BPP401k.com Newsletter January 19

Small But Mighty: Micro plans start to catch up to their larger brethren Traditionally, micro plans have been assumed to be the laggards of the retirement plan market—as many in the industry often are waiting for them to “catch up” to their larger peers in terms of the type and number of plan features and participant involvement. However, respondents to this year’s PLANSPONSOR Defined Contribution Survey sponsoring plans with assets of less than $1 million (micro A) and those with assets of $1 million to $5 million (micro B) show that, while there might be some slight statistical differences, micro plans do appear to be catching up to their larger peers in many areas. Source: Plan Adviser

Designating a QDIA: What Are You Waiting For? Although seeking fiduciary relief and promoting better participant diversification may seem like benefits worth pursuing, about 42% of plans at Vanguard have not yet designated a QDIA. Even more puzzling—about 40% of these non-QDIA plans are already using investments that would qualify as QDIAs, but plan sponsors haven't taken steps to officially designate them as such. Source: Vanguard Research and Commentary.

New Year's Resolutions Defined Contribution Plan Sponsors Should Make Mercer has published its "10 for 2011" checklist of New Year's resolutions that US defined contribution plan sponsors should make now to address investment and plan-design concerns, fulfill fiduciary responsibilities and help participants meet their retirement objectives. Source: 401khelpcenter.com.

Plan Administrators Should Prepare Now to Comply with New Participant Disclosure Requirements A sweeping new set of participant disclosure requirements will take effect for most 401k and 403(b) plans later this year. The regulation creates a new ERISA fiduciary duty for administrators of all retirement plans that provide for participant investment direction. Plan administrators of covered plans will need to give participants an expanded array of information that meets specific content, formatting and frequency requirements. Source: McGuire Woods LLP

Two Simple Ideas for Improving DC Plans There are two proposed pieces of legislation sitting in Congress that would seem to be no-brainers for helping people save for retirement and helping advisers help their clients. Source: Employee Benefit News

The New Retirement Journey: What Today's Woman Needs to Know and Do While women today have more economic opportunity than ever before, it comes with big financial responsibilities. This is especially true when it comes to funding our retirement. Source: Women's Institute for a Secure Retirement (PDF File).

Key 2011 Dates and Deadlines for DB Plans Milliman published this 2011 key administrative dates and deadlines for calendar-year defined benefit retirement plans subject to ERISA and the Internal Revenue Code. Source: Milliman (PDF File).

Lower Payroll Tax Could Bring Higher 401k Savings The reduction in Social Security payroll taxes is essentially a gain for American workers in their take-home pay. Sponsors of defined contribution retirement plans can take advantage of the reduced payroll deduction by encouraging employees to increase their plan contributions by a like amount, which could greatly improve their odds of saving enough for a secure retirement. Source: Society for Human Resource Management.

FASB Revises Its Position on Reporting of Participant Loans According to FASB's new position, the financial statements of defined contribution plans should classify participant loans as notes receivable, measured as the outstanding principal amount plus accrued but unpaid interest. This change affects any defined contribution plan that offers participant loans. Source: Prudential Retirement (PDF File).

The Role of Committees in Maximizing DC Plan Effectiveness and Minimizing Exposure The most effective way for employers to manage a DC plan is through a well-defined process of plan governance and management with clear allocation of roles and accountability. Organizations that establish and maintain retirement and investment committees give themselves the best opportunity to meet their obligations in overseeing the plan. Source: Sibson Consulting (PDF File).

Participant Fee Disclosure Regulations: Investment Disclosures This article discuss the investment disclosures the plan administrator (or the person the plan administrator designates) must make to participants and beneficiaries. The DOL has posted a model chart demonstrating the investment disclosures. Source: Sungard/Relius.

Most Investors Understand Design and Risk of Target-Date Funds While there has been a great deal of speculation about investors' understanding of target-date funds, a new Vanguard survey finds that most target-date fund investors understand the funds' basic design and are aware of the accompanying investment risks. Source: 401khelpcenter.com.

Investor Comprehension and Usage of Target-Date Funds More than 4,700 IRA owners and plan participants responded to a Vanguard online survey designed to gauge the knowledge of target-date fund (TDF) investors. Among the chief findings: Retirement investors who are aware of TDFs generally understand both the funds' basic design and their risks. In this research paper we discuss how well retirement investors know TDFs and point out opportunities for plan and fund sponsors to improve investors' understanding of how TDFs work. Source: Vanguard (PDF File).

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