Strange Bedfellows: Benefits, Finance Collaborate on 401ks While benefits executives report they are, in general, working well with their counterparts in finance, research points to patterns of divergent perceptions of 401k participants' goals and needs, as well as different operational priorities for the plan itself, that could hinder its ultimate success. Source: Employee Benefit News
Adviser Group Urges Congress to Keep 'Authentic' Fiduciary Standard The Committee for the Fiduciary Standard, a group of 600 investment professionals, sent a letter to House Financial Services Committee Chairman Barney Frank, D-Mass., and others, voicing concern about proposals to adopt a new fiduciary code of conduct for brokers and advisers. Source: Investmentnews.com
One Year Later, Investors Remain Committed to Their Workplace Retirement Plans A survey conducted by the ING Institute for Retirement Research found that, despite the uncertain market conditions and negative headlines during the past year, most Americans who participate in employer-sponsored defined contribution plans value these plans greatly and have continued to support them. Source: 401khelpcenter.com
Most 401(k) Investors Don't Read Investment Information Just because participants in 401(k) plans have investment information doesn't mean that they will read it, according to a JPMorgan Retirement Plan Services survey. Source: Investment News
Plugging the DC Plan Dike There were some positive numbers on employee retirement investments. Although U.S. workers who held 401k accounts from 2003 through 2008 suffered a 24.3% average drop in their account balance during 2008's bear market, their accounts still grew at an average annual rate of 7.2%. Source: Employee Benefit Adviser
Vanguard Reports Majority of 401(k) Account Balances Have Recovered Investment giant Vanguard has released a new report that shows what’s really happening with consumer’s 401(k) balances. Source: American Banking News
What Every Tax Payer Should know about Marginal Tax Brackets Many people get confused with marginal tax brackets, although, in effect, they are pretty straightforward. Source: Best Syndication
How the Retirement Plan System Has Changed Over Time How has the distribution of assets in private-sector retirement plans changed over recent years? Source: Employee Benefit Research Institute
Employer Commitment to Workers' Retirement Plans Has Declined Over Last Decade Corporate America's commitment to workers' retirement plans, measured by benefit values as a percentage of pay, has dropped consistently over the last decade, according to research by Watson Wyatt. Source: 401khelpcenter.com
Employee-Benefit Cost Pressures Plague CFOs Of all the pricing pressures that senior finance executives are most worried about, employee benefits tops the list by far, according to the results of a Grant Thornton survey. Source: CFO.com
Companies Plan to Reinstate 401k Matches Many businesses are quietly restoring plans to match a portion of their employees' 401k contributions. Source: Wall Street Journal.
Thinking Differently About 401k Matching Contributions The danger in cutting matching contributions is that employers may be sending a message to employees that helps rationalize cutting workers' own deferrals into the plan. Further, there are other questions for employers to consider. Source: Employee Benefit News
Restoring Americans' Retirement Security a Shared Responsibility Even before the financial crisis that began in the fall of 2008, Americans were woefully unprepared for retirement. While the subsequent drop in the stock market exacerbated the problem, it also heightened anxiety and awareness about the issue of retirement security among individuals, employers and government leaders. This could prove to be the silver lining in the crisis: an end to complacency and the willingness to change attitudes, behaviors and policies to restore Americans' retirement security. Source: McKinsey & Co.
Average American Family Faces a 37% Shortfall in Retirement Income The average American working household will have only 63 percent of what it will need for a dignified retirement, leaving millions of Americans to face very difficult choices about housing, food, and health care upon retirement, according to new report by McKinsey & Co. Source: 401khelpcenter.com.
Four in Five Investors Misusing Target-Date Funds Target-date fund investors may be happy with their plans — but they don't seem to be using them properly, according to a new study by AllianceBernstein. Source: Investmentnews.com
For more information visit www.bpp401k.com
Target Date Funds a "Particular Focus" for SEC The Securities and Exchange Commission is taking a hard look at retirement products, including the positioning of target date funds. Source: Planadviser.com.
403(b) Plans and EFAST2 This article focuses on how EFAST2 will affect the Form 5500 filing requirements for 403(b) plans. In addition, the article discusses the DOL's changes to the Form 5500 filing requirements for 403(b) plans. Source: Sungard/Relius.
Redefining DC Plans to Enhance Retirement Security This paper describes how and why DC plans became so important in ensuring retirement security, reviews the benefits that today's DC plans offer, proposes specific enhancements to DC plans, and discusses the benefits of such enhancements. Source: Prudential Retirement
Attitudes in the Wake of the 2008–2009 Market Decline A survey conducted by Vanguard Center for Retirement Research in May–June 2009 examines investor attitudes toward equity investing following the market turmoil of 2008–2009. Although the study found that expectations for investment returns were relatively modest and worry about market risks remained high, it also found an ongoing commitment to holding equities for retirement and other long-term goals. Source: Vanguard Center for Retirement Research
Supplemental FAQs About the 2009 Schedule C The U.S. Department of Labor released this additional guidance to help plan administrators and service providers comply with the expanded requirements for reporting service provider fee and compensation information on the Form 5500 Annual Returns/Reports. Source: Department of Labor.
Sponsors of DC Plans Must Determine Minimum Distribution Policies by Nov. 30, 2009 The IRS provided new guidance on the minimum distribution rules governing retirement plans. As described in IRS Notice 2009-82, employers that sponsor defined contribution plans have until Nov. 30, 2009, to make certain key decisions, although any actual plan amendment may be delayed until the last day of the 2011 plan year. Source: Davis Wright Tremaine LLP.
Moving 401k After-Tax Contributions to a Roth A financial newsletter has reported that the IRS has issued a private ruling that after-tax contributions to a 401k plan can be pulled out in a lump sum and rolled over to a Roth IRA without triggering income tax. Source: Wall Street Journal
10.21.2009
BPP401k.com Newsletter October 21
Fiduciary Advice: New Perspectives The White House has called for a fiduciary standard under the securities laws for investment advice given by broker-dealers and their representatives. If that proposal is adopted, what will it mean for invest. advice for 401k plans and participants? In theory, it would be meaningless. However, in practice, the change would probably be significant. Source: Reish & Reicher
Why Are Advisors Going Independent? This Schwab white paper explains why many successful advisors are starting or joining independent firms. Source: Schwab Institutional
National Save for Retirement Week October 18-24, 2009
Retire the 401(k). Replace it With This. Now that Time Magazine and the New York Times have joined CBS MoneyWatch at beating up on the 401(k), it’s only fair to ask what the country ought to have instead. Source: Moneywatch.com
Twelve Things About Target-Date Funds The recent market turmoil has drawn a fresh, heightened scrutiny to the philosophy and structure of asset-allocation fund solutions and, certainly for plan sponsors, reminded us all that there are differences—significant differences, in fact—in how these vehicles are constructed, how they are managed, and even the philosophies underpinning those designs. Source: Plansponsor.com
Attention ERISA Plan Sponsors: Get Ready Now for New Form 5500 Requirement to Disclose Compensation Paid to Plan Service Providers Source: Paul Hastings
IRS Announces Pension Plan Limitations for 2010 The Internal Revenue Service announced on October 15, 2009, the cost-of-living adjustments applicable to dollar limitations for pension plans and other items for Tax Year 2010. Source: 401khelpcenter.com
IRS Retirement Plans Navigator An easy retirement plan guide for small employers Source: IRS
Is There a 401(k) Fix? Over the past 30 years, the way we save for retirement has come to be dominated by one plan: the 401(k). But the financial crisis and resulting market meltdown showed the 401(k) to be far from perfect. Source: Time
Rethinking the 401(k) if There’s No Company Match For employees in a 401(k) retirement plan, the strategy used to be simple: If your company offered a “match” — added money to your account based on the percentage of your salary that you contributed — then you should participate up to the percentage to be matched and take the free money. After that, you could think about saving for other needs or paying off credit card debt. Source: New York Times
IRS guidance on safe harbor distribution notices; automatic enrollment/increase arrangements; contribution of unused paid time off to qualified plans. Source: JP Morgan
Survey Reveals Behaviors of 401k Participants after Market Volatility J.P. Morgan Retirement Plan Services released the findings of a nationwide Harris Interactive survey of 1,077 employees participating in 401k plans. The survey was conducted online April 24-May 1, 2009 and captured participants' thoughts on retirement readiness, the economic impact on their retirement plan and what investment decisions they made as a result of the market downturn. Source: 401khelpcenter.com
Majority of DC Plans Should Choose Passive Management The majority of Defined Contribution (DC) pension plans would benefit from the significant use of passive management because of its cost effectiveness and alignment with the governance capability of most plan fiduciaries, according to Watson Wyatt. Source: 401khelpcenter.com
Is It Important for 401k Fees to Be Equitable? Who should pay, and how? This is a debate Americans are having on many fronts—from health care to taxes. It is also a question that more and more 401k plan sponsors are asking about plan fees. Source: Workforce.com
Employee Retirement Income Security Act (ERISA) Litigation Recent decisions handed down by US courts, although sometimes favorable to defendants, are unlikely to stem the flow of ERISA-related disputes. As a result, companies need to be aware of the latest developments and prepare themselves for the threat of potential litigation. Source: Financier Worldwide
Investors Believe Target-Date Funds Performed Better Than a 'Do-It-Yourself' Approach With target-date funds under close scrutiny this year as a result of the recent market crisis, new research from AllianceBernstein reveals that 76% of defined contribution plan participants using target-date funds think that these funds provide better performance than a mix of investments they selected on their own would. Source: 401khelpcenter.com.
In Target-Date Funds, Hidden Homework How could an investment specifically aimed at someone retiring in just a few years be so heavily into stocks? Shouldn’t the money be tucked in less risky options, like bonds and money market instruments? Congress, the Labor Department and the Securities and Exchange Commission all held hearings looking into the funds’ marketing and investment strategies. Source: New York Times
A One-Page Estimator of Retirement Income and 401k Contributions How much will I need in my 401k to buy the future lifestyle I want? No one can tell you exactly, but here is a one-page estimator that should help. Source: DennisAckley.com
Reporting 12b-1 Fees The current government activity on service provider compensation includes a Form 5500 reporting requirement. The reporting requirement is imposed on plan sponsors, but disclosure of that information by advisers is necessary for plan sponsors to complete the Form. Source: Reish & Reicher
Benchmarking as a Part of a Prudent Process It is commonly accepted that 401k fiduciaries must prudently select and monitor both investments and service providers. It is also understood that, in order to fulfill their selection and monitoring responsibilities, 401k fiduciaries must engage in a prudent process. However, many plan fiduciaries and advisers do not understand the specific requirements for a prudent process. This article focuses on those requirements. Source: Reish & Reicher
Deadline Looms for Section 403(b) Plan Sponsors Section 403(b) tax-sheltered annuity plans became subject to an updated and revised set of regulations effective Jan. 1, 2009. One of the requirements of the new regulations is that the plan sponsor must maintain a written plan document that satisfies the regulations’ various rules and conditions. Source: McGuire Woods LLP
DOL Provides Reporting Relief for 403(b) Plans FAB 2009-02 acknowledges that administrators of ERISA 403(b) plans face challenges in complying with the new Form 5500 filing requirements. To address these concerns, the DOL has provided relief for sponsors of 403(b) plans that make good faith efforts to follow the Form 5500 filing requirements. Source: Prudential
Hispanics and Retirement: Challenges and Opportunities This paper, prepared by the Hispanic Institute think-tank and the Americans for Secure Retirement coalition, finds that the unique challenges include a general lack of retirement preparation, less access to employer-sponsored retirement plans, lower levels of personal savings and inadequate financial literacy. Source: The Hispanic Institute
Impact of the Pension Protection Act on Financial Advice A challenge that emerged in the wake of the Pension Protection Act of 2006 is how to deliver advice without compromising plan sponsors' fiduciary responsibilities, and without relying on participants to indirectly fund the cost of advice programs through their purchase of ancillary financial products. Source: Pension Research Council
Significance of November 30th in New RMD Waiver Rules In Notice 2009-82, the IRS provides transition relief and other guidance relating to the WRERA waiver of required minimum distributions under Code §401(a)(9). November 30, 2009 figures prominently in the Notice, however, there is substantial confusion about the significance of that date. This article discusses what distribution recipients and retirement plan sponsors must do by that date. Source: Sungard/Relius
IRS Model 402(f) Notice The IRS released Notice 2009-68, providing a long-awaited updated model 402(f) notice. The updated model notice reflects recent changes in the law and attempts to simplify this lengthy notice by using a Q&A format. Source: McKay Hochman Co.
IRS Creates Retirement Plan Tool for Small Business The Internal Revenue Service has created a new Web-based tool to help small-business owners determine which tax-favored pension plan best suits their needs and how to keep their plans in compliance. Source: webCPA.com
For more information visit www.bpp401k.com
Why Are Advisors Going Independent? This Schwab white paper explains why many successful advisors are starting or joining independent firms. Source: Schwab Institutional
National Save for Retirement Week October 18-24, 2009
Retire the 401(k). Replace it With This. Now that Time Magazine and the New York Times have joined CBS MoneyWatch at beating up on the 401(k), it’s only fair to ask what the country ought to have instead. Source: Moneywatch.com
Twelve Things About Target-Date Funds The recent market turmoil has drawn a fresh, heightened scrutiny to the philosophy and structure of asset-allocation fund solutions and, certainly for plan sponsors, reminded us all that there are differences—significant differences, in fact—in how these vehicles are constructed, how they are managed, and even the philosophies underpinning those designs. Source: Plansponsor.com
Attention ERISA Plan Sponsors: Get Ready Now for New Form 5500 Requirement to Disclose Compensation Paid to Plan Service Providers Source: Paul Hastings
IRS Announces Pension Plan Limitations for 2010 The Internal Revenue Service announced on October 15, 2009, the cost-of-living adjustments applicable to dollar limitations for pension plans and other items for Tax Year 2010. Source: 401khelpcenter.com
IRS Retirement Plans Navigator An easy retirement plan guide for small employers Source: IRS
Is There a 401(k) Fix? Over the past 30 years, the way we save for retirement has come to be dominated by one plan: the 401(k). But the financial crisis and resulting market meltdown showed the 401(k) to be far from perfect. Source: Time
Rethinking the 401(k) if There’s No Company Match For employees in a 401(k) retirement plan, the strategy used to be simple: If your company offered a “match” — added money to your account based on the percentage of your salary that you contributed — then you should participate up to the percentage to be matched and take the free money. After that, you could think about saving for other needs or paying off credit card debt. Source: New York Times
IRS guidance on safe harbor distribution notices; automatic enrollment/increase arrangements; contribution of unused paid time off to qualified plans. Source: JP Morgan
Survey Reveals Behaviors of 401k Participants after Market Volatility J.P. Morgan Retirement Plan Services released the findings of a nationwide Harris Interactive survey of 1,077 employees participating in 401k plans. The survey was conducted online April 24-May 1, 2009 and captured participants' thoughts on retirement readiness, the economic impact on their retirement plan and what investment decisions they made as a result of the market downturn. Source: 401khelpcenter.com
Majority of DC Plans Should Choose Passive Management The majority of Defined Contribution (DC) pension plans would benefit from the significant use of passive management because of its cost effectiveness and alignment with the governance capability of most plan fiduciaries, according to Watson Wyatt. Source: 401khelpcenter.com
Is It Important for 401k Fees to Be Equitable? Who should pay, and how? This is a debate Americans are having on many fronts—from health care to taxes. It is also a question that more and more 401k plan sponsors are asking about plan fees. Source: Workforce.com
Employee Retirement Income Security Act (ERISA) Litigation Recent decisions handed down by US courts, although sometimes favorable to defendants, are unlikely to stem the flow of ERISA-related disputes. As a result, companies need to be aware of the latest developments and prepare themselves for the threat of potential litigation. Source: Financier Worldwide
Investors Believe Target-Date Funds Performed Better Than a 'Do-It-Yourself' Approach With target-date funds under close scrutiny this year as a result of the recent market crisis, new research from AllianceBernstein reveals that 76% of defined contribution plan participants using target-date funds think that these funds provide better performance than a mix of investments they selected on their own would. Source: 401khelpcenter.com.
In Target-Date Funds, Hidden Homework How could an investment specifically aimed at someone retiring in just a few years be so heavily into stocks? Shouldn’t the money be tucked in less risky options, like bonds and money market instruments? Congress, the Labor Department and the Securities and Exchange Commission all held hearings looking into the funds’ marketing and investment strategies. Source: New York Times
A One-Page Estimator of Retirement Income and 401k Contributions How much will I need in my 401k to buy the future lifestyle I want? No one can tell you exactly, but here is a one-page estimator that should help. Source: DennisAckley.com
Reporting 12b-1 Fees The current government activity on service provider compensation includes a Form 5500 reporting requirement. The reporting requirement is imposed on plan sponsors, but disclosure of that information by advisers is necessary for plan sponsors to complete the Form. Source: Reish & Reicher
Benchmarking as a Part of a Prudent Process It is commonly accepted that 401k fiduciaries must prudently select and monitor both investments and service providers. It is also understood that, in order to fulfill their selection and monitoring responsibilities, 401k fiduciaries must engage in a prudent process. However, many plan fiduciaries and advisers do not understand the specific requirements for a prudent process. This article focuses on those requirements. Source: Reish & Reicher
Deadline Looms for Section 403(b) Plan Sponsors Section 403(b) tax-sheltered annuity plans became subject to an updated and revised set of regulations effective Jan. 1, 2009. One of the requirements of the new regulations is that the plan sponsor must maintain a written plan document that satisfies the regulations’ various rules and conditions. Source: McGuire Woods LLP
DOL Provides Reporting Relief for 403(b) Plans FAB 2009-02 acknowledges that administrators of ERISA 403(b) plans face challenges in complying with the new Form 5500 filing requirements. To address these concerns, the DOL has provided relief for sponsors of 403(b) plans that make good faith efforts to follow the Form 5500 filing requirements. Source: Prudential
Hispanics and Retirement: Challenges and Opportunities This paper, prepared by the Hispanic Institute think-tank and the Americans for Secure Retirement coalition, finds that the unique challenges include a general lack of retirement preparation, less access to employer-sponsored retirement plans, lower levels of personal savings and inadequate financial literacy. Source: The Hispanic Institute
Impact of the Pension Protection Act on Financial Advice A challenge that emerged in the wake of the Pension Protection Act of 2006 is how to deliver advice without compromising plan sponsors' fiduciary responsibilities, and without relying on participants to indirectly fund the cost of advice programs through their purchase of ancillary financial products. Source: Pension Research Council
Significance of November 30th in New RMD Waiver Rules In Notice 2009-82, the IRS provides transition relief and other guidance relating to the WRERA waiver of required minimum distributions under Code §401(a)(9). November 30, 2009 figures prominently in the Notice, however, there is substantial confusion about the significance of that date. This article discusses what distribution recipients and retirement plan sponsors must do by that date. Source: Sungard/Relius
IRS Model 402(f) Notice The IRS released Notice 2009-68, providing a long-awaited updated model 402(f) notice. The updated model notice reflects recent changes in the law and attempts to simplify this lengthy notice by using a Q&A format. Source: McKay Hochman Co.
IRS Creates Retirement Plan Tool for Small Business The Internal Revenue Service has created a new Web-based tool to help small-business owners determine which tax-favored pension plan best suits their needs and how to keep their plans in compliance. Source: webCPA.com
For more information visit www.bpp401k.com
10.14.2009
BPP401k.com Newsletter October 14
401(k) Participants, Advisors Hurt By High Fees Of the 600,000 401(k) plans in the United States, many, if not most, have hidden fees that are ripping off the participants and the advisors who administer the plans, says author David Loeper, . Source: Financial Advisor
Hardship Requirement in Proposed Safe Harbor 401k Regs Too Harsh Witnesses at a recent IRS hearing urged the IRS to remove the requirement in proposed regulations that employers maintaining safe harbor 401k plans prove "substantial business hardship" before reducing or suspending required nonelective 401k plan contributions. Source: CCH.
Seven Qualitative Due Diligence Factors A sound due diligence process is the first step in investment selection. A good due diligence process begins by measuring investments using quantitative factors against set benchmarks and in relation to peers. Source: Investmentnews.com
Conventional Wisdom and the Law of Unexpected Consequences This article addresses the 401k fiduciary responsibility deals with and proactive steps that fiduciaries should take to minimize successful breach of fiduciary lawsuits against them and the sponsor. Source: InvestmentHorizons.com (PDF File).
'Automatic' Features in DC Plans Gaining Worldwide Acceptance A new 33-country survey of organizations that sponsor DC retirement plans reveals widespread adoption of automatic enrollment and other relatively new 'automatic' features designed to boost employee enrollment and limit the number of decisions employees need to make. Source: Mercer.
IRS Issues Guidance and Model Amendments for Suspending 2009 Minimum Required Distributions The IRS has released Notice 2009-82, which provides much-needed guidance for employers regarding the waiver of required minimum distributions (RMDs) from IRAs and defined contribution plans for 2009, including two model amendments that employers may use to update their plans. Source: Drinker Biddle & Reath LLP.
New Sample Plan Amendments and Added Guidance on Automatic 401k Contributions The Obama administration has issued several Internal Revenue Service Notices and Revenue Rulings aimed to provide additional guidance and sample plan amendments for automatic contribution arrangements in 401k and other eligible plans. Source: Pillsbury Winthrop Shaw Pittman LLP.
Better Information and Sponsor Guidance Could Improve Oversight and Reduce Fees for Participants September report from the Government Accountability Office to the Chairman, Committee on Ways and Means, House of Representatives on the oversight of 401k plans and the fees charged to 401k plan participants. Source: GAO (PDF File).
Financial Illiteracy is Rampant Among the Young Once upon a time, a twenty-something American’s finances were pretty simple. Today’s young people, though, have to cope with student loans and credit cards while deciding how to invest within a 401k plan. And many of them aren’t well equipped to make such decisions, according to a recent study. Source: St. Louis Post-Dispatch
How Your 401(k) Investments Stack Up The bulk of 401(k) assets are invested in stocks. At the end of 2008, 56 percent of 401(k) participants’ savings was invested in the stock market including equity funds, the equity portion of balanced funds, and company stock, according to a new report. Source: US News & World Report
401(k) Asset Gain Seen Despite Market Meltdown Consistent” 401(k) participants posted an annual average increase of 7.2% over that five-year period, despite suffering huge losses in the 2008 market meltdown, according to new research from the Employee Benefit Research Institute and the Investment Company Institute. Source: Pensions & Investments
Answers to 401k Questions That Matter Most The information that HR provides to employees about their defined contribution savings plan typically focuses on basic plan facts. That leaves unanswered questions about how to use the plan. This article deals with some of the answers employees need to begin using their 401k to have the financial future they want. Source: Society for Human Resource Management.
Debt Levels Increase for Those In or Near Retirement Debt levels of those in or near retirement age are heading up: Among elderly families -- and especially among the lower -- income elderly-housing debt in particular is rising, according to a study published by the nonpartisan Employee Benefit Research Institute. Source: 401khelpcenter.com.
Two-thirds of 401k Participants Turn Blind Eye to Investment Info Two-thirds of 401k participants don't read the investment information provided to them by their plan executives, according to a soon-to-be-released survey by J.P. Morgan Retirement Plan Services. Source: PIonline.com (PDF File).
Market Meltdown Costs 401k Participants One-Third of Their Retirement Savings The average 401k participant lost nearly one-third of his or her retirement account assets in 2008 because of the market downturn, according to a report released by the Investment Company Institute and the Employee Benefit Research Institute. Source: Workforce.com
A Master Financial Plan for Retirement Savings Many companies are going well beyond basic education programs for retirement savings, and instead are providing a variety of services and tools to help employees plot their entire financial future. Source: Workforce.com
New Twist on Annuities in 401k Several money managers are scrambling to design investment options embedded with annuities or income guarantees in what they hope will be the next major evolution in defined contribution plans. Source: PIonline.com
An Introduction to Independent Fiduciaries Matthew Hutcheson is a congressional expert, and is recognized around the globe as a dedicated advocate of investor and plan participant rights. In this interview he shares his expertise on working with independent fiduciaries and retirement planning. Source: Suite101.com.
Independent Registered Investment Advisors Upbeat About Career and Economy A new survey of independent registered investment advisors (RIAs), released by TD AMERITRADE Institutional, shows advisors are upbeat about their jobs and the outlook on the U.S economy. Source: 401khelpcenter.com.
WaMu Employees' 401k Lawsuit Against JPMorgan Dismissed An attempt by former Washington Mutual Inc. employees to recoup their retirement account losses from JPMorgan Chase & Co., part of a complex tangle of litigation stemming from WaMu's collapse last year, has been dismissed. Source: Associated Press.
401k Plan Asset Allocation, Account Balances, and Loan Activity in 2008 Because 401k balances can fluctuate with market returns from year to year, meaningful analysis of 401k plans must examine how participants' accounts have performed over the long term. This study looks at consistent participants in the EBRI/ICI 401k database over the five-year period from 2003 to 2008 and reports on the findings. Source: Investment Company Institute (PDF File).
Guidance on Department of Labor Enforcement Priorities for Employee Benefits Article examines the new enforcement priorities of the US Labor Department's Employee Benefits Security Administration, which include an initiative to pursue criminal charges against serious violators of ERISA. Source: Arent Fox LLP.
For more information visit www.bpp401k.com
Hardship Requirement in Proposed Safe Harbor 401k Regs Too Harsh Witnesses at a recent IRS hearing urged the IRS to remove the requirement in proposed regulations that employers maintaining safe harbor 401k plans prove "substantial business hardship" before reducing or suspending required nonelective 401k plan contributions. Source: CCH.
Seven Qualitative Due Diligence Factors A sound due diligence process is the first step in investment selection. A good due diligence process begins by measuring investments using quantitative factors against set benchmarks and in relation to peers. Source: Investmentnews.com
Conventional Wisdom and the Law of Unexpected Consequences This article addresses the 401k fiduciary responsibility deals with and proactive steps that fiduciaries should take to minimize successful breach of fiduciary lawsuits against them and the sponsor. Source: InvestmentHorizons.com (PDF File).
'Automatic' Features in DC Plans Gaining Worldwide Acceptance A new 33-country survey of organizations that sponsor DC retirement plans reveals widespread adoption of automatic enrollment and other relatively new 'automatic' features designed to boost employee enrollment and limit the number of decisions employees need to make. Source: Mercer.
IRS Issues Guidance and Model Amendments for Suspending 2009 Minimum Required Distributions The IRS has released Notice 2009-82, which provides much-needed guidance for employers regarding the waiver of required minimum distributions (RMDs) from IRAs and defined contribution plans for 2009, including two model amendments that employers may use to update their plans. Source: Drinker Biddle & Reath LLP.
New Sample Plan Amendments and Added Guidance on Automatic 401k Contributions The Obama administration has issued several Internal Revenue Service Notices and Revenue Rulings aimed to provide additional guidance and sample plan amendments for automatic contribution arrangements in 401k and other eligible plans. Source: Pillsbury Winthrop Shaw Pittman LLP.
Better Information and Sponsor Guidance Could Improve Oversight and Reduce Fees for Participants September report from the Government Accountability Office to the Chairman, Committee on Ways and Means, House of Representatives on the oversight of 401k plans and the fees charged to 401k plan participants. Source: GAO (PDF File).
Financial Illiteracy is Rampant Among the Young Once upon a time, a twenty-something American’s finances were pretty simple. Today’s young people, though, have to cope with student loans and credit cards while deciding how to invest within a 401k plan. And many of them aren’t well equipped to make such decisions, according to a recent study. Source: St. Louis Post-Dispatch
How Your 401(k) Investments Stack Up The bulk of 401(k) assets are invested in stocks. At the end of 2008, 56 percent of 401(k) participants’ savings was invested in the stock market including equity funds, the equity portion of balanced funds, and company stock, according to a new report. Source: US News & World Report
401(k) Asset Gain Seen Despite Market Meltdown Consistent” 401(k) participants posted an annual average increase of 7.2% over that five-year period, despite suffering huge losses in the 2008 market meltdown, according to new research from the Employee Benefit Research Institute and the Investment Company Institute. Source: Pensions & Investments
Answers to 401k Questions That Matter Most The information that HR provides to employees about their defined contribution savings plan typically focuses on basic plan facts. That leaves unanswered questions about how to use the plan. This article deals with some of the answers employees need to begin using their 401k to have the financial future they want. Source: Society for Human Resource Management.
Debt Levels Increase for Those In or Near Retirement Debt levels of those in or near retirement age are heading up: Among elderly families -- and especially among the lower -- income elderly-housing debt in particular is rising, according to a study published by the nonpartisan Employee Benefit Research Institute. Source: 401khelpcenter.com.
Two-thirds of 401k Participants Turn Blind Eye to Investment Info Two-thirds of 401k participants don't read the investment information provided to them by their plan executives, according to a soon-to-be-released survey by J.P. Morgan Retirement Plan Services. Source: PIonline.com (PDF File).
Market Meltdown Costs 401k Participants One-Third of Their Retirement Savings The average 401k participant lost nearly one-third of his or her retirement account assets in 2008 because of the market downturn, according to a report released by the Investment Company Institute and the Employee Benefit Research Institute. Source: Workforce.com
A Master Financial Plan for Retirement Savings Many companies are going well beyond basic education programs for retirement savings, and instead are providing a variety of services and tools to help employees plot their entire financial future. Source: Workforce.com
New Twist on Annuities in 401k Several money managers are scrambling to design investment options embedded with annuities or income guarantees in what they hope will be the next major evolution in defined contribution plans. Source: PIonline.com
An Introduction to Independent Fiduciaries Matthew Hutcheson is a congressional expert, and is recognized around the globe as a dedicated advocate of investor and plan participant rights. In this interview he shares his expertise on working with independent fiduciaries and retirement planning. Source: Suite101.com.
Independent Registered Investment Advisors Upbeat About Career and Economy A new survey of independent registered investment advisors (RIAs), released by TD AMERITRADE Institutional, shows advisors are upbeat about their jobs and the outlook on the U.S economy. Source: 401khelpcenter.com.
WaMu Employees' 401k Lawsuit Against JPMorgan Dismissed An attempt by former Washington Mutual Inc. employees to recoup their retirement account losses from JPMorgan Chase & Co., part of a complex tangle of litigation stemming from WaMu's collapse last year, has been dismissed. Source: Associated Press.
401k Plan Asset Allocation, Account Balances, and Loan Activity in 2008 Because 401k balances can fluctuate with market returns from year to year, meaningful analysis of 401k plans must examine how participants' accounts have performed over the long term. This study looks at consistent participants in the EBRI/ICI 401k database over the five-year period from 2003 to 2008 and reports on the findings. Source: Investment Company Institute (PDF File).
Guidance on Department of Labor Enforcement Priorities for Employee Benefits Article examines the new enforcement priorities of the US Labor Department's Employee Benefits Security Administration, which include an initiative to pursue criminal charges against serious violators of ERISA. Source: Arent Fox LLP.
For more information visit www.bpp401k.com
10.07.2009
BPP401k.com Newsletter October 7
The 800 lb. Tax Gorilla The specter of tax hikes likely means growing interest in after-tax savings. Source: Plan Sponsor
Independent Retirement Advisors Want Legal Clarity A representative for the National Association of Independent Retirement Plan Advisors told Congress that it should provide clear rules prohibiting conflicted invest. advice in workplace retirement plans. Source: 401khelpcenter.com
401k Plans Could Be Tweaked to Reduce Leaks When the Government Accountability Office talks about preventing leakage from 401k plans, it isn’t talking about the bear market that siphoned a big gusher of money out of your account. Source: St. Louis Post-Dispatch
GAO Proposes Changes to 401(k) Hardship Withdrawal Rule Noting that 15% of 401(k) participants have engaged in some form of “leakage,” that is, hardship withdrawals from their plans or failure to roll the money over when changing jobs, between 1998 and 2006, the Government Accountability Office is recommending that Congress eliminate the ban on additional contributions for six months by those who make such withdrawals. Source: Money Management Executive
Impact of the Pension Protection Act on Financial Advice A challenge that emerged in the wake of the Pension Protection Act of 2006 is how to deliver such advice without compromising plan sponsors' fiduciary responsibilities, and without relying on participants to indirectly fund the cost of advice programs through their purchase of ancillary financial products. Source: Pension Research Council
What 403(b)s Need from Advisers With new 403(b) regulations effective 1/1/2009, sponsors of 403(b) plans are looking for help, creating a great opportunity for retirement plan advisers wanting to grow their business. Source: Plansponsor.com
New Twist on Annuities in 401(k)s Investment-only shops create income guarantees, but clients aren't biting yet. Source: Pensions & Investments
How Many 401(k) Investment Options Do You Want? 401(k) accounts generally allow workers to specify how their retirement stash is invested. Source: US News & World Report
IRS Guidance on 2009 RMD Relief The Service recently issued Notice 2009‐82 which provides much‐needed guidance on how defined contribution plans (including 403(b) and governmental 457(b) plans) and IRAs implement the waiver of 2009 required minimum distributions Source: ASPPA
Putnam CEO Reynolds Calls for a "New Generation" of Workplace Savings Plans Drawing what he described as "the right lessons" from last year's market extremes, Putnam Investments President and Chief Executive Officer Robert L. Reynolds today called for a new generation of workplace savings plans that do more to lower volatility and create more dependable sources of lifetime income. Source: 401khelpcenter.com
Employers and Employees Take Wait-and-See Approach to Retirement Many employees are waiting for an economic recovery before moving forward with retirement, and employers are taking the same attitude with retirement program changes and risk issues, according to Aon Consulting. Source: 401khelpcenter.com
Fiduciary Q&A: Use of Alternative Investments in DC Plans What is fi360's position on the usage of alternative asset classes in Defined Contribution plans? Source: Investmentnews.com
NEW BOOK: Automatic: Changing the Way America Saves The new Brookings Institution Press book "Automatic: Changing the Way America Saves" from the Retirement Security Project offers a radical new way to think about how Americans can save for retirement. Source: 401khelpcenter.com
GAO Weighs How to Minimize 401k 'Leakage' A new report from the Government Accountability Office examines how to minimize the loss in retirement savings that occurs when 401k participants tap into their accounts early. Source: webCPA.com
Suspending 401k Matching Contributions The decision to suspend contributions is a difficult one. The purpose of this article is to help with the analysis by demonstrating the long-term impact of a suspension of 401k matching contributions. Source: Reish & Reicher
Investing in a 401k vs. Roth IRA The one decision you make today could severely impact the way you live your life when you're ready to retire. There are extreme differences in the two when it comes to the way taxes are handled, and it's important you understand them before making a decision on how you want to invest. Source: Des Moines Register
Auto-Enrollment Remains a Crowd Pleaser Nearly half of U.S. companies are automatically enrolling workers into 401k plans, according to a new Watson Wyatt survey. The poll also uncovered that the number of employers that use target-date or lifecycle funds as their default option has increased dramatically in the last few years. Source: Employee Benefit News
Workforce Reductions May Result in Partial Plan Termination In challenging economic times, employers may be forced to reduce their workforces. In those instances, employers must be aware that a reduction in workforce could lead to a partial plan termination, requiring affected participants to become fully-vested in their retirement benefit. Source: Prudential
Implementing a 401k Automatic Enrollment Arrangement Recent changes in the law under the Pension Protection Act of 2006 and regulations issued have made "automatic enrollment arrangement" easier to implement and more palatable to both employers and employees. Source: Ivins, Phillips & Barker
What's Next for 401k Plans? Among employee benefit programs, it's probably fair to say that 401k plans stand in a class by themselves in terms of upheaval in the wake of the global economic crisis. Despite the stabilization of financial markets and, in some cases, welcome gains, employers and plan participants are asking all kinds of tough questions that essentially boil down to this: Where do we go from here? Source: Towers Perrin
Towers Perrin Retirement Legislative Tracking Chart This selection of bills represents Towers Perrin's best judgment on the likelihood of enactment and the relevance of the issue for employers. Source: Towers Perrin
Private Pensions: Alternative Approaches Could Address Retirement Risks Faced by Workers but Pose Trade-offs This GAO report was requested by Chairman George Miller of the U.S. House Committee on Education and Labor and includes modeling the effects of a compulsory defined contribution system for employers (i.e., universal access), with variations based on whether enrollment by employees is voluntary, automatic with an opt-out, or mandatory. Source: GAO
Making Your Nest Egg Last a Lifetime One straightforward solution to the drawdown challenge is an immediate annuity, which turns a lump sum of income into a lifelong payment stream. However, for various reasons, such annuities have not proven broadly popular. This paper examines several alternatives. Source: Center for Retirement Research at Boston College
Alternatives to the Traditional 401k Match White paper. Companies looking ahead to how they will restructure their reward programs in a recovering economy will no doubt be asking some tough questions about their 401k plans. Source: Towers Perrin
Mandatory Electronic Filing of 5500s to Begin in 2010 The Department of Labor has taken another step toward requiring electronic filing and disclosure of all Form 5500 annual reports by announcing that paper filing will no longer be accepted for filings for the 2009 plan year. Source: Seyfarth Shaw LLP
IRS Release Package to Promote Workplace Retirement Savings The Internal Revenue Service released a package of guidance generally intended to promote workplace retirement savings. The guidance consists of three revenue rulings and four notices. Source: Ropes & Gray LLP
Fall 2009 IRS Employee Plans News In this issue: Dos and Don'ts of Hardship Distributions; IRS Retirement Plans Online; When Limits Collide, Which One Wins?; Tax Return Preparer Review Board; Critical Priorities...With Monika Templeman Today's Discussion: Loans and Hardships in 401k Plans; and more. Source: IRS
For more information visit www.bpp401k.com
Independent Retirement Advisors Want Legal Clarity A representative for the National Association of Independent Retirement Plan Advisors told Congress that it should provide clear rules prohibiting conflicted invest. advice in workplace retirement plans. Source: 401khelpcenter.com
401k Plans Could Be Tweaked to Reduce Leaks When the Government Accountability Office talks about preventing leakage from 401k plans, it isn’t talking about the bear market that siphoned a big gusher of money out of your account. Source: St. Louis Post-Dispatch
GAO Proposes Changes to 401(k) Hardship Withdrawal Rule Noting that 15% of 401(k) participants have engaged in some form of “leakage,” that is, hardship withdrawals from their plans or failure to roll the money over when changing jobs, between 1998 and 2006, the Government Accountability Office is recommending that Congress eliminate the ban on additional contributions for six months by those who make such withdrawals. Source: Money Management Executive
Impact of the Pension Protection Act on Financial Advice A challenge that emerged in the wake of the Pension Protection Act of 2006 is how to deliver such advice without compromising plan sponsors' fiduciary responsibilities, and without relying on participants to indirectly fund the cost of advice programs through their purchase of ancillary financial products. Source: Pension Research Council
What 403(b)s Need from Advisers With new 403(b) regulations effective 1/1/2009, sponsors of 403(b) plans are looking for help, creating a great opportunity for retirement plan advisers wanting to grow their business. Source: Plansponsor.com
New Twist on Annuities in 401(k)s Investment-only shops create income guarantees, but clients aren't biting yet. Source: Pensions & Investments
How Many 401(k) Investment Options Do You Want? 401(k) accounts generally allow workers to specify how their retirement stash is invested. Source: US News & World Report
IRS Guidance on 2009 RMD Relief The Service recently issued Notice 2009‐82 which provides much‐needed guidance on how defined contribution plans (including 403(b) and governmental 457(b) plans) and IRAs implement the waiver of 2009 required minimum distributions Source: ASPPA
Putnam CEO Reynolds Calls for a "New Generation" of Workplace Savings Plans Drawing what he described as "the right lessons" from last year's market extremes, Putnam Investments President and Chief Executive Officer Robert L. Reynolds today called for a new generation of workplace savings plans that do more to lower volatility and create more dependable sources of lifetime income. Source: 401khelpcenter.com
Employers and Employees Take Wait-and-See Approach to Retirement Many employees are waiting for an economic recovery before moving forward with retirement, and employers are taking the same attitude with retirement program changes and risk issues, according to Aon Consulting. Source: 401khelpcenter.com
Fiduciary Q&A: Use of Alternative Investments in DC Plans What is fi360's position on the usage of alternative asset classes in Defined Contribution plans? Source: Investmentnews.com
NEW BOOK: Automatic: Changing the Way America Saves The new Brookings Institution Press book "Automatic: Changing the Way America Saves" from the Retirement Security Project offers a radical new way to think about how Americans can save for retirement. Source: 401khelpcenter.com
GAO Weighs How to Minimize 401k 'Leakage' A new report from the Government Accountability Office examines how to minimize the loss in retirement savings that occurs when 401k participants tap into their accounts early. Source: webCPA.com
Suspending 401k Matching Contributions The decision to suspend contributions is a difficult one. The purpose of this article is to help with the analysis by demonstrating the long-term impact of a suspension of 401k matching contributions. Source: Reish & Reicher
Investing in a 401k vs. Roth IRA The one decision you make today could severely impact the way you live your life when you're ready to retire. There are extreme differences in the two when it comes to the way taxes are handled, and it's important you understand them before making a decision on how you want to invest. Source: Des Moines Register
Auto-Enrollment Remains a Crowd Pleaser Nearly half of U.S. companies are automatically enrolling workers into 401k plans, according to a new Watson Wyatt survey. The poll also uncovered that the number of employers that use target-date or lifecycle funds as their default option has increased dramatically in the last few years. Source: Employee Benefit News
Workforce Reductions May Result in Partial Plan Termination In challenging economic times, employers may be forced to reduce their workforces. In those instances, employers must be aware that a reduction in workforce could lead to a partial plan termination, requiring affected participants to become fully-vested in their retirement benefit. Source: Prudential
Implementing a 401k Automatic Enrollment Arrangement Recent changes in the law under the Pension Protection Act of 2006 and regulations issued have made "automatic enrollment arrangement" easier to implement and more palatable to both employers and employees. Source: Ivins, Phillips & Barker
What's Next for 401k Plans? Among employee benefit programs, it's probably fair to say that 401k plans stand in a class by themselves in terms of upheaval in the wake of the global economic crisis. Despite the stabilization of financial markets and, in some cases, welcome gains, employers and plan participants are asking all kinds of tough questions that essentially boil down to this: Where do we go from here? Source: Towers Perrin
Towers Perrin Retirement Legislative Tracking Chart This selection of bills represents Towers Perrin's best judgment on the likelihood of enactment and the relevance of the issue for employers. Source: Towers Perrin
Private Pensions: Alternative Approaches Could Address Retirement Risks Faced by Workers but Pose Trade-offs This GAO report was requested by Chairman George Miller of the U.S. House Committee on Education and Labor and includes modeling the effects of a compulsory defined contribution system for employers (i.e., universal access), with variations based on whether enrollment by employees is voluntary, automatic with an opt-out, or mandatory. Source: GAO
Making Your Nest Egg Last a Lifetime One straightforward solution to the drawdown challenge is an immediate annuity, which turns a lump sum of income into a lifelong payment stream. However, for various reasons, such annuities have not proven broadly popular. This paper examines several alternatives. Source: Center for Retirement Research at Boston College
Alternatives to the Traditional 401k Match White paper. Companies looking ahead to how they will restructure their reward programs in a recovering economy will no doubt be asking some tough questions about their 401k plans. Source: Towers Perrin
Mandatory Electronic Filing of 5500s to Begin in 2010 The Department of Labor has taken another step toward requiring electronic filing and disclosure of all Form 5500 annual reports by announcing that paper filing will no longer be accepted for filings for the 2009 plan year. Source: Seyfarth Shaw LLP
IRS Release Package to Promote Workplace Retirement Savings The Internal Revenue Service released a package of guidance generally intended to promote workplace retirement savings. The guidance consists of three revenue rulings and four notices. Source: Ropes & Gray LLP
Fall 2009 IRS Employee Plans News In this issue: Dos and Don'ts of Hardship Distributions; IRS Retirement Plans Online; When Limits Collide, Which One Wins?; Tax Return Preparer Review Board; Critical Priorities...With Monika Templeman Today's Discussion: Loans and Hardships in 401k Plans; and more. Source: IRS
For more information visit www.bpp401k.com
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