , July 2014
Summary: Fred Reish discusses his predictions for DC plans. Fred believes the biggest change will be that these plans will become more individualized, participant by participant. In most cases, every employee now receives the same information at enrollment; everyone gets the same communications materials about the investments; everyone gets the same asset allocation in his portfolio investments.
Source: Drinkerbiddle.com , July 2014
Summary: Plan forfeitures occur when participants terminate employment before vesting fully in their retirement plan. But what happens to the unvested money these participants must forfeit? Forfeitures can be tricky, and the IRS monitors this area. Article examines what forfeitures are and how they work.
Source: Bizactions.com, July 2014
Summary: Sound financial planning requires neither the determination of safe withdrawal rates nor the use of Monte Carlo simulations. Relying on the past to predict the future is unnecessary. Instead, one must focus on how much can be spent each year, given expected returns and inflation, and then consider how negative and worst-case scenarios would affect retirement planning. That is the basis for the annual available spend methodology described here.
Source: Advisorperspectives.com, July 2014
Summary: The study, which consisted of responses from 1,619 full-time employed individuals between the ages of 25 and 65 who have been participating in their employer-sponsored retirement plan, looked at why participants delay saving for retirement and how those barriers can be overcome.
Source: 401khelpcenter.com, July 2014
Summary: The nonprofit Transamerica Center for Retirement Studies released a new report and fact sheet revealing the retirement savings habits of American Millennial workers (born between 1979 and 1996) from its 15th Annual Transamerica Retirement Survey, one of the largest and longest-running national surveys of its kind.
Source: 401khelpcenter.com, July 2014
Summary: Millennial workers are an emerging generation of retirement super savers. Unlike their parents' generation, most expect their primary source of income in retirement to be self-funded through retirement accounts or other savings and investments. The good news is that they are getting an early start with their savings and are taking advantage of the latest innovations that their employer-sponsored retirement plans have to offer. Employers should take note: Two-thirds of Millennials say they would be likely to switch companies for a similar job if it comes with better retirement benefits.
Source: Transamericacenter.org , July 2014
Summary: Mutual fund companies are trying to juice returns of target-date funds by giving their managers more leeway to make tactical bets on stock and bond markets, even though this could increase the volatility and risk of the widely held retirement funds.
Source: Reuters.com, July 2014
Summary: Despite participant education efforts and the availability of simplified investment decision-making options, there is a general lack of confidence that participants are appropriately diversified within their 401k plans. Conducting a re-enrollment not only helps get participants into a diversified portfolio, but also helps to ensure their asset allocation changes with them over time.
Source: Jpmorganfunds.com , July 2014
Summary: There is tension in the world of 401k plans. Participants fret over the investment decisions they must make. Their employers worry about fiduciary liability for how the participants' accounts are invested. Fortunately, there is a straightforward strategy for dealing with this tension -- a strategy that dramatically improves the quality of participant investing while providing enhanced protections to the plan sponsors and committee members who manage those plans. This strategy is known as "re-enrollment."
Source: Jpmorganfunds.com , July 2014
Summary: With the outlook for passage of a uniform fiduciary duty now bleak, it's astonishing to think the prospects for strengthening investment-advice rules to better protect investors looked so bright four years ago.
Source: Investmentnews.com (free registration may be required), July 2014
Summary: If you are the person -- or one of the people -- at your company who is responsible for administering the company's retirement plan, please make sure you review the Form 5500 for your plan each year. It is important for you to understand the 5500. This article reviews the important items you need to review on your Form 5500-SF (short form) or Form 5500 (long form).
Source: Consultrms.com, July 2014
Summary: In seeking clarity about the "type" of 401k professional it has retained, plan sponsors often find the answers they are given to be incoherent with a slant in favor of the 401k industry instead of plan participants. The residual fuzziness plan sponsors are left feeling about this topic is a source of significant irritation to them. This comprehensive article attempts to peel back the fiduciary layers and unscramble the fiduciary fuzziness.
Source: 401khelpcenter.com, July 2014
Summary: Fiduciaries do need to deal with expanded liabilities from the changing regulatory and judicial landscape. Employers, plan administrators, HR staff and plan service providers should make sure that plan fiduciaries meet regularly to discuss plan business and document their deliberations. If you have any concerns about the prior conduct of plan fiduciaries, make sure you consult top notch plan service providers.
Source: Retirementplanblog.com, July 2014
Summary: The IRS issued final regulations that clarify the tax treatment of payments for accident or health insurance by qualified retirement plans. The final rules provide that amounts held in a qualified retirement plan used to pay accident or health insurance premiums are taxable distributions unless there is an exception. The final regulations include an additional exception, to already existing exceptions, under which payment of disability insurance premiums from a qualified plan are not taxable if certain requirements are satisfied.
Source: Prudential.com , July 2014
Summary: While the pensions of hundreds of millions of Americans can be protected by a single statute, ERISA, Canada apparently requires 11 statutes to achieve the same results. Pension regulation is one area where Canada could benefit by following the lead of its neighbors to the south.
Source: Benefitscanada.com, July 2014
Summary: Inasmuch as an annuity contract held under a DC plan is treated as an IRA, the value of the annuity contract is included in the participant's account balance and subject to the RMD rules. Acknowledging a need for deferred annuities commencing at an advanced age, the final regulations modify the RMD rules to provide that the value of a QLAC prior to annuitization is excluded from the participant's account balance for purposes of determining the participant's RMD, provided that certain requirements are met.
Source: Troutmansanders.com, July 2014
Summary: Employers and plan fiduciaries should stay tuned as there should be more clarity and guidance forthcoming. In the meantime, they should: Review plans to ensure that employer stock is an authorized investment; Seek to limit liability by capping the amount that participants can invest in employer stock; and, Conduct risk assessments of the continued maintenance of employer stock funds.
Source: Shrm.org, July 2014
Summary: The Court emphasized that such claims will be very fact specific but left it up to the Sixth Circuit to determine whether the plaintiff's complaint sufficiently pled a fiduciary breach. Based on these factors, it is pretty evident that while the employer-friendly presumption is no longer valid, plaintiff-participants may still have a hard time sufficiently alleging complaints.
Source: Pension-Consultants.com, July 2014
Summary: Whether a plan sponsor is trying to minimize costs, monitor investments or improve administrative efficiencies, all plan sponsors fiduciaries must first understand their legal fiduciary responsibility under ERISA. If you are a plan fiduciary and you don't believe you are able to meet your fiduciary responsibilities under the prudent man rule with your current resources, you should consider working with a RIA. Working with an RIA can help mitigate your fiduciary responsibilities regarding the investment options in the plan, as well as providing assistance in implementing best practices and strong governance processes.
Source: Multnomahgroup.com, July 2014
Summary: Due to the changes to the DOL's electronic filing system, an electronic DFVCP filing does not include all of the information required by the IRS. Therefore, in order to benefit from the waiving any late filing penalties by the IRS, plan sponsors must now meet three requirements.
Source: Masudafunai.com, July 2014
Summary: While it may look good on paper to hire a payroll provider as a 401k TPA, the author of this paper thinks it's actually a terrible idea and explains why in this article.
Source: Jdsupra.com, July 2014
Summary: Retirement plan service providers have continually created new and improved ways of helping plan sponsors with their fiduciary duties and liabilities, including the outsourcing of some duties. Seeking to reduce fiduciary liability, the fiduciary warranty was an early approach. Fiduciary warranties have continued to evolve and reviewed here.
Source: Thecfdd.com, July 2014
Summary: Non-ERISA 403(b) plans seem to be dropping in popularity among non-profit organizations. Given regulatory guidelines that can be difficult to follow, many plan sponsors are finding it harder to maintain a fully compliant non-ERISA plan. This article offers tips to help plan sponsors change their non-ERISA 403(b) plan to an ERISA plan and reviews compliance issues you need to consider to make this change.
Source: Strategicbenefitservices.com, July 2014
Summary: Sending "negative confirmations" to all participants receiving distributions during the year is an important part of a plan sponsors fiduciary processes. Watch this Sunscreen Moment to learn more.
Source: Erisasunscreen.com, July 2014
Summary: Ensuring reasonableness and transparency of fees in 401k plans has been a hot topic for the past number of years. Jerry Schlichter was the first attorney in the U.S. to challenge 401k fee reasonability directly at the source. This is a summary of a discussion with Mr. Schlichter.
Source: Ekonbenefits.com , July 2014
Summary: Following a spate of district court cases in response to United States v. Windsor, some same-sex surviving spouses are asking retirement plan sponsors to review previously denied death benefit claims. Among them has emerged Passaro v. Bayer Corp. Pension Plan in which the key issue will be the retroactive application of Windsor to qualified retirement plans.
Source: Benefitsbryancave.com, July 2014
Summary: Here is a great Infographic from the 401k Averages Book offering a breakdown of small 401k retirement plan fees.
Source: 401kfeedisclosure.com, July 2014
Summary: Despite their growing popularity, there are a number of misunderstandings about target-date funds. Some of these misunderstandings lead to bad decisions that can hurt plan participants and expose plan trustees to legal action. Paper reviews some of the misunderstandings around target-date funds.
Source: Paladinregistry.com , July 2014
Summary: New disclosure rules and the threat of fiduciary violation lawsuits have helped bring down investment management, recordkeeping and other fees in 401k and other retirement accounts. Now revenue-sharing is following suit. About 13% of plans had no form of revenue sharing whatsoever last year, a figure that most expect will grow.
Source: Thinkadvisor.com, July 2014
Summary: This paper reviews and analyzes the various types of fiduciary warranties. It exposes various warranty deficiencies and highlights genuine benefits. Details include: The evolution of fiduciary warranties; Three types of fiduciary warranties; and, Analysis of the liabilities and benefits of each type of warranty.
Source: Naplia.com (free registration may be required), July 2014
Summary: Smaller US defined contribution plans face a host of fee difficulties simply because of the size of their plans. This has led to a growing interest in multiple employer plans as a potential cost-effective solution. But, MEPs do have an important regulatory issue.
Source: Alliancebernstein.com, July 2014
Summary: While 401k plans continue to grow in popularity, so has the immense scope of complexity surrounding compliance. Lately there's more attention and scrutiny from regulators and lawyers, making it imperative for plan sponsors to understand their fiduciary roles, the overall process, and how to safeguard themselves before an examination.
Source: Thefiresystem.com , July 2014
Summary: As reports of more auditors in the field from the U.S. Department of Labor circulate the industry, advisers are increasingly concerned about compliance for their employer clients. Research from the employment and labor law firm Littler Mendelson confirms another good reason that advisers should be offering compliance help: It's a top concern for employers.
Source: Benefitnews.com, July 2014
Summary: In the paper "Beyond Diversification: The Pervasive Problem of Excessive Fees and 'Dominated Funds' in 401k Plans," by Professors Ayres and Curtis, the authors conclude that 401k plan participants suffer significant losses from (1) sponsor-fiduciary fund menu construction decisions, (2) participant asset allocation mistakes and (3) high fees on plan investment options. This article we review their paper in detail.
Source: Octoberthree.com, July 2014
Summary: This white paper provides a summary and analysis of essential factors that should be considered regarding target-date design and analysis, including: Risk in the target-date fund space; Active versus passive manager selection; and, Closed versus open-architecture approaches.
Source: Americancentury.com , July 2014
Summary: In a two-phase online GAO survey, stakeholders identified problems with the usefulness, reliability, and comparability of data from the Form 5500. GAO recommends DOL, Treasury, and PBGC consider modifying Form 5500 plan investment and service provider fee information to address challenges, which are laid out in this report.
Source: Gao.gov, July 2014
Summary: Designing an industry "best practices" investment menu for a participant directed retirement plan requires a lot more thought than merely filling the Morningstar style boxes and calling it a day. Experience has shown that participants often frustrate the best intentioned expert who tries to build these investment line-ups. Understanding Behavioral Finance is key to overcoming many of the obstacles participants have when interacting with their plan's investment menu.
Source: Francisinvco.com, July 2014
Summary: The Internal Revenue Service has issued final regulations which will allow participants in a qualified defined contribution plan to purchase and hold qualified longevity annuity contracts in their accounts. Here is an overview of the rules.
Source: Erisalawyerblog.com, July 2014
Summary: Rising stock markets are boosting investor confidence and leading Canadians to increase the share of income they invest, according to the latest TD Investor Insights Index. The annual survey finds that more than half of Canadian investors saw their investments improve over the past 12 months, and nearly as many expect continued gains in the year ahead.
Source: Benefitscanada.com, July 2014
Summary: The Government Accountability Office is recommending that regulators consider modifying Form 5500 plan investment and service provider fee information. Stakeholders interviewed by the agency said the form's information about service provider fees was misaligned with other required fee disclosures, and also cited various exceptions and gaps in current reporting requirements as major challenges.
Source: Plansponsor.com, July 2014
Summary: This 2014 survey focuses on finance executives' increasing interest in pension de-risking strategies, explores the different options that companies are considering to enhance defined contribution plans, and reflects on how to achieve a better balance between retirement benefits and other employee benefit offerings. Twenty pages.
Source: Prudential.com , July 2014
Summary: When a retirement plan advisor is more concern with low cost than the quality of service, they are likely to get a TPA that under performs for both the plan sponsor and the advisor. This article is about why retirement plan advisors should avoid recommending a TPA just because they charge low fees.
Source: Jdsupra.com, July 2014
Summary: If you're an employer who sponsors a 401k or profit sharing plan, it's time to amend and restate your plan. Qualified retirement plans must operate in accordance with their plan documents. Ongoing legal and regulatory changes in retirement plan rules frequently require plan sponsors to amend and restate their plans to keep their documents compliant with the IRS.
Source: Retirementplanblog.com, July 2014
Summary: The Internal Revenue Service issued final regulations relating to the use of longevity annuity contracts in defined contribution plans. These regulations provide guidance necessary to comply with the required minimum distribution rules under Section 401(a)(9) of the Internal Revenue Code applicable to a plan that holds a longevity annuity contract.
Source: Practicallaw.com, July 2014
Summary: The IRS has published a final regulation that allows defined contribution plans to offer longevity annuities commencing as late as age 85. Although the final regulation is similar to the rule proposed in 2012, the IRS has made some welcome improvements in response to public comments. The final regulation is effective for annuities purchased after July 1, 2014.
Source: Natlawreview.com, July 2014
Summary: The Supreme Court's rejection of a 'presumption of prudence' switches out the well-developed jurisprudence supporting the Moench presumption for defenses that will inevitably be tested and illuminated over time. Further, it will require plan sponsors and fiduciaries to redo their defensive paradigm for offering employer stock, which was constructed around this presumption. This article provides context for the decision and notes additional detail on the case, the key takeaways and practical next steps.
Source: Kilpatricktownsend.com, July 2014
Summary: Mutual fund assets worldwide increased 2.7 percent to $30.84 trillion, an all-time high, at the end of the first quarter of 2014. The Investment Company Institute compiles worldwide statistics on behalf of the International Investment Funds Association, an organization of national mutual fund associations. The collection for the first quarter of 2014 contains statistics from 45 countries.
Source: Ici.org, July 2014
Summary: Keeping Board of Trustee minutes for major decisions affecting the plan makes all the sense in the world. Watch this video to learn what information that should be summarized in your plan committee minutes.
Source: Erisasunscreen.com, July 2014
Summary: The Supreme Court's decision in Dudenhoeffer is indeed a broad rebuke to the six appellate court decisions that established and have continued to recognize the Moench presumption. However, as discussed here, the precise impact of Dudenhoeffer on litigation relating to the acquisition and holding of company stock is yet to be determined. Indeed, while the Supreme Court's repudiation of the Moench presumption may be welcome news to ERISA stock-drop plaintiffs.
Source: Dechert.com, July 2014
Summary: The IRS took a substantial step in making these DC lifetime income efforts become a reality with its publication of the final regulations establishing the "Qualified Plan Longevity Annuity Contract," or "QLAC." In order to even publish this regulation, however, the IRS had to "clear the underbrush" and resolve an number of technical issues relating to the manner in which defined contribution plans could even provide lifetime income.
Source: Businessofbenefits.com, July 2014
Summary: 403(b) plan documents currently may be presented in a myriad of forms, but pre-approved prototype plans are coming, which will provide some uniformity, notes Barbara J. Webb of PenServ Plan Services, Inc.
Source: Plansponsor.com, July 2014
Summary: Financial knowledge is critical to ones retirement security, finds a new study showing that 401k plan participants who scored higher on a test of their financial knowledge earned an additional 1.3 percentage points of investment returns annually on their retirement accounts.
Source: Nber.org, July 2014
Summary: Morningstar's annual study of the target-date industry shows these retirement funds continue to get cheaper while garnering stronger performance in unexpected ways. Also points to Fidelity as the new price leader, replacing Vanguard.
Source: Morningstar.com, July 2014
Summary: Has the debate around the Department of Labor's fiduciary proposal become so heated that the administration will shelve the controversial proposal? At least one opponent says it's possible.
Source: Financial-Planning.com, July 2014
Summary: Prior to auto-features, workers had to make a lot of choices, such as enrollment, level of participation and investments. Decades of research on participant behavior in 401k plans showed that many participants don't like making these choices. Many workers chose not to participate over being faced with the myriad choices, even when employers promised matching contributions. But most people want to do the right thing, and auto-solutions help them do that.
Source: Workforce.com, July 2014
Summary: The Supreme Court issued a decision that will impact fiduciaries of retirement plans that hold employer stock. The Court held that such fiduciaries are not subject to the so-called Moench presumption of prudence and are subject to the same duty of prudence that applies to all ERISA fiduciaries, except to the extent that the duty of prudence requires diversification. The Court's ruling has some redeeming aspects that could be helpful in defending against stock-drop litigation at the motion to dismiss stage of the litigation.
Source: Troutmansanders.com, July 2014
Summary: Under the regulations, the value of QLACs are excluded from the account balances used to determine RMDs, and QLAC distributions would be treated as meeting the RMD requirements. The final regulations substantially follow the approach of the proposed regulations, with a number of helpful refinements and clarifications provided in response to comments on the proposal.
Source: Sutherland.com, July 2014
Summary: Studies have linked the perception of workplace benefits with satisfaction and retention. But "without solid communication efforts, employees may not understand or value even the best and most generous benefits plans," said Mary Schafer, vice president of benefits and talent outsourcing at payroll provider ADP. The best messaging is "short and sweet, using simple and memorable language," she noted. "Don't get caught up in alphabet soup. That gets confusing fast" to employees.
Source: Shrm.org, July 2014
Summary: The IRS recently announced a pilot program to provide penalty-free relief for late 5500-EZ filers. While Revenue Procedure 2014-32 is hardly a model of clarity, some research provides better understanding of what needs to be done to qualify for relief under the new program.
Source: Relius.net, July 2014
Summary: Of the 3,677 DOL qualified retirement plan audit investigations closed in 2013, violations were found in nearly three-quarters of them. Bruce Ashton says those numbers contain a clear message for plan fiduciaries and financial advisers working with retirement plans: The best way to survive a plan audit unscathed is to avoid an audit in the first place. And once an audit is triggered, only the most carefully governed plans can expect a clean bill of health. Here some tips to take the heat off.
Source: Plansponsor.com, July 2014
Summary: The SEC's Division of Investment Management issued a Guidance Update in light of comments the Commission's staff has provided to a number of funds and their counsel related to the Summary Prospectus Rules. The Guidance Update reports that the staff has observed a trend in which a significant number of prospectuses include complex, technical, and duplicative disclosure that is inconsistent with the objective of the Summary Prospectus Rules.
Source: Paulhastings.com, July 2014
Summary: Plan documents must be updated from time-to-time to conform to changes in the federal tax laws made by Congress, or to reflect regulations under the Internal Revenue Service or Department of Labor. Failure by plan sponsors to complete the restatement during this window could result in plan disqualification, and disqualification can cause unintended tax consequences for both employers and participants.
Source: Multnomahgroup.com, July 2014
Summary: Revenue sharing with 401k service providers has been common practice for many years. It may sound like your service provider is offering "free money" when it offers to share part of its revenue sharing payments. But do not jump on the offer without taking the time to satisfy your fiduciary duties, which requires a careful consideration of how the arrangement works, the service provider's role, and the reasonableness of the service provider's compensation.
Source: Mckennalong.com, July 2014
Summary: According to Stephen R. Banks, co-founder of TSA Consulting Group in Tucson, Arizona, only around 30% of eligible employees are participating in 403(b)'s sponsored by school systems. Banks told attendees of the 2014 National Tax-Sheltered Savings Association 403(b) Summit one reason employees do not participate in 403(b) plans is the employer is not engaged.
Source: Planadviser.com, July 2014
Summary: What the Supreme Court clearly did not appreciate was the argument that the fiduciaries are supposed to be clairvoyant and know the stock price is overvalued when the entirety of the investing public did not or has yet to adjust. In the same vein, the Supreme Court did not appreciate the idea that the fiduciary was supposed to use insider information, again, presumably, when the stock price was at its highest.
Source: Fraplantools.com, July 2014
Summary: Retirees with 401k plans and individual retirement accounts will have more flexibility to purchase annuities that don't start paying out until age 80 or 85, under final rules from the U.S. Treasury Department.
Source: Businessweek.com, July 2014
Summary: Author writes, "So, where do we even begin with Fifth Third Bancorp v. Dudenhoeffer, which is, first, a fascinating decision and, second, one that has already inspired countless stories in both the legal and financial media? I thought I would begin by passing along some of the better commentary I have come across in the wake of the decision, along with a few thoughts of my own."
Source: Bostonerisalaw.com, July 2014
Summary: The Federal Register contains the IRS final regulations on the use of certain longevity annuity contracts in tax-qualified retirement savings arrangements, offering the ability to delay required minimum distributions on amounts used to purchase such annuity contracts.
Source: Ascensus.com, July 2014
Summary: One way that nonprofits attempt to encourage talent to stay employed within their organizations is through their benefits plans. These benefits could include a 403(b) retirement plan. But what many nonprofits don't realize what tasks they have accepted as a plan provider. This article offers a good overview.
Source: Linkedin.com, July 2014
Summary: An employer did not breach fiduciary duties under ERISA by electing to make required contributions to a 401k plan in employer stock, rather than cash, according to the U.S. Court of Appeals in New York City. The decision to fund plan contributions in company stock is not a fiduciary act, the court explained, even if the decision has a detrimental impact on the plan.
Source: Wolterskluwerlb.com, July 2014
Summary: The defined benefit world is changing, and in ways you may not be aware of. Consider this: Cash Balance plans have increased six-fold since the year 2000 and have taken over a sizeable chunk of the DB market and notched their own place in the U.S. retirement system.
Source: Russell.com, July 2014
Summary: The Supreme Court concluded that ERISA fiduciaries are no longer entitled to a presumption that they acted prudently in investing in employer stock. While the Supreme Court struck the presumption entirely, the Court provided new guidance regarding the duties of plan fiduciaries, particularly those of publicly traded companies.
Source: Groom.com , July 2014
Summary: Although ERISA does not explicitly require a written governance process or investment policy statement, it is a best practice. However, an IPS with too much detail may create legal breaches if the plan sponsor fails to perform every step in the process.
Source: Ekonbenefits.com , July 2014
Summary: While the DOL has issued guidance in several areas regarding both plan sponsor and service provider responsibilities, there is no uniform analytical framework for understanding outsourcing, particularly in the context of fiduciary services. The 2014 ERISA Advisory Council will be looking at this issue.
Source: Dol.gov, July 2014
Summary: A new government study shows that a decades-long trend toward retirement at a young age has reversed, probably because we can no longer afford it. Here are some of the issues -- benign and otherwise -- that the study suggests are pushing people to work longer.
Source: Bankrate.com, July 2014
Summary: Morningstar announced findings from its 2014 target-date series research paper. The industry, which turned 20 years old in 2014 and captures most new dollars into retirement plans, consistently has pushed fees lower. Key findings about the industry's overall growth are reviewed here.
Source: 401khelpcenter.com, July 2014
Summary: Kravitz released the 2014 National Cash Balance Research Report, showing a 22% increase in new plans for the most recent year. The number of new Cash Balance Plans continues to grow faster than all other sectors of the retirement plan market, including 401k plans, which increased just 1% despite continuing economic recovery.
Source: 401khelpcenter.com, July 2014
Summary: The Treasury Department today announced a final rule that will facilitate retirement plan participants' access to deferred-income annuities. Though the Treasury Department and the Labor Department have acknowledged that workers could benefit from using deferred-income annuities to ensure they have enough money later in life, there were still a number of hurdles to overcome.
Source: Investmentnews.com (free registration may be required), July 2014
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