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Daily Article Digest - Updated Throughout the DayThis digest contains a wide variety of the freshest source material dealing with current trends, opinion, news, legislative action, investments, marketing, sales, consulting, and legal issues regarding 401k, 403b and other retirement plans. Each listing contains a headline (hyperlinked to the source document), description, source of the item, and the month and year posted to this digest. Use the SEARCH feature to located specific items from this digest and from our ARCHIVE. RSS feed of this page is available:
Legislation Introduced With Changes to Retirement Savings Tax CreditAbstract: Legislation to change the current non-refundable saver's credit into a refundable, government matching contribution for more workers to contribute to 401k plans or IRAs was introduced Thursday by Senate Finance Committee ranking member Ron Wyden and four other senators. Source: Pionline.com, November 2018
IRS Issues Proposed Regulations on Hardship Distribution RulesAbstract: The Treasury Department and Internal Revenue Service issued proposed regulations that would amend the rules governing hardship distributions from 401k plans. The proposed regulations reflect statutory changes, including changes made by the Bipartisan Budget Act of 2018 and Pension Protection Act of 2006. Source: Westlaw.com, November 2018
DOL Guidance Addresses Fiduciary Status and Fees Under Program Facilitating Portability of Automatic RolloversAbstract: The program provider asked the DOL for two forms of guidance: first, an advisory opinion clarifying the fiduciary status of the parties involved; and second, a prohibited transaction exemption that would allow the provider to receive a fee for transferring a default IRA's assets into the plan of the IRA owner's current employer without the owner's affirmative consent. Source: Thomsonreuters.com, November 2018
401k Hardship Withdrawals, Account Transfers Might Get EasierAbstract: Taking hardship withdrawals from 401k plans may soon be easier for plan participants, while plan sponsors could face fewer risks when transferring small "left behind" 401k accounts to departing employees' individual retirement accounts and new 401k plans. Source: Shrm.org, November 2018
ERISA Advisory Council Recommends Rules for the Encouragement of Lifetime Income Options in QDIAsAbstract: Brief article that reviews the ERISA Advisory Council recommendations for rule changes to encourage the inclusion of lifetime income options in QDIAs, the effect of the new Society of Actuaries MP-2018 mortality improvement scale on liability valuations, and a recent IRS “Program Letter” identifying qualified plan distributions as a compliance target. Source: Octoberthree.com, November 2018
Fiduciary Liability Claim TrendsAbstract: While insurers have not reacted in a unified way, the claim environment has become much more active and severe during the past 24- 36 months, highlighted by well-publicized excessive fee litigation under ERISA. This 10-page fiduciary liability claim trends report discusses, among other items, the many excessive fee cases brought against universities, why proprietary funds are more challenging risks, and recent results from a Boston College study examining the causes and consequences of 401k lawsuits. Source: Lockton.com, November 2018
The 401k Adoption Agreement ExplainedAbstract: Maybe you're looking into establishing a 401k for your company. Or perhaps you've realized it is time to make a change to how your plan is run. Both are often excellent, if tough, decisions. In this easy-to-read 401k plan document reference guide is just about everything you need to know about 401k adoption agreements. Source: Forusall.com, November 2018
401k Plan Administration Checklist for the 2019 Plan YearAbstract: Annual 401k administration tasks generally fall into one of four categories: nondiscrimination testing, Form 5500 reporting, participant disclosure, and plan document maintenance. If you're an employer, it is recommend that you manage the completion of these tasks using a checklist. A checklist can serve another important purpose, monitoring your 401k provider's job performance. Source: Employeefiduciary.com, November 2018
DOL RCH Advisory Opinion Illustrates the Difficulties Inherent to Bulk IRA/Auto Portability ProgramsAbstract: The DOL Advisory Opinion 2018-01 on the Retirement Clearinghouse shows the challenges presented by auto-portability in general, and specifically in the use of these types of IRA programs to accomplish it. Its ruling on negative consent related to "plan" assets (which includes IRA monies) is a big deal, of which we should all take note when dealing with auto-portability. Source: Businessofbenefits.com, November 2018
Best Intentions: The Unintended Consequences of Plan DesignAbstract: DC plans are complex and changes often bring unintended consequences. The most well-intentioned and carefully considered plan design decisions may have unexpected results and even successful implementations occasionally reveal the limits of some baseline assumptions. Source: Blackrock.com, November 2018
IRS Issues Proposed Amendments to Retirement Plan Hardship RulesAbstract: The IRS released proposed amendments in REG-107813-18 to defined contribution retirement plan hardship distribution regulations. These amendments have been drafted to reflect statutory changes contained in the Bipartisan Budget Act of 2018 and the application of hardship rules related to modifications made by the Tax Cuts and Jobs Act. Source: Ascensus.com, November 2018
Will the DOL's MEP Proposal Make Meps Available to You?Abstract: The key legal issue here is that plans, including MEPs, must be adopted by an employer of employees covered under the plan. Up to now, the Department of Labor defined "employer" narrowly to preclude unrelated employers from adopting single plan MEPs. Unfortunately, these eagerly awaited regulations did not authorize the kind of MEP many wanted. Source: 401ktv.com, November 2018
Here's How to Fix 401k Elective Deferral FailuresAbstract: In order to encourage employers to use plan designs that include automatic contribution features (such as auto enrollment and auto escalation of elective deferrals), the IRS allows special "safe harbor" correction methods for plans that experience elective deferral failures related to these types of features. Source: 401kspecialistmag.com, November 2018
Cuomo Forced to Court in 401k Financial FarceAbstract: New York Gov. Andrew Cuomo had, through the Department of Financial Services, ordered state regulators to suggest to 401k and similar financial firms they "review any relationships they may have with the National Rifle Association and other similar organizations. Upon this review, the companies are encouraged to consider whether such ties harm their corporate reputations and jeopardize public safety." Source: 401kspecialistmag.com, November 2018
Significant Disconnect Exists Between Employers and Employees on Saving for RetirementAbstract: The survey results show a significant disconnect between employers and employees when it comes to saving for retirement. While 88 percent of employees think it's important to have retirement plans when choosing a new employer, just 67 percent of small business employers think it's important to have a retirement program for employees. Source: 401khelpcenter.com, November 2018
DOL Guidance on Auto PortabilityAbstract: Under an auto portability program, employees would be told that their 401k savings will be moved to tax-favored IRAs when they leave a job or if the plan is terminated, and that the employee's savings in the IRA would then be automatically transferred to the 401k plan or other individual account plan of the new employer when the employee finds a new job. However, because the prohibited transaction provisions of ERISA and the Internal Revenue Code prohibit a plan fiduciary from using its discretion to cause the plan or IRA to pay the fiduciary a fee, implementation of this type of program would require a prohibited transaction exemption. Source: Wagnerlawgroup.com, November 2018
Would You Move Your 401k to a State Plan if Given the Opportunity?Abstract: A surprising number of plan sponsors answered 'yes' to this question, but not necessarily for the reasons you might think. The LIMRA Secure Retirement Institute recently followed up on a 2016 survey that found that more than half (55%) of plan sponsors said they would be "very" or "somewhat" likely to consider transitioning from their current DC plan to a state-managed solution. The latest survey seemingly validates the degree of interest LIMRA found among plan sponsors in 2016. Source: Napa-net.org, November 2018
DOL Releases Advance Copy of 2018 Form 5500Abstract: The research finds that public employees who have access to retirement education resources at the workplace and the assistance of financial professionals are saving earlier and contributing more to their 403b plans and have greater confidence in being able to achieve their retirement goals. The report is being made available to school districts nationally to assist them in understanding how to improve 403b participation and savings rates to help employees achieve a comfortable and timely retirement. Source: Ntsa-net.org, November 2018
IRS Proposes New Hardship Distribution RegulationsAbstract: The Internal Revenue Service has issued proposed regulations that would change the rules for hardship distributions from 401k and 403b plans. The proposed regulations are scheduled to be published in the Federal Register on November 14, 2018. The provisions of the unpublished draft are summarized here. Source: Ktserisacorner.com, November 2018
IRS Issue Eagerly-Awaited Guidance on Hardship Distributions With a Few SurprisesAbstract: As a general rule, there are two key components for a permissible hardship distribution: (1) the withdrawal must be made due to an immediate and heavy financial need; and (2) the amount of the withdrawal must be limited to the amount necessary to satisfy that financial need. Existing regulations provide detailed rules for how plan participants can prove each requirement is met when requesting a withdrawal. The Proposed Regulations would modify and relax many of these rules to conform to new law changes. Source: Erisapracticecenter.com, November 2018
Under the DOL Proposed MEP Reg: Is Controlling and Maintaining a Retirement Plan a "Substantial Employment Function?"Abstract: The key to the DOL's proposed MEP regulation is not so much the helpful and appropriate hemming in of the "commonality and control" requirements; nor is it that certain PEOs can generally be "employers" when acting indirectly on behalf of their clients in sponsoring a MEP; nor is it in the likewise helpful notion that participating employers are not co-sponsors; nor is it in the DOL's new-found willingness to recognize important policy differences between MEWAs and a retirement plan MEP. Source: Businessofbenefits.com, November 2018
Retirement Plans for the Millennial WorkforceAbstract: The marked differences in communication style and expectations about the availability of cutting-edge technology and multiple career paths provide a roadmap for design. As a group, Millennials are more interested in saving and investing than previous generations of entry-level workers and may be more risk averse. Given the importance of DC plans to Millennials, what characteristics will improve participation and utilization, and set the plan apart? Source: Buck.com, November 2018
DOL Releases Advance Copy of 2018 Form 5500Abstract: The U.S. Department of Labor, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation released advance informational copies of the 2018 Form 5500 Annual Return/Report and related instructions. Source: 401khelpcenter.com, November 2018
Less Choice Leads to Lower 403b Participation, StudyAbstract: New research published by the National Tax-Deferred Savings Association confirms that a decrease in investment choice and reduced access to advisors leads to lower retirement plan participation by employees in public education 403b plans. The research is based on data from nearly 4,500 school districts across the United States. Source: 401khelpcenter.com, November 2018
Survey: Advisors and 3(16) Fiduciary OutsourcingAbstract: Pentegra released this report -- based on the results of a survey of retirement plan advisors -- to determine what their attitudes are toward ERISA 3(16) fiduciary outsourcing. Source: Issuu.com, November 2018*
DOL Plan Would Help Workers Consolidate 401k AccountsAbstract: The Labor Department is seeking public comment on an "auto-portability" program intended to help workers consolidate small 401k and IRA balances when they change jobs. Source: Thinkadvisor.com, November 2018
Ways to Help 401k Participants Understand Portfolio RiskAbstract: One of the most obvious ways to look at the risk of portfolio is by checking its standard deviation. Another way to help people understand risk is to make sure they understand the risk and reward aspect of investing, and how that relates to their future goals. Investigating loss and gain factors in major scenarios can also help. Source: Rixtrema.com, November 2018
SEC Investor Advisory Committee Calls for Stronger Best Interest RegulationsAbstract: The committee says the SEC should explicitly explain that Regulation Best Interest is a fiduciary duty shared equally by advisers and broker/dealer to act in their customers' best interest. Source: Planadviser.com, November 2018
DOL Proposes New Multiple Employer Plan Rules: Everything You Need to KnowAbstract: The MEP proposal would allow certain small businesses to band together to offer more robust 401k plans to their employees and achieve significant savings. While the new regulation is certainly a step in the direction, it doesn't go as far as many had hoped. Thus, the future of open MEPs lies in the hands of a Congress that seems to be at a clear impasse going into the midterms. Source: Lockton.com, November 2018
Regulation Moves to Expand Multi-Employer PlansAbstract: President Trump issued an executive order in August directing the DOL to examine policies that expand the circumstances where employers, especially small- and mid-sized businesses, may sponsor or adopt a multi-employer plan as a workplace retirement savings option, subject to appropriate safeguards. In response, the DOL issued a proposed regulation on October 23 that clarifies who can sponsor or adopt a MEP. The regulation is meant to expand the use of open multiple employer plans, allowing different businesses to join a MEP. Source: Callan.com, November 2018
401k Sponsors in Serious Need of Fiduciary TrainingAbstract: There is not a legal requirement that committee members receive fiduciary training. Instead, it's a best practice and good risk management. But, what should the fiduciary education cover? Based on an analysis of court decisions on fiduciary responsibility, Fred Reish worries that fiduciaries may not be adequately educated about their basic responsibilities and particularly their administrative oversight duties. Source: 401kspecialistmag.com, November 2018
Average 401k Account Balances Reach New RecordAbstract: 401k participants and retirement savers alike have plenty to be thankful for this year. Account balances have reached another all-time high, nearly doubling since 2008's economic downturn. Source: 401kspecialistmag.com, November 2018
Employees Can Now Save in a 401k by Using a Credit CardAbstract: Spending and saving are kind of like oil and water, they don't mix well together. But one company is trying to link credit-card spending to increased retirement savings, and financial advisers are taking notice. Source: Investmentnews.com (registration may be required), November 2018
DOL Proposes Rule to Reduce Leakage in 401k PlansAbstract: The DOL has proposed a rule that's meant to stanch the flow of money out of 401k plans, an issue that has long troubled retirement policymakers. The proposal promotes the idea of "auto-portability," a mechanism that automatically reconnects plan participants with 401k savings they may have inadvertently left behind or forgotten about after leaving a prior employer. Source: Investmentnews.com (registration may be required), November 2018
Top Five Post-Election Retirement Policy ObservationsAbstract: The historic 2018 mid-term elections are in the rearview mirror, and Democrats are poised to take control of the House in January while Republicans will expand their majority in the Senate. The new political landscape fundamentally changes the retirement policy dynamic in Washington and there is a very real possibility of significant reforms over the next two years. There are five key issues to keep in mind. Source: Groom.com, November 2018
Deadline for Retirement Plan Annual Notice Is Rapidly ApproachingAbstract: The time of the year has come for Plan Sponsors to send their annual notices to participants (if your retirement plan has a December 31 plan year-end). Make sure that you send the appropriate notices to your participants on time if your plan contains certain features. Source: Graydon.law, November 2018
Making Sure 401k & 403b Fees are "Necessary and Reasonable" - Part OneAbstract: As a plan sponsor, you are required to understand all of the fees that are associated your organization's retirement plan benefit program. This is a challenge because plan fee structures are often opaque, complicated, and downright misleading. The most effective way to meet your fiduciary requirement is a Request for Proposals process, typically run every three-to-five years. Why? The 401k and 403b markets are extremely competitive. They are constantly evolving and changing. Source: Fiduciaryplangovernance.com, November 2018
Five Key Moves That Can Help Boost Your 401k SavingsAbstract: These days, more and more 401k investors are keeping their accounts on cruise control and employers are encouraging that trend. Most companies automatically enroll you, choose your contribution rate, and nudge you into the preferred investing option. But this convenience carries a major risk: Leaving your 401k on autopilot is likely to jeopardize your retirement goals. Source: Consumerreports.org, November 2018
The Target-Date Funds State of the UnionAbstract: LifePath, the industry's first target-date fund, prepares to mark its 25th anniversary in 2018, creating the perfect opportunity to step back and consider the growth and future of target-date funds. Source: Blackrock.com, November 2018
Qualified Retirement Plan Considerations and 2018 Year-End Action ItemsAbstract: This 4-page advisory reminds plan sponsors of deadlines for amending qualified retirement plans and highlights other action items for plan sponsors to consider in the near future. Source: Alston.com, November 2018
What is a 3(16), 3(21), or 3(38) Fiduciary?Abstract: 401k Plan Sponsors may consider retaining outside help to assist the organization in meeting various fiduciary responsibilities. To prepare for any meaningful conversation of fiduciary responsibilities, there are a few terms one should be familiar with and have a basic working knowledge of - §3(16), §3(21) and §3(38). Source: 5500audit.com, November 2018
Debt Disaster is Real, Especially for Generation XAbstract: The generation of flannel and grunge are heading into their highest earning years yet, compared to other generations, Gen Xers have also accumulated the most debt. In fact, a recent LightStream survey found that one in four Gen Xers who are currently in debt say they are not confident in the way they manage it, and 22 percent don't see a way out. Source: 401kspecialistmag.com, November 2018
DOL Wants Your Opinion on 401k Auto PortabilityAbstract: The DOL's Employee Benefits Security Administration is asking the public to comment on a proposed exemption related to the consolidation of small 401ks that are commonly left behind when employees change jobs. Source: 401kspecialistmag.com, November 2018
How Many Plans Make You a DC Specialist?Abstract: Cogent Reports' latest analysis of the DC plan adviser industry shows most advisers touching this space still manage only a handful of plans, while those with more plans are growing much faster than the average firm. Source: Planadviser.com, November 2018
Taxpayers Generally Comply With Annual Contribution Limits for 401k Plans; Additional Efforts Could Further Improve ComplianceAbstract: Analysis of IRS records showed that the vast majority of taxpayers are complying with tax laws designed to limit the annual amount of compensation that can be contributed to 401k retirement plans. Nonetheless, two areas in which compliance could be improved were identified: 1) some 401k plans did not prevent taxpayers from exceeding the annual limit, and 2) some taxpayers exceed annual limits when contributing to multiple 401k plans. Source: Oversight.gov, November 2018
Biennial Study on the American Retirement ExperienceAbstract: The goal of this 23-page study is to examine the retirement experience of individuals who have been living in retirement for a meaningful amount of time, and develop a deeper understanding of the underpinnings of their retirement security: the risks they have encountered, are worried about, and may face; how well they have prepared, and where their preparations are weak; and finally, how their experience can help guide the preparations of future generations of retirees. Source: Myirionline.org, November 2018
Revisiting Target-Date Retirement Income FundsAbstract: This article explains why advisors to retirement plans may wish to consider offering a series of target-date retirement income funds and provides an update about a development. Source: Morningstar.com, November 2018
Jackson National to Settle 401k Self-Dealing Lawsuit for $4.5 MillionAbstract: Jackson National Life Insurance Co. has reached a $4.5 million settlement in a self-dealing lawsuit that alleged the company profited at the expense of its employees by adding high-cost proprietary investment funds to its 401k plan. Source: Investmentnews.com (registration may be required), November 2018
What Does Consistent Participation in 401k Plans Generate?Abstract: This 24-page paper provides an annual update of a longitudinal analysis of 401k plan participants drawn from the EBRI/ICI 401k database. Because the annual cross sections cover participants with a wide range of participation experience in 401k plans, meaningful analysis of the potential for 401k participants to accumulate retirement assets must examine the 401k plan accounts of participants who maintained accounts over all of the years being studied (consistent participants). Key findings are detailed. Source: Ici.org, November 2018
Open MEP Opportunities: A Look at the Compliance Challenges, as WellAbstract: The success of these plans will largely depend on the nature of the guidance issued by the DOL at the president's direction or that of any legislation enacted by Congress. Advisers likely will have the opportunity to sponsor open MEPs and make them available to their small business clients; they also likely will be subject to ERISA, to at least some extent. Source: Groom.com, November 2018
Consistent 401k Participation Leads to Higher Account BalancesAbstract: The average 401k plan account balance of "consistent 401k participants" -- those who remained active in the same 401k plans from year-end 2010 through year-end 2016 --- more than doubled in that period, according to new data published by the Employee Benefit Research Institute. Source: Ici.org, November 2018
Proposed Multiple Employer DC Plan Rules Could Affect Co-Employers of Leased EmployeesAbstract: Employers of all sizes that provide retirement plan coverage for all or a portion of their workforce through an association or leasing organization may benefit from new options presented by proposed DOL regulations. The proposal would simplify Form 5500 filing requirements and clarify fiduciary responsibilities. Source: Buckglobal.com, November 2018
Corrections of Elective Deferral Failures in Automatic Contribution ArrangementsAbstract: This 1-page article examines the correction methods for the most common downside of automatic contribution arrangements: elective deferral failures. Source: Boutwellfay.com, November 2018
Five Reasons You Should Never Take Out a 401k LoanAbstract: Borrowing from a 401k only delays, or wipes out, retirement plans. Sometimes, taking out a loan from retirement savings is the only option to cover unexpected costs. But using a retirement account as emergency savings comes with serious risks. Source: Bankrate.com, November 2018
Student Loan Programs Top List of Plan Design WarningsAbstract: With Student Loan Repayment programs so popular and with the blessing of the IRS in the case of at least one 401k SLR program, why is caution advisable? Steve Riordan notes that SLR contributions are subject to all qualification requirements; however, he said that he is more concerned about coverage, non-discrimination and contribution limits. Each component, he noted, is separately tested regarding coverage and non-discrimination. If one population receives a match and the other receives a non-elective contribution, that increases the potential for coverage and non-discrimination failures, he warned. Source: Asppa.org, November 2018
Multiplication FablesAbstract: When you see headlines putting a really big number on what you already suspect is a problem -- in this case 401k plan "leakage" -- well, you could hardly be blamed for simply accepting at face value the most recent attempt to quantify the impact of the problem. A closer look at the assumptions behind that analysis, however, puts things in a different light. Source: Asppa.org, November 2018
Have You Noticed? A Guide to Year-End (and other) 401k DisclosuresAbstract: There's often confusion about the many required 401k plan notices including the purpose of each notice, when each must be distributed, and to whom each must be sent. This short article explains some of the most common notices and clarify the distribution requirements. Source: Alliant401k.com, November 2018
401k Plan Design Drives Best Outcomes and Big ImpactAbstract: Employers should be thinking about ways to improve their 401k plan design. Participants in plans that offer features like a generous employer match typically have higher projected income replacement rates, and these plans tend to have better participation rates overall. These are both desirable outcomes for employers considering ways to use 401k plan design to improve plan performance. In short, 401k plan design matters when it comes to offering a competitive workplace retirement plan benefit for employees and helping them to get on a path to a financially comfortable future. Source: 401ktv.com, November 2018
Revenue Procedure 2018-52 Released by IRS: VCP ModificationsAbstract: The most impactful change comes to the submission of corrections process to the IRS's Voluntary Correction Program. The VCP is one of three correction programs plan sponsors can use to correct errors under the Employee Plans Compliance Resolution System, and is in place for plan sponsors to correct mistakes with either the plan document's language or how the plan has been run. Source: Schneiderdowns.com, November 2018
IRS Updates Model Tax Notices for Eligible Rollover Distributions From Retirement PlansAbstract: In its recent Notice 2018-74, the IRS provides updated model tax notices for the required written explanations given to recipients of eligible rollover distributions from qualified retirement plans. These updated notices reflect recent changes to the laws in this area as well as IRS guidance. Plan administrators should review the notices they are currently using to see if they need updating. Source: Findley.com, November 2018
Why We Still Need Open MEP LegislationAbstract: We know that there are many factors that can deter 401k plan adoption. The "open MEP," a plan in which unrelated employers can be pooled in a plan run by professionals, seems to be a solution to these problems. However, we need changes in the law to make these plans a workable reality, and the recent proposal by the Labor Department falls short of what we need. Source: Cohenbuckmann.com, November 2018
ERISA: Thou Shall Not Pay Excessive FeesAbstract: With increased government scrutiny, ERISA lawsuits at an all-time high, and the plaintiff's bar not only increasing in number but in sophistication, 403b plan fiduciaries will continue to face high exposure if they fail to prudently select and then continue to monitor the investments options of their plans and plan fees. Litigation is not limited to large plans, as plaintiffs and the DOL have found that smaller plans are "low hanging fruit" in terms of finding ERISA violations. Source: Ckrlaw.com, November 2018
Casualties of the Retirement Plan Recordkeeping Fees Race to the BottomAbstract: Recordkeeping fees can't go down to zero, so cost savings are going to become less robust over time as plan sponsors continue to go back to the well to renegotiate pricing. More importantly, there is concern about the casualties of the "race to zero" which can be generally placed into two categories: impact on recordkeeper services and impact on competition. Source: Cammackretirement.com, November 2018
DOL Opens Door to Wider MEP Availability, but How Much?Abstract: Advocates of expanding access to retirement plans through a multiple employer plan approach have been hoping for a relaxation of existing rules that govern these cooperative arrangements. Now, the DOL has obliged, at least to a degree. But if MEP proponents were looking for a magic bullet to significantly expand worker coverage and saving within employer plans, that outcome -- at least as it can be influenced by MEPs -- will only be determined with time and employers' response to the following guidance. Source: Ascensus.com, November 2018
IRS Rules on Student Loan Program Under 401k Plan Leaves Important Compliance Issues UnansweredAbstract: The IRS released the private letter ruling in response to an employer's request to amend its 401k plan to include a voluntary student loan program, under which it would make contributions to the accounts of participants making student loan repayments. The PLR and the contingent benefit rule are described in detail here including some issues the IRS leaves open. Source: Truckerhuss.com, November 2018
Stock Drop Claims Based on Public Information Fail to Overcome Deference to Market PricesAbstract: Two more courts have disallowed claims of imprudence against 401k plan fiduciaries that permitted investments in employer stock as those companies headed toward bankruptcy. Source: Thomsonreuters.com, November 2018
Mitigating the Risk of Cyber Attacks to Your Employee Benefit PlanAbstract: Cybersecurity risks, such as phishing techniques, malware and ransomware attacks, facing employee benefit plans are no different than those facing corporations, and in fact, may be even more significant. As a plan sponsor and those charged with governance, you have a responsibility with respect to management and oversight of the plan, including understanding risks to the plan, even risks of cyberattacks. Source: Schneiderdowns.com, November 2018
DOL ERISA Regulatory Enforcement EmphasisAbstract: The demise of the confusing Investment Fiduciary Advice Rule has allowed the DOL to focus on other enforcement priorities. The Plan Investment Conflicts project, which began in 2016, continues the efforts of prior enforcement projects by investigating the payment of improper or undisclosed compensation to ERISA plan vendors. This article offers five tips to help HR managers and committees be prepared and not get caught off guard. Source: Rolandcriss.com, November 2018
Many Retirees Fail to Consider Effect of TaxesAbstract: Thirty-seven percent of retirees admit they did not consider how taxes would impact their retirement income, a Nationwide Retirement Institute survey found. As a result, the institute says, they may have lost the opportunity to save six years' worth of income in retirement. Source: Planadviser.com, November 2018
ERISA Tips: Sufficient Information for Purposes of Section 404(c)Abstract: In order to be in compliance with ERISA Section 404(c), a plan needs to meet some general requirements; one is that plan participants must be allowed to receive information sufficient for them to make informed decisions. But what constitutes "sufficient information"? Source: Ntsa-net.org, November 2018
The Labor Department's Proposal for Multiple-Employer Plans Is LimitedAbstract: The proposal isn't comprehensive enough to create sweeping changes. But, it may induce a few more entities to offer MEPs, possibly increasing retirement coverage and perhaps improving the quality of the retirement plans for some small businesses. The most significant impact of this proposal might be that it gives professional employer organizations a leg up in offering MEPs and might encourage more employers to join such organizations. Source: Morningstar.com, November 2018
401k Plan Notice Issues of Which to Be Aware (or Beware)Abstract: There are detailed laws and regulations regarding the content and when/how the plan participant notices are delivered. For most plans, the next plan year will begin on January 1, 2019, which means that December 1 is generally the last date by which those notices may be provided. This article touches on some bigger picture issues for an employer's attention as we enter notice season. Source: Hawleytroxell.com, November 2018
Averting a 401k DisasterAbstract: As the bull market approaches its 10th year, retirement plan specialists are essentially offering plan sponsors and plan participants some of the same tips the National Park Service suggests for tourists who encounter a bear: Stay calm, don't run, and remember that a sudden movement may trigger an attack. Dumping equities from a 401k plan when a bear market is pending -- or when it's in progress -- is a sure way for plan participants to sabotage their retirement savings efforts, caution the retirement experts. But continuing to invest too aggressively can also be a problem. Source: Fa-mag.com, November 2018
2019 401k Plan LimitsAbstract: The Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019. The contribution limit for employees who participate in 401k, 403b, most 457 plans, and the federal government's Thrift Savings Plan is increased from $18,500 to $19,000. Full details provided. Source: 401khelpcenter.com, November 2018
Best Practices for Managing Participant DataAbstract: Plan sponsors could save a lot of time, expense and stress by implementing a thorough system for managing participant data. Having the appropriate procedures in place can limit potential liability in an audit. Most companies don't realize the pertinence of maintaining adequate, compliant records until there is a need. Source: Planpilot.com, October 2018
Closer Examination of DOL MEP ProposalAbstract: Those industry stakeholders disappointed by the limited scope of the proposed regulations can take heart in the fact that DOL staff calls for detailed commentary on ways the proposal could be expanded, including into the area of "open MEPs" and "corporate MEPs." Source: Planadviser.com, October 2018
What's Driving Fiduciaries to Multimanager Target-Date Funds?Abstract: In a recent survey of nearly 500 consultants, sponsors, and retirement plan advisors, the majority now prefers open-architecture, or multimanager, target-date funds. This portends a significant shift in plan design, given that less than a third of target-date funds employ an open-architecture approach today. Performance is the driving factor. Source: Jhinvestments.com, October 2018
Recent Updates to the IRS 402(f) Tax NoticeAbstract: The IRS published Notice 2018-74, which updated the model tax notice that is regularly referred to the "Special Tax Notice" or the "402(f) Tax Notice." This tax notice is required to participants any time that all or a part of a distribution is eligible for rollover. The previous update to the model tax notice was made in 2014. Source: Foxrothschild.com, October 2018
Retirement Plan Participants Reap Some Benefit From Tax ReformAbstract: After a long period of relative stability enjoyed by sponsors of qualified retirement plans, several significant modifications have been made by the Bipartisan Budget Act of 2018, following closely on the heels of changes enacted by the Tax Cuts and Jobs Act of 2017, particularly as affecting hardship withdrawal from 401k plans. Source: Foxrothschild.com, October 2018
IRS to Audit 401k Savers Who Contribute Too MuchAbstract: The Treasury Inspector General for Tax Administrator is out with a report that suggests that some 401k workplace retirement plan savers are pushing the limits, saving more than what's allowed, costing the U.S. Treasury. The IRS will beef up employer education and conduct targeted audits for taxpayers who appear to have excess 401k deferrals, especially those with multiple 401ks. Source: Forbes.com, October 2018
What Costs Can Be Covered Under a Hardship Distribution for Purchase of a Primary Residence?Abstract: How strictly does the IRS interpret what costs qualify as being associated with the purchase of a primary residence? Is there any wiggle room that would allow renovation costs to qualify for a hardship withdrawal for purchase of a primary residence? Source: Dwc401k.com, October 2018
Are We on the Verge of the Next Big Pension Bill?Abstract: The Family Savings Act, which is one of three tax bills clearing the House as part of the Republicans' push for "Tax Reform 2.0," contains a series of proposals designed to enhance Americans' retirement security and increase other savings. Some of the proposals contained in the Family Savings Act are new, but many have been taken from previously introduced legislation, most substantially, from the Retirement Enhancement and Savings Act. Source: Bna.com, October 2018
How Do Fees Affect Plans' Ability to Beat Their Benchmarks?Abstract: Plans compare their returns by asset class to selected benchmarks that reflect their investment goals for the asset class. Plans pay fees to external asset managers with the expectation that the managers will exceed these benchmarks. As such, this paper focuses on the benchmarks to assess the role of fees. The question is whether higher fees help or hinder the ability for a plan to outperform its chosen benchmarks. Source: Bc.edu, October 2018
2019 Calendar of Significant DC Plan Compliance TasksAbstract: This calendar will help you set up your own schedule of activities to address as the year progresses so that you do not miss important deadlines for your qualified plans. As you evaluate the various tasks, you can confirm suitable deadlines with your vendors for their completion. Source: Buckglobal.com, October 2018
2019 Planning for ERISA Single-Employer DC Plan OperationsAbstract: In addition to verifying that routine tasks are monitored in accordance with plan terms and administrative policies -- such as making required minimum distributions, sending safe harbor notices, and attending to the myriad annual reporting and disclosure requirements -- administrators must be on the alert for some important tasks. Here are some key areas to watch. Source: Buckglobal.com, October 2018
The New Proposed MEP Regulations - Meh!Abstract: The Department of Labor issued proposed regulations on October 22, 2018, that represent the first major step in changing its restrictions on multiple employer plans. However, it is just the first step, and does not change the landscape for Open MEPs. The first part of the article gives a general description of what the proposal does and the second part takes a "deeper dive." Source: Ferenczylaw.com, October 2018
DOL Proposes Eased Restrictions on Open Multiple-Employer Plans for Small BusinessesAbstract: Under the proposed DOL rule, MEPs could be created by associations of employers in various cities, counties, states, or regions or nationwide across an industry. The proposal states that such groups will now qualify as "employers" under the terms of ERISA for the purpose of setting up an individual employee pension plan. Source: Blr.com, October 2018
DOL Announces Guidance and Relief for Plans Impacted by Recent HurricanesAbstract: The U.S. Department of Labor recognizes that plan fiduciaries, employers, labor organizations, service providers, and participants and beneficiaries may encounter issues complying with ERISA over the next few months as the consequences of Hurricane Florence and Hurricane Michael unfold. It has published this employee benefit plan compliance guidance. Source: 401khelpcenter.com, October 2018
How 401ks Can Help Recruit and Retain EmployeesAbstract: Four in five employees indicate they want benefits and perks more than a pay raise. With a tight labor market and recent trends surrounding retirement concerns, offering a high-quality 401k plan is an essential tool to add to your HR toolbox. Source: Workforce.com, October 2018
2018 Year-End Qualified Plan AmendmentsAbstract: As the end of the calendar year 2018 approaches, sponsors of tax-qualified retirement plans need to consider whether their plan documents require updates to meet legal compliance deadlines. This article summarizes the important legal changes that may impact tax-qualified defined contribution and defined benefit retirement plans. Source: Winston.com, October 2018
DOL Issues Proposed Regulations on Association Retirement PlansAbstract: The Department of Labor has issued proposed regulations clarifying the definition of "employer" under Section 3(5) of the Employee Retirement Income Security Act of 1974 (ERISA) for purposes of multiple employer plans (MEPs), also referred to as association retirement plans in the proposal. Source: Westlaw.com, October 2018
DOL Issues Regulations Regarding Multiple Employer Pension PlansAbstract: While there are generally four types of MEPs, the proposal modifies the rules for so-called "closed" MEPs and clarifies rules with respect to MEPs sponsored by a professional employer organization. The proposed regulations provide that a bona fide group or association of employers and bona fide PEOs are deemed to be acting in the interests of an employer, and thus, can establish a pension plan so long as they satisfy the DOL's regulatory requirements. Source: Wagnerlawgroup.com, October 2018
The Role of the Employer Default Allocation in DC Retirement Plan DesignAbstract: Most 401k and 403b retirement plans now provide a default asset allocation for participants who do not choose their own investments. This paper offers plan providers insights on the use of defaults, including explaining why the optimal default is not a riskless allocation; why the default should reflect the characteristics of individuals most likely to use it; what attributes lead employees to select an asset allocation; and why improvement in the default allocation can reduce people's ability to manage their retirement funds over time. Source: Tiaainstitute.org, October 2018
Five Steps to Help Prepare Your Retirement Portfolio for a Bear MarketAbstract: The risk of a down market in the years preceding and early in retirement can be particularly damaging. Volatile markets can be a good reminder that it may be time for a check-up. This article provides five steps you can take now to help prepare your retirement portfolio for a potential bear market. Source: Schwab.com, October 2018
The Value of a FiduciaryAbstract: This 5-page white paper is for plan sponsor representatives who desire to know more about key fiduciary issues: (1) the high standards applicable to a fiduciary; (2) a fiduciary's core responsibilities; (3) the danger of working with a non-fiduciary; and, (4) what they should expect from a strong fiduciary partner. Source: Qualifiedplanadvisors.com, October 2018
Closer Examination of DOL MEP RegulationsAbstract: Days after the DOL published new regulations pertaining to multiple employer plans, it is becoming clearer exactly what its 100-page proposal entails, and the consensus is that DOL is holding short of embracing "open MEPs." Source: Planadviser.com, October 2018
Risks to Canada's Retirement SystemAbstract: Canada's multi-pillared approach of providing universal government programs, combined with a tax system that promotes voluntary pension and savings programs continues to provide Canadians with a strong retirement system. The key risks are low pension coverage among private sector workers, rising debt and healthcare costs, which will prove challenging as the population ages. Source: Pensionpulse.blogspot.com, October 2018
Indictments Handed Down in TPA Embezzlement CaseAbstract: A federal grand jury in Texas has indicted Jeffrey and Wendy Richie on claims that they stole $14.5 million from at least 1,000 plan participants in at least 20 retirement plans. The Richies -- Jeffrey, the President and CEO of Vantage Benefits Administrators Inc., and Wendy, VP of Administration for the firm, and wife of Jeffrey -- were charged with aggravated identity theft, wire fraud and theft from an employee benefit plan. Source: Napa-net.org, October 2018
Outsourcing Automatic Rollovers Strengthens Core Recordkeeping FunctionsAbstract: A rapidly evolving regulatory environment is galvanizing change in the retirement industry. Greater regulatory scrutiny is changing the way some service providers approach automatic rollover services. Instead of providing the services in-house, they've begun to outsource rollovers to firms that specialize in servicing small balance accounts. Source: Mtrustcompany.com, October 2018
Much Ado About Nothing: DOL Issues New MEP GuidanceAbstract: The proposed rules that the DOL just published offered pretty much nothing. While it offered more guidance on how associations and professional employer organizations could sponsor MEPs, it did nothing with its restriction on requiring commonality among adopting employers. So the door for Open MEPs remains closed. Source: Jdsupra.com, October 2018
Here's How the 401k World Will Evolve Over the Next Three YearsAbstract: The 401k world is about to change that paradigm as retirement becomes even more important to employees, companies, politicians, advisers and providers. As Bob Dylan warned in his seminal 1964 song, "You better start swimming or you'll sink like a stone 'cause the times they are a changin.'" So what changes can be expected in the next one to three years? This article looks at the likely changes broken down by retirement sector. Source: Investmentnews.com (registration may be required), October 2018
Fidelity Ramps Up 401k Managed Account DistributionAbstract: Fidelity Investments is trying to expand its reach into the 401k managed account market. Company plans to bypass recordkeepers and ask plan sponsors directly if they will offer its managed accounts to retirement plan participants. Source: Investmentnews.com (registration may be required), October 2018
Unintended Fiduciary Consequences of 401k Fee CompressionAbstract: For years, asset-manager-owned record keepers were a means to an end and were used as a "loss leader" to attract investment dollars to proprietary investments. With increasing transparency and the imposition of fiduciary prudence, record keepers have been forced to offer open-architecture platforms where competitor options are also made available with full fee transparency. This "glasnost" event turned the original asset-gathering approach on its head. In fact, the wholesale change to indexing has limited choice, diversification and investment ideas. Four responses have resulted so far from plan providers. Source: Chaoco.com, October 2018
DOL Develops Compliance Assistance ResourcesAbstract: The U.S. Department of Labor's Employee Benefits Security Administration has developed compliance assistance resources to help protect employee benefits. EBSA's goal is to help workers by restoring plan assets and securing the payment of promised benefits, and to help employee benefit officials understand the law. These tools give employee benefit plans the ability to self-correct violations. Source: 401khelpcenter.com, October 2018
DOL Proposes Regulations to Expand Access to MEPsAbstract: The DOL has issued proposed regulations that would interpret ERISA's definition of "employer" to allow certain groups or associations of employers, and certain professional employer organizations, to establish multiple employer defined contribution retirement plans. The proposed regulations would permit MEPs to be established and maintained by "a bona fide group or association of employers" or "a bona fide professional employer organization." The proposed regulations also address MEP participation by certain working owners who have no employees. Source: Thomsonreuters.com, October 2018
Retirement Savings: Working Six Months Longer Makes a Big DifferenceAbstract: Great news for older retirement-saving laggards who are paying into Social Security: They can catch up to a striking extent and increase their standard of living in retirement by working just a bit longer than planned. Source: Thinkadvisor.com, October 2018
DOL Releases Proposed Rule on MEPsAbstract: Following a directive from President Donald Trump, the Labor Department announced a proposed rule making designed to make it easier for small businesses to offer retirement savings plans to their workers through association retirement plans, often referred to as multiple-employer plans, or MEPs. Source: Thinkadvisor.com, October 2018
DOL Proposes to Relax Multiple Employer Plan RulesAbstract: Historically, the DOL tried to limit the circumstances under which groups of employers could safely access the advantages of participating in a MEP. The proposed regulations clarify that employers may band together into employer groups or professional employer organizations to sponsor a retirement plan if they meet certain requirements. Source: Sgrlaw.com, October 2018
Connecticut to Implement Mandatory IRA Program for Private-Sector Employees in 2019Abstract: The State of Connecticut has announced that in January 2019 it will begin requiring private-sector employers without their own workplace-based retirement plans to enroll employees in Individual Retirement Arrangements sponsored by the state. The requirement stems from legislation enacted in 2016 that is intended to help employees save for retirement. Source: Littler.com, October 2018
Retirement Plan Fees: Small Percentages Can Have Big ImpactsAbstract: Employers offering a retirement plan as part of their employee benefit program engage various partners to help operate these plans. The costs may be paid by the employer, from the participant account or shared, and may impact the amount a participant has available to replace their income in retirement. As little as one percent in administrative fees can have a significant impact on the retirement plans final balance. Source: Hcwbenefits.com, October 2018
DOL Proposes Multiple Employer Plan ExpansionAbstract: The proposed regulation provides clarity regarding the types of "bona fide" groups or associations of employers and professional employer organizations that are permitted to sponsor MEPs. The proposed regulation is similar in many material respects to the DOL's recently finalized Association Health Plan regulation. This article reviews the proposed regulations and provides detail analysis. Source: Groom.com, October 2018
Retirees Adjust Their Lives Once They Discover Pre-Retirement Assumptions Are MistakenAbstract: This article explores three ways retirees adjust their lives once they discover their pre-retirement assumptions are mistaken. Source: Fiduciarynews.com, October 2018
Can In-Service Distributions be Taken Prior to Age 59 1/2?Abstract: Is it possible for a participant to withdraw some or all of his or her account while still employed prior to age 59 1/2? If so, is there anything that should be considered before amending a plan to allow this? Source: Dwc401k.com, October 2018
Can States Enact Their Own Fiduciary Rules?Abstract: Does ERISA permit states to act to enforce their own fiduciary rules? Many practitioners think that although these states have good intentions in trying to protect the public, the answer to that question is no. States appear to be giving inadequate consideration to the principle of ERISA preemption when crafting their fiduciary rules. Source: Cohenbuckmann.com, October 2018
Recommending Rollovers in the Evolving Regulatory EnvironmentAbstract: In making rollover recommendations, good risk management suggests that broker-dealers and RIAs develop policies, procedures and supervisory practices for gathering and considering the relevant information. This article looks at how to make a compliant rollover recommendation. Source: Brokerdealerlawblog.com, October 2018 Looking for earlier information? Go to our Archive. 401khelpcenter.com, LLC is not the author of the material referenced in this digest unless specifically noted. The material referenced was created, published, maintained, or otherwise posted by institutions or organizations independent of 401khelpcenter.com, LLC. 401khelpcenter.com, LLC does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com, LLC. | |||||||
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